Inflation

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Comparative Analysis of Inflation in Nepal and India

Nepal Rastra Bank
Research Department
Baluwatar, Kathmandu

30 November 2011

Nepal Rastra Bank
Research Department
30 November 2011

Comparative Analysis of Inflation in Nepal and India
Background: Year-on-Year monthly variation of inflation, both in Nepal and India, seemed to be higher than expected at present situation. Inflation in Nepal is largely affected by rising food price in the country, which is a global phenomenon also in the present context. However, inflation in food component has come down to single digit after a long time in October 2011. Non food inflation would go higher in the future if the present exchange rate trend (especially USD exchange rate appreciation) still goes to upward direction. Overall consumer price inflation in Nepal has been influenced by rising prices of food and petroleum products and rising inflation India. Inflation data1 for the past few years (August 2007 to October 2011 of Nepal and August 2007 to July 2011 of India for the analysis of monthly annual variation) have been taken into consideration for a review. Observations and suggestions extended by a report (IMF Country Report No. 11/319, November 2011- Nepal: Selected Issues) of International Monetary Fund (IMF) have also been referred. Consumer Price Inflation in Nepal: Overall Inflation: Overall consumer price inflation was moderate between August 2007 and March 2008 having an approximate range of 5 percent to 6 percent changes.  Inflation started to escalate and reached to double digit (10.1 percent) in June 2008. Afterwards, overall inflation remained either in double digit (highest peak 13.8 on January 2009) or higher side single digit till to date within the review period. Food Price Inflation:  Very few months (August 2007 – March 2008 except in September) observed a single digit food price inflation ranging from 6.6 percent to 9.2 percent. Rest of the periods observed double digit inflation

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