Annual Average Inflation: Comparing Nepal’s Last 5 Fiscal Years

Published on September 24, 2025

Nepal’s annual average inflation (CPI period average) has moved through distinct phases over the past five years, reflecting both domestic conditions and global economic shifts. In FY 2020/21, average inflation was 3.60%, a relatively low and stable level as the economy began emerging from the pandemic slowdown. The following year, FY 2021/22, saw a sharp surge to 6.32%, driven by rising global fuel and food prices, supply chain disruptions, and imported inflation. This upward trend continued into FY 2022/23, when average inflation peaked at 7.74%, the highest in the five-year period, heavily straining household budgets and reducing real wage gains.

The picture improved in FY 2023/24, with inflation easing to 5.44%, supported by stabilizing international commodity prices, stronger foreign reserves, and moderating demand. By FY 2024/25, the average inflation rate cooled further to 4.06%, with mid-August 2082/83 data showing it at just 1.68% year-on-year, signaling a rare phase of price stability. The contrast between the highs of FY 2022/23 and the lows of FY 2082/83 highlights how quickly Nepal’s inflation environment can shift, shaped by external imports, remittance-driven demand, and domestic agricultural supply.

For households, these swings in inflation mean that periods of high cost-of-living pressure were followed by short-lived relief. For policymakers, the lesson is clear: while inflation has moderated, structural vulnerabilities remain. Heavy reliance on imports, exposure to global oil and food price shocks, and supply bottlenecks mean inflation can quickly resurface. Long-term stability requires boosting domestic food production, improving supply chains, and reducing dependency on volatile imports.

Policy Lessons from India: Can Nepal Control Inflation More Effectively?

India has kept inflation relatively moderate through strong agricultural systems, buffer stocks, and inflation-targeting policies, while Nepal has historically struggled with food-driven volatility. Nepal’s CPI fell below India’s in 2025/26 for the first time in four years, but to sustain this trend, Nepal must strengthen supply chains, adopt buffer policies, and set clearer inflation targets.

Inflation Convergence in South Asia: What Nepal-India CPI Data Reveals

Nepal and India’s inflation rates, once far apart, have gradually converged—Nepal’s CPI dropping from 7.74% in 2022/23 to 1.68% in 2025/26, while India’s remained steadier around 2–5%. For the first time in four years, Nepal’s inflation fell below India’s, highlighting both shared regional cycles and unique domestic vulnerabilities.

Nepal vs India: Monthly CPI Comparison and Regional Economic Impact

Nepal’s inflation fell to 1.68% in August 2025/26, below India’s 2.07%, reversing a four-year trend. While both economies share similar seasonal inflation cycles, Nepal’s sharper food-driven spikes contrast with India’s steadier, monsoon-driven patterns. Regionally, this convergence impacts household costs, trade competitiveness, and economic stability.

Inflation Gap Narrows: Nepal’s Deviation with India Falls to -0.39% in 2025/26

In August 2025/26, Nepal’s CPI stood at 1.68%, lower than India’s 2.07%, with the inflation deviation dropping to -0.39% for the first time in four years. While Nepal gained from falling food prices, India’s inflation stayed higher due to agricultural pressures, though both countries continue to face rising service costs.

Cross-Border Inflation Trends: How Nepal and India’s Prices Move Together and Apart

Nepal and India’s inflation trends usually move in sync, reflecting shared regional and global factors. But in August 2025/26, Nepal’s inflation (1.68%) fell below India’s (2.07%) for the first time in four years, thanks to easing food prices in Nepal, while India faced higher agricultural pressures.

Nepal vs India Inflation 2025/26: Why Nepal’s CPI Fell Below India’s for the First Time

In August 2025/26, Nepal’s inflation dropped to 1.68%, falling below India’s 2.07% for the first time in four years. While food price declines drove Nepal’s slowdown, India’s inflation held slightly higher due to agricultural pressures. However, Nepal’s service costs remain a long-term challenge, even as headline CPI looks favorable.