Nepal | July 19, 2019

Inflation moderates to 10.2pc

Himalayan News Service

Kathmandu, April 20

Improved supply of fuel and daily essentials and narrow inflation wedge between Nepal and India helped limit inflation to 10.2 per cent in the eighth month (mid-February to mid-March) of this fiscal.

The Macroeconomic Report of the eighth month unveiled by Nepal Rastra Bank (NRB) today shows that the consumer price inflation moderated to 10.2 per cent in mid-March from a peak of 12.1 per cent in mid-January.

Consumer price inflation has slipped since mid-January after normalcy was restored in the southern customs points. Consumer price index stood at 11.3 per cent in mid-February as the border blockade at the southern plains organised by the Madhes-based political parties ended from the first week of February.

Inflation of food and beverages, nevertheless, is still higher compared to the services group inflation. Food and beverages group inflation dropped to 10.3 per cent as against 12.8 per cent in the previous month. Meanwhile, non-food and services group inflation edged up to 10.2 per cent against 10.1 per cent in the preceding month.

Meanwhile, inflation in India has also slightly moderated since January due to fall in oil prices. Narrow inflation wedge between India and Nepal is another reason behind moderate inflation as the country is largely dependent on the southern neighbour for import of daily essentials, industrial raw materials and is entirely reliant for fuel import.

“Inflation in the country was 10.2 per cent in mid-March as compared to 4.8 per cent in India during the same period, showing an inflation wedge of 5.4 per cent during the review period,” says the NRB report.

A year ago, inflation in Nepal stood at seven per cent compared to 5.3 per cent in India, reflecting a narrower inflation wedge of 1.7 per cent. Inflation wedge between Nepal and India, which rose due to the massive temblors of last year and disruptions in supply lines from the southern neighbour, has been gradually narrowing down in recent months.

In the review period, supply from all the customs points with India except for Birgunj — the major trade route with the southern neighbour — rose significantly. Import growth from dry port customs office (also located in Birgunj) rose by 11.7 per cent to Rs 60.31 billion, Bhairahawa by 71.3 per cent to Rs 108.25 billion and Biratnagar by 8.5 per cent to Rs 72.84 billion as compared to the corresponding period of the previous fiscal.

Similarly, import surged by 13.9 per cent to Rs 18.40 billion from Mechi, 10.2 per cent to Rs 16.83 billion from Nepalgunj, over 100 per cent from Krishnanagar to Rs 8.7 billion and over 100 per cent to Rs 8.96 billion from Kailali customs office, against the corresponding period of the previous fiscal, as per NRB.

Some routes also emerged as alternative trade routes, like import from Jaleshwar Customs Office surged by 242.8 per cent to Rs 1.47 billion in the review period.

Export slumps substantially

KATHMANDU: Export of goods and services from the country dropped around 25 per cent in the first eight months of this fiscal. The country exported goods and services worth Rs 42.73 billion as compared to Rs 56.87 billion in the corresponding period of last fiscal. Export to China and India dropped heavily by 45.9 per cent and 34.5 per cent, respectively, in the review period due to obstructions of trade routes. China has only temporarily opened the Tatopani trade route so far after it was damaged in last year’s earthquake. Similarly, the four-month long protest along the border points with India organised by Madhesi parties also adversely affected export and import to and from India. Third-country export also dropped by 3.7 per cent as the unfavourable economic situation affected the production sector and exporters failed to deliver the goods to their third-country buyers in a timely manner. In the review period, import declined by 13.9 per cent to Rs 425.8 billion.


A version of this article appears in print on April 21, 2016 of The Himalayan Times.


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