By Sandeep Chaudhary
Policy Lessons from India: Can Nepal Control Inflation More Effectively?
The CPI data from 2022/23 to 2025/26 reveals how Nepal has consistently faced higher inflation than India, averaging 1.68 percentage points above India’s CPI until very recently. Nepal’s inflation was 7.74% in 2022/23 compared to India’s 6.06%, and even in 2023/24 and 2024/25, Nepal’s price growth remained slightly higher. Only in August 2025/26 did Nepal’s CPI (1.68%) finally fall below India’s (2.07%), marking a historic reversal. This long trend of higher inflation in Nepal raises an important question: what policy lessons can Nepal learn from India to better manage price stability?
India’s relatively moderate inflation outcomes can be attributed to a combination of structural strengths and targeted policies. First, India benefits from a larger and more diversified agricultural base, which helps stabilize food supply even during seasonal shocks. Second, India has invested heavily in storage, logistics, and public distribution systems, which reduce volatility in staple food prices. Third, India’s monetary policy framework, led by the Reserve Bank of India, explicitly targets inflation, with a well-communicated band (4% ±2%), ensuring tighter coordination between fiscal and monetary measures. Additionally, India uses strategic buffer stock releases (e.g., wheat, rice, pulses) and adjusts import duties to control food inflation during shortages.
Nepal, by contrast, remains highly dependent on food imports and lacks strong storage and supply-chain infrastructure. Seasonal inflation spikes—especially during winter and festival months—show how vulnerable Nepal is to food-driven shocks. Moreover, Nepal Rastra Bank’s monetary policies often focus on liquidity and foreign reserves management rather than explicit inflation targeting, leaving gaps in inflation control.
For Nepal, adopting lessons from India means:
Strengthening agricultural productivity and storage systems to smooth out seasonal volatility.
Developing buffer stock policies for key staples like rice, wheat, and pulses.
Improving cross-border trade logistics to stabilize prices during shortages.
Enhancing monetary policy frameworks with clearer inflation targets.
Nepal has shown progress in lowering inflation—down to 1.68% in August 2025/26, its lowest in years—but sustaining this requires more than favorable harvests. By adopting India’s supply-chain strategies, inflation-targeting policy frameworks, and food security mechanisms, Nepal can manage inflation more effectively and shield households from recurring price shocks.
