Why Food Prices Are Declining in Nepal: Data from Mid-August 2082

Published on September 24, 2025

The latest inflation data reveals that food prices in Nepal have entered deflationary territory, with the food CPI recording -2.28% in mid-August 2082/83. This marks a continuation of the trend from FY 2024/25, when food inflation had already fallen to -1.19%, highlighting a persistent decline in food prices. While this may appear to be good news for consumers, the underlying causes reflect deeper structural and cyclical dynamics in Nepal’s economy.

One major factor is improved supply conditions. A favorable agricultural season, alongside increased imports of cereals, vegetables, and processed food items, has helped keep domestic food markets well-stocked. Strong foreign exchange reserves (USD 20 billion by mid-August 2082/83) have enabled stable imports, preventing food shortages and controlling price pressures. At the same time, the strengthening of the Nepali rupee against regional currencies has helped reduce import costs for key staples.

Another driver is weak domestic demand. Household consumption growth has been subdued, with wages and salaries increasing at just 2.63% in FY 2024/25, limiting purchasing power. Many households are prioritizing non-food spending such as education, healthcare, and housing, where inflation is still persistent, leaving less pressure on food demand. The combination of slowing demand and ample supply has created conditions for food price declines.

Seasonal and global trends also play a role. Global food commodity prices stabilized in 2024/25, particularly oil, wheat, and rice, which reduced imported inflation. Domestically, bumper harvests in certain crops led to temporary oversupply in local markets, pushing prices downward. However, this oversupply often hurts farmers, who face reduced incomes even as consumers enjoy cheaper food.

While food price deflation offers short-term relief to urban consumers, it poses risks for Nepal’s rural economy. Agriculture remains the livelihood for more than half the population, and falling farmgate prices discourage production, lower incomes, and risk deepening rural poverty. If prolonged, declining food prices could also suppress overall inflation (CPI stood at just 1.68% in mid-August 2082/83), signaling weak aggregate demand that may slow broader economic growth.

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.