NRB's inflation data misleading

DIKSHYA SINGH

KATHMANDU: Despite the opposing fundamentals, the government statistics of rate of price rise has incredulously hit the target fanning doubts regarding the credibility of government statistics.

The year-on-year inflation in the eighth month of the current fiscal year stands at seven per cent, according to the macroeconomic report published by Nepal Rastra Bank (NRB). Likewise, the report states that broad money supply during the period has gone up by 12 per cent, and national salary and wage index also increased by 27.6 per cent.

The increase in the wage rate and money supply puts more money in the hands of people which eventually increases demand for products leading to increased price, theoretically. But in Nepal, increased or reduced money supply seems to have little or no effect whatsoever.

The lowered inflation, in spite of the increased money supply and wage, gives rise to suspicion regarding possible airbrushing of the data. “Government statistics regarding inflation is unreliable as it is quite ironical that inflation has remained at seven per cent while money supply has soared and average households have difficulty in meeting expenses,” said economist Dr Bishwambher Pyakurel.

In the corresponding period last year, broad money had increased by 5.3 per cent while inflation grew by 10.7 per cent. Likewise, the same report states that national salary and wage index had increased by 19.41 per cent in the corresponding period.

Likewise, empirical studies show that, in Nepal, 10 per cent increment in money supply results in inflation by three to four per cent. “Moreover, the inflow of money through donor agencies, which makes up a large part of money supply, is still not well accounted for,” pointed out Dr Pyakurel.

The monetary policy of the current fiscal year has estimated to level inflation at seven per cent –– the South Asian inflation average. From the sixth month, NRB data shows inflation has tamed down to seven per cent. NRB has estimated to tame down inflation by keeping money supply within 15 per cent, in the monetary policy.

“Hitting the target due to data manipulation might seem to be a political milestone but it will have serious economic implications,” he cautioned, adding, all of the economic projections and budget estimations are done based on NRB’s inflation rate and planning commission’s growth rate, and if any of these rates are false then the desired results cannot be attained.

However, statistics show that it cannot be denied that the cost of living for an average Nepali has skyrocketed due to rising prices. “If households base their monthly outlay on the official statistics then they will have a difficult time managing expenses,” pointed out consumer rights activist Ramesh Chandra Paudel, who is also vice president of Consumer Rights Protection Forum.

Moreover, there is a tendency among retailers and wholesalers to feed researchers with prices that are lower than the ones being charged to the public, thus misleading the data, he added.

“The theories and reality do

not match in the Nepali context. Moreover, money supply is also within the targeted limit and inflation has also come down,” pointed out NRB spokesperson Bhaskar Mani Gyanwali.