Salary Growth vs Inflation: Are Nepalis Really Better Off?

The relationship between salary growth and inflation is one of the most telling measures of whether workers are improving their standard of living. In Nepal, the Salary and Wage Rate Index shows that nominal incomes have risen in recent years but not always in step with inflation. For instance, salaries and wages grew just 2.76% in FY 2020/21, when inflation was 4.19%, meaning workers actually lost purchasing power. In FY 2021/22, wages jumped by 9.09%, but inflation also soared to 8.08%, leaving real income growth only marginal. Similarly, in FY 2022/23, wages rose by 8.71%while inflation was 7.44%—again, only a slim real gain.

The situation has become even more concerning in the last two years. In FY 2023/24, wages increased just 3.56%, barely keeping up with inflation at 3.57%. And in FY 2024/25, salary growth fell further to 2.63%, while inflation dropped to 2.20%. On paper, this means wages slightly outpaced inflation, but the real benefit to workers is negligible, particularly given rising non-food costs such as housing, utilities, education, and healthcare, which grew faster than the overall CPI.

This mismatch between salary growth and the cost of living suggests that most Nepalis are not significantly better offdespite stable inflation. While headline data shows some years of positive real wage growth, the gains are small, inconsistent, and easily offset by structural pressures such as high urban rents and imported goods dependency. For rural workers, the situation is even more difficult: with food inflation turning negative (-2.28% in mid-August 2082/83), farmers are facing lower incomes, even as urban households benefit from cheaper food prices.

The implication is that Nepali workers are effectively treading water. They are not experiencing significant improvements in purchasing power, and in many cases, real incomes remain stagnant. Without stronger productivity-driven growth, industrial expansion, and wage policies tied to cost-of-living changes, salaries will continue to lag behind household needs. This reinforces the reliance on remittances, as many families depend on foreign earnings rather than domestic wages to maintain living standards.