Province-wise Economic Growth Nepal (2025/26)
Nepal's seven provinces and Kathmandu Valley show significantly different economic conditions. NRB data on inflation and credit provides a province-level economic snapshot.
Province-wise Inflation (Mid-March 2026)
| Province | CPI Inflation | vs National (3.62%) |
|---|---|---|
| Madhesh | 4.95% | +1.33pp above |
| Lumbini | 4.21% | +0.59pp above |
| Koshi | 3.96% | +0.34pp above |
| Kathmandu Valley | 3.64% | +0.02pp above |
| Bagmati | 3.31% | -0.31pp below |
| Gandaki | 2.87% | -0.75pp below |
| Karnali | 2.21% | -1.41pp below |
What Drives Provincial Differences
High inflation provinces (Madhesh, Lumbini): Heavy dependence on Indian imports, food price sensitivity, dense population, border trade dynamics. These Terai provinces face price pressures from cross-border inflation transmission.
Low inflation provinces (Karnali, Gandaki): More subsistence-oriented economies, lower market integration, sparse population. Low inflation here reflects limited economic activity rather than price stability.
Credit Distribution
Credit data is national-level in the NRB report, but sectoral patterns suggest:
- Kathmandu/Bagmati: Financial services, real estate, wholesale trade dominate
- Terai provinces: Agriculture (declining -1.99%), manufacturing, cross-border trade
- Hill provinces: Tourism, hydropower, services
- Karnali/Far West: Limited banking penetration, minimal credit flow
Conclusion
Nepal's provinces have a 2.74 percentage point inflation spread (4.95% to 2.21%). This gap highlights the need for region-specific economic policies — national-level monetary tools cannot address the unique price dynamics of each province.