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

Published on September 26, 2025

The CPI data from 2022/23 to 2025/26 shows a story of gradual convergence between Nepal and India’s inflation rates, reflecting both shared regional dynamics and domestic differences. In the earlier years, Nepal consistently ran hotter than India—averaging 7.74% in 2022/23 compared to India’s 6.06%, a gap of 1.68 percentage points. This was largely driven by Nepal’s heavier reliance on food imports, limited storage capacity, and vulnerability to global shocks.

In 2023/24, the difference narrowed, with Nepal averaging 5.44% and India 5.11%. By 2024/25, the two economies were nearly aligned, at 4.06% for Nepal and 3.91% for India, a gap of just 0.16 points. Both followed a similar seasonal pattern—higher inflation during winter and festival months (November–December) and easing during harvest months (April–July). Still, Nepal’s spikes were sharper, with inflation peaking at 6.05% in December, compared to India’s 5.22%.

The real turning point came in August 2025/26, when Nepal’s inflation dropped to 1.68%, falling below India’s 2.07% for the first time in four years. This reversal was driven by a steep decline in food inflation in Nepal, thanks to strong harvests and stable imports, while India faced agricultural price pressures due to erratic monsoons.

This convergence suggests that while both countries share common inflationary pressures from energy prices, global trade, and food cycles, their domestic conditions shape the intensity of price swings. Nepal’s inflation is highly sensitive to food supply shocks, while India’s is more tied to monsoon patterns and service sector pressures. For South Asia as a whole, this convergence reflects increasing economic interdependence but also underscores the need for coordinated strategies in food security, trade, and monetary stability.

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.