Wholesale Price Index 2082/83: Signals for Future Inflation

The Wholesale Price Index (WPI) is a leading indicator for inflation trends because it tracks changes in prices at the wholesale or producer level before they are transmitted to consumers. Nepal’s WPI has shown a marked cooling over the past few years. After peaking at 12.74% in FY 2021/22 due to global commodity shocks and supply chain disruptions, it slowed to 4.98% in FY 2022/23, further to 4.41% in FY 2023/24, and dropped to just 1.05% in FY 2024/25. By mid-August 2082/83 (2025/26), WPI inflation stood at 2.37%, signaling subdued wholesale price pressures.

This downward shift has important implications for future inflation. Since wholesale prices are a precursor to retail prices, the moderation suggests that consumer inflation is likely to remain contained in the short term, aligning with the cooling CPI trend (1.68% as of mid-August 2082/83). Stable global oil prices, improved foreign exchange reserves, and easing import costs have contributed to this trend. For households, this means the risk of a sudden spike in consumer prices has diminished, at least in the near future.

However, the signals are mixed when viewed alongside sectoral price trends. While food prices at wholesale and retail levels have entered negative territory, non-food components—particularly energy, transport, and housing—remain under upward pressure. This indicates that while overall inflation may remain subdued, household costs in essential non-food categories will not ease as quickly. Furthermore, very low wholesale inflation can also reflect weak demand in the economy, suggesting businesses face challenges in raising prices due to slow consumption.

For policymakers and investors, the WPI signals a window of price stability that could be leveraged to stimulate investment and credit growth. Lower wholesale inflation reduces input cost pressures for manufacturers and traders, potentially encouraging production. Yet, unless this translates into stronger domestic demand and higher fixed capital formation, subdued wholesale prices might also mirror underlying economic sluggishness.