CPI Trends in Nepal: Inflation Cooling Down in 2082/83?

Published on September 24, 2025

Nepal’s inflation trajectory, as measured by the Consumer Price Index (CPI), shows a clear pattern of cooling down in recent years after a period of volatility. In FY 2020/21, inflation stood at 4.19%, relatively stable by regional standards. However, it surged to 8.08% in FY 2021/22, driven by global supply chain disruptions, rising oil and food prices, and domestic bottlenecks. Inflation remained elevated at 7.44% in FY 2022/23, straining household budgets and increasing borrowing costs.

The tide began to turn in FY 2023/24, when CPI inflation moderated sharply to 3.57%, helped by easing global commodity prices, a stronger external position, and improved foreign reserves. By FY 2024/25, inflation cooled further to 2.20%, with mid-August data for FY 2082/83 showing a still-lower reading of 1.68% year-on-year. This is the lowest level in recent years and indicates that Nepal has entered a phase of relative price stability.

Breaking it down, the food CPI tells a different story. While overall inflation has fallen, food prices have shown volatility, including periods of deflation such as -1.19% in FY 2024/25 and -2.28% by mid-August 2082/83. This reflects supply fluctuations, import dependency, and seasonal agricultural trends. Meanwhile, non-food CPI has remained more stable, hovering around 3–4%, suggesting that core inflation is under control even as food prices swing.

For the broader economy, cooling inflation has both positives and challenges. On one hand, it improves household purchasing power, supports consumption, and lowers pressure on interest rates, creating a more stable environment for businesses and investors. On the other hand, very low inflation—or deflation in food items—could signal weak demand and sluggish domestic activity, especially in agriculture and small-scale industries. This balance highlights that while inflation stability is a positive development, Nepal must still focus on stimulating production and investment to ensure growth is not hindered by weak demand.

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.