Real GDP Growth at Purchasers’ Price: What Investors Must Know

Published on September 24, 2025

Nepal’s real GDP at purchasers’ price is one of the most critical indicators for investors as it reflects the actual expansion of the economy after adjusting for inflation. Over the past five years, Nepal has witnessed fluctuating growth, shaped by external shocks, domestic policy challenges, and structural bottlenecks. Growth peaked at 5.6% in FY 2021/22, supported by post-pandemic recovery momentum, before sharply slowing to 2.0% in FY 2022/23, one of the weakest performances in recent history. The economy regained some footing in FY 2023/24 with growth at 3.7%, and the outlook for FY 2024/25 is stronger at 4.6%, showing clear signs of stabilization.

For investors, these trends matter deeply. Real GDP growth reflects the overall demand environment, the health of consumer spending, and the opportunities available for business expansion. The improvement to 4.6% suggests that the economy is entering a more stable phase, supported by rising remittances, strong external balances, and low inflation. At the same time, it highlights that Nepal remains vulnerable to slower investment momentum, as capital formation has fallen below 30% of GDP, limiting the productive capacity of the economy.

A closer look at sectoral dynamics reveals that services remain the main driver of real GDP growth, powered by remittance-led consumption, financial activity, and a recovering tourism sector. Agriculture continues to provide stability but limited dynamism, while industry faces headwinds from weak fixed capital formation and underutilized public investment. For investors, this means that short-term opportunities are strongest in services—especially financials, retail, IT, and tourism—while longer-term growth requires policy reforms to revive industrial and infrastructure investments.

The most important insight is that while Nepal’s real GDP growth of 4.6% looks encouraging compared to the past two years, it still falls short of the 6–7% growth needed to significantly transform the economy, reduce unemployment, and raise incomes. Investors must therefore assess opportunities with caution: near-term gains are possible in consumption-led sectors, but long-term value creation depends on how effectively Nepal channels remittance income and high savings into productive domestic investment.

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.