After Covid-19 pandemic, it’s price rise that is biting Nepalis hardThere is a government but there is no governance, say experts, as the administration has failed to limit inflation ahead of festivals and elections.
Manju Shakya, a resident of Lalitpur, was surprised to hear the price of broad leaf mustard greens last week.
Called “rayo ko saag,” broad leaf mustard greens are one of the most common fixtures on Nepalis’ plates.
“I was shocked that it was being sold at Rs250 per kg in the market,” said Shakya, 47.
Prices of such leafy vegetables of late have become super expensive, and retailers are selling them by weighing them, unlike in the past when they used to be sold in bunches, with the price tagged per bunch.
It’s not just vegetables, prices of almost everything have gone up drastically, said Shakya whose income was badly hit by the Covid-19 pandemic.
Shakya owns Gautam Gift Emporium that exports handicraft products.
The pandemic over the last two years affected her business.
“My savings dried up. This inflation is killing us,” said Shakya. During the first lockdown last year in March, I used to allocate Rs3,000 for weekly expenses to buy groceries. But even Rs7,000 is falling short now.”
Srijana Bhattarai of Taukhel is worried about her family expenses as her kitchen expenses alone have more than doubled.
“From vegetables to fruits and lentils to legumes, the prices of daily essentials have skyrocketed,” said Bhattarai.
Inflation is the rate of increase in prices over a given period of time. Inflation measures overall increase in prices or the increase in the cost of living. But it can also be more narrowly calculated—for example, for certain goods, such as food, or for services, such as school tuition.
Legumes that used to come at Rs100 per kg before the pandemic, now cost more than Rs150 per kg, split red lentils that used to cost Rs70-80 before the pandemic have now doubled to Rs150 per kg.
Okra, a seasonal vegetable, costs more than Rs90 per kg. Sugar is now Rs100 per kg and mustard oil costs [Dhara] Rs365 per litre, up from Rs200 per litre.
Sunflower oil that used to cost Rs200 per litre, now costs Rs290 per litre.
A 25 kg sack of sona mansuli rice that used to cost Rs1,500 before mid-April now costs Rs1,700.
“My husband's wages have remained the same but expenses have doubled,” said Bhattarai, a housewife, who lives in a rented apartment. “School and college fees have gone up outrageously.”
Her son is an 11th grader and his monthly college fee is Rs7,000.
Bhattarai’s husband is the sole earner for a family of three making a monthly earnings of Rs22,000.
“Forget about saving money. We are at a Rs2,000 deficit a month,” she said.
Between mid-July and mid-August, the first month of Nepal’s fiscal year, the year-on-year consumer price inflation has remained 4.35 percent.
According to the macroeconomics and financial situation of Nepal, a monthly report of the Nepal Rastra Bank, the food and beverage inflation stood at 3.86 percent whereas non-food and service inflation stood at 4.74 percent in the review month.
But for Shakya and Bhattarai, these are just numbers that do not reflect reality.
Their assertion could be right, as the inflation rate in India for the same period has been 5.30 percent, one percentage point more than that in Nepal.
A majority of consumer products, not counting items like leafy vegetables, are imported from India.
“I can’t believe this situation. Rs500 is not even sufficient to pay for two meals,” said Bhattarai, 37.
A recent Inflation Expectation Survey Report of Nepal’s central bank also showed that the majority of people expect the average prices of goods and services to grow by 10 percent in a year.
Economists said it’s a sustained inflation that occurs when a nation's money supply growth outpaces economic growth.
Factors like economic growth, inflation in India, exchange rates, global oil prices and credit flows affect inflation in Nepal.
Keshav Acharya, an economist, said inflation is popping and there’s political fluidity and that this doesn’t bode well for consumers.
“Nepal fell into political instability ever since KP Sharma Oli, the erstwhile prime minister, dissolved Parliament in December last year,” Acharya told the Post. “Nepal is in a precarious position politically and such a situation creates a golden opportunity for opportunist traders to take advantage.”
Nepali Congress leader Sher Bahadur Deuba took over from Oli on July 13 after the latter dissolved Parliament for a second time on May 21.
It has been more than two and a half months, but Deuba has not been able to expand his Cabinet.
Experts say there’s a government but there is no governance, and rising prices of daily essentials shows the administration is failing.
“There is no government presence in the market,” Acharya said, adding that those who take care of the country and its people have been struggling for more than 75 days to even expand the Cabinet. “In such situations, unscrupulous traders hike prices and create artificial shortages as they know that the government is busy playing politics.”
The unrestrained inflation will mostly hit daily wage earners and people from low-income groups. But others are also going to suffer as festivals are round the corner. Dashain will begin in about 10 days, and this is one of the festivals when Nepalis tend to spend money.
“Now that the market has opened, the suppressed demand during the prolonged lockdown will come out which will further increase the demand,” said Acharya. “There is more inflation ahead. It’s imminent.”
Economists say that the more Nepal depends on imported goods, the more it will suffer from inflation.
According to the Nepal Rastra Bank, Nepal’s trade deficit increased by 70.6 percent to Rs129.97 billion as imports surged to a high of Rs150.73 billion in a single month putting pressure on foreign exchange reserves.
With the country spending a large amount of foreign exchange on imports, the inflow of remittance, which is the largest source of foreign currency reserves, dropped by 18.1 percent to Rs75.96 billion in the review period in contrast to an increase of 23 percent during the same period last fiscal year.
The hike in transportation costs is also the key component to fuel inflation.
With the beginning of Nepal’s new fiscal year in mid-July, the Department of Transport Management had allowed transport entrepreneurs to jack up bus fares on inter-provincial routes by a sharp 28 percent.
Cargo carriers serving routes in the Tarai and hills have been permitted to hike freight charges by 26 and 20 percent, respectively. Shipping costs are a key component of food prices in countries like Nepal.
Gunakar Bhatta, executive director of the Nepal Rastra Bank, said the supply constraint is a major reason behind the rise in commodity prices. “As soon as the supply side resumes, inflation will gradually decline,” he said. “Besides, observing the market trend, prices generally increase during the festive time as nearly 40 percent of annual consumption takes place in the first quarter of the fiscal year.”
Also the government’s social security expenses have increased which also impacts inflation, economists say.
This year, according to traders, the rise in vegetable prices was largely due to extended monsoon. Monsoon generally begins on June 10 and lasts until September 23.
Continuous rainfall has impacted crop production while floods and landslides have disrupted the smooth supply of vegetables in Kathmandu Valley.
The problem, however, is stemming from multiple factors.
“As I said, there is political instability and there is no government… elections are also not far. Politicians take money from traders who raise the money from consumers,” said Acharya. “It's been a deep-rooted problem for decades. Elections increase the price of everything.”
And there’s a surge in imports.
“We are not only importing goods,” said Acharya, adding, “We are importing inflation as well.”