KATHMANDU: Inflation has moderated to 10.2 percent in mid-March after reaching nearly seven-year high of 12.1 percent in mid-January due to Tarai strikes and disruption of trade routes.
The inflation, fuelled by the supply side constraints, is slowing down after gradual normalisation of the supply of fuel and other essential commodities, according to a recent report on macroeconomic indicators published by Nepal Rasta Bank (NRB). According to NRB officials, Nepal’s inflation is driven by supply rather than demand, so the normalisation of supply has eased inflation. “If the stability continues, the inflation will keep on decreasing,” said Nara Bahadur Thapa, chief of NRB’s Research Department.
Breaking down geographically, the Kathmandu Valley witnessed a relatively higher inflation rate of 12.7 percent, followed by the Hilly region’s 10.4 percent, the Tarai region’s 8.6 percent and the mountain region’s 8.5 percent. Last year, the Kathmandu Valley and the hilly region had witnessed 7.1 percent inflation, followed 6.9 percent in the Terai region.
NRB officials said the population of Kathmandu is more sensitive to supply constraints. “The Kathmandu population is yet to recover from the hangover of the trade blockade and Tarai protests. Therefore, the mentality of Kathmandu denizens to hoard essential commodities is still prevailing,” said Thapa. “This is the major reason behind the higher inflation in the Valley.” While the food and beverage group inflation saw a pick-up of 10.3 percent, the non-food and services group inflation showed a growth of 10.2 percent in mid-March 2016, according to NRB.
Food and beverage items such as pulses and legumes sub-group and ghee and oil sub-group saw price rise of 31.6 percent and 18.8 percent, respectively, in the review period. Prices of spices sub-group and clothes and footwear sub-group saw growth of 16.6 percent and 15.3 percent, respectively. “The prices of clothes and footwear grew due to unavailability of cheaper Chinese goods imported through bordering Chinese market of Khasa,” said Thapa.
