The Kathmandu Post, 17 July 2018
Consumer price inflation reached 4.1 percent in June with people paying higher prices to buy food items, mainly vegetables, fruits, ghee and oil, milk products and eggs. Consumer price inflation stood at 2.8 percent during the same period last year.
The 11-month Macroeconomic Report of Nepal Rastra Bank (NRB) shows that food prices rose 3 percent, calculated on the constant price of 2014-15. The rise in prices of green vegetables was attributed mainly to a short supply with the start of the rainy season as downpours damaged vegetable crops.
Prices of fruits, which contributed 2.08 percent to the consumer basket, soared 11.4 percent. Likewise, cereal grain and products that contribute 11.33 percent to the consumers’ expenditure increased 3.9 percent. Over the period, the price of pulses plunged 22.7 percent.
The government has set a target of containing inflation at 7 percent in the current fiscal year. Average inflation so far has stood at 4.1 percent. Average annual inflation fell to a 12-year low of 4.5 percent in the last fiscal year.
Inflation started moderating in Nepal after India formally adopted flexible inflation targeting in June 2016, making price stability the primary objective of the monetary policy. As per this policy, India fixed the inflation target at 4 percent with an upper tolerance level of 6 percent and a lower limit of 2 percent. This policy has helped Nepal to maintain price stability as the country imports over 60 percent of its requirements from India.
Prices of non-food items increased 5 percent, down from 5.8 percent last year. “A slower growth in prices of education, clothes and footwear, furnishing and household equipment and housing and utilities, among others, led to a moderation in non-food inflation during the review period,” the NRB report said. Among non-food items, the price of education rose 7 percent, the highest in the sector.
Broken down by geographical region, inflation in the mountains reached 6.4 percent due to a sharp rise in prices of non-food items and services. The figure was 4.9 percent in the hills and 4.2 percent in the Tarai. In the Kathmandu Valley, the price rise stood at 3.1 percent.