Inflation climbs above 5% as fruit prices and transport costs surge

KATHMANDU: Nepal’s annual consumer inflation accelerated sharply in Baisakh (mid-April to mid-May), crossing the 5 percent mark for the first time this fiscal year, driven largely by soaring fruit prices, higher transport costs, and rising expenses for various goods and services.

According to the latest Current Macroeconomic and Financial Situation Report released by Nepal Rastra Bank, annual point-to-point consumer inflation stood at 5.04 percent in Baisakh 2083, almost double the 2.77 percent recorded during the same month of the previous fiscal year.

The figures indicate a renewed rise in price pressures across the economy after a prolonged period of relatively moderate inflation.

Food and Non-Food Prices Both Rise

The central bank’s data show that inflationary pressures were broad-based, affecting both food and non-food categories.

The food and beverage group recorded inflation of 4.63 percent, significantly higher than the 1.52 percent seen a year ago.

Similarly, inflation in the non-food and services group climbed to 5.26 percent, compared to 3.45 percent during the corresponding period last year.

Despite the recent acceleration, average inflation during the first ten months of the current fiscal year remained relatively contained at 2.66 percent, lower than the 4.39 percent average recorded during the same period of FY 2024/25.

Economists say the latest figures suggest that while overall inflation has remained manageable for much of the year, certain sectors are now experiencing stronger price pressures.

Fruit Prices Jump Nearly 19 Percent

Among food items, fruits recorded the sharpest increase.

According to NRB, fruit prices surged by 18.60 percent year-on-year, making them the single largest contributor to food inflation during the review month.

Consumers also faced higher prices for several essential food items:

• Ghee and edible oils: up 13.99 percent
• Vegetables: up 5.40 percent
• Fish and meat products: up 4.16 percent

The rise in fruit and vegetable prices is likely linked to supply-side constraints, transportation costs, seasonal factors and import-related expenses.

However, not all food products became more expensive.

The report shows that:

• Pulses and legumes became cheaper by 1.67 percent.
• Spices declined by 0.65 percent.

These declines helped partially offset broader food inflation.

Transport Costs Rise by More Than 15 Percent

Outside the food sector, transportation emerged as one of the biggest drivers of inflation.

Transport fares increased by 15.30 percent, reflecting higher operating costs across passenger and freight transportation services.

The increase is particularly significant because transportation costs influence the prices of many other goods and services throughout the economy.

Another major contributor was the category of miscellaneous goods and services, where prices jumped by 19.90 percent, the highest increase among non-food categories.

Other notable increases included:

• Education: up 5.54 percent
• Alcoholic beverages: up 4.77 percent
• Clothing and footwear: up 4.73 percent

The rise in these categories suggests that inflationary pressures are extending beyond essential commodities and affecting household spending more broadly.

Terai Records Highest Inflation

Price increases varied considerably across Nepal’s geographical regions.

According to NRB data:

• Terai: 5.59 percent
• Kathmandu Valley: 4.90 percent
• Hills: 4.73 percent
• Mountain Region: 3.73 percent

The Terai recorded the highest inflation rate among all regions, reflecting stronger price increases in consumer goods and services.

The mountain region, by contrast, experienced the lowest inflation.

Urban Inflation Outpaces Rural Areas

The central bank’s analysis also reveals a growing urban-rural inflation gap.

Inflation in urban areas reached 5.29 percent, compared with 4.35 percent in rural areas.

The difference suggests that residents of cities and municipalities are facing stronger cost-of-living pressures than those living in rural communities.

Higher housing-related expenses, transport costs, education fees and service-sector inflation are often among the factors contributing to stronger urban inflation.

Koshi Province Sees Highest Price Growth

At the provincial level, inflation rates varied significantly.

Koshi Province recorded the highest inflation at 5.64 percent, while Bagmati Province reported the lowest at 4.55 percent.

The variation reflects differences in transportation costs, supply chains, local market conditions and consumption patterns across provinces.

Wholesale Inflation Also Accelerates

The increase in consumer prices was accompanied by a rise in wholesale prices.

According to NRB, annual point-to-point wholesale inflation reached 5.96 percent in Baisakh, up from 3.95 percent a year earlier.

Within wholesale categories:

• Construction material prices increased by 2.47 percent.
• Intermediate goods prices surged by 15.59 percent.

Rising wholesale prices are closely watched because they often signal future increases in consumer prices if producers pass higher costs on to consumers.

Nepal Inflation Higher Than India

The latest data also show Nepal experiencing higher inflation than neighboring India.

While Nepal’s annual consumer inflation stood at 5.04 percent in Baisakh, India’s consumer inflation rate was 3.48 percent during the same period.

The widening gap suggests domestic factors, including transportation expenses and supply-chain dynamics, are contributing to stronger inflationary pressures in Nepal.

Implications for Consumers and Policymakers

The rise in inflation comes as Nepal’s economy continues to benefit from strong remittance inflows, robust foreign exchange reserves and improving liquidity conditions in the banking sector.

However, the latest figures indicate that households are beginning to feel greater pressure from rising living costs, particularly in food, transport and essential services.

For policymakers at Nepal Rastra Bank, the inflation trend will be an important consideration as the central bank prepares the monetary policy for the upcoming fiscal year.

While the current inflation rate remains below historical peaks seen in recent years, continued increases in food prices, transportation costs and service-sector expenses could influence future monetary policy decisions.

The latest data suggest that Nepal’s inflation remains under control by regional standards but is moving upward, with fruit prices, transport fares and miscellaneous services emerging as the key drivers of rising consumer costs across the country.