Inflation Fell to 1.11%: Good News For the Market, But What Does it Really Mean?
If you’ve been out shopping for groceries in Nepal lately, you might have noticed something surprising: prices aren’t climbing the way they used to. Official numbers show inflation has dropped to just 1.11%; a big change from last years 5.6%.
At first glance, this feels like the good news. Lower inflation usually means families can plan their budgets with less stress, and the fear of prices going up every month eases. But inflation is a bit like a fever chart; it can mean the patient is healing, or it can mean the body is weak. So, let’s dig deeper into what this drop really means.
What the numbers show?
- Food and drinks actually got cheaper overall (-3.32%).
- Non-food items and services still went up (+3.69%).
- Vegetables saw the biggest drop; prices fell by a sharp -14.43% compared to last year. (NRB data)
In short: your grocery basket may feel lighter on the wallet, but services and other daily costs haven’t slowed down as much.
Why low inflation is both good and tricky?
Lower inflation can be a blessing when it comes from good harvests, smoother transport, or falling global prices. Everyone benefits in that case.
But sometimes, inflation falls because people are buying less. When demand weakens, sellers struggle to raise prices and may even cut them just to sell their goods. Reports suggest weak demand is part of Nepal’s current story. That’s why low inflation doesn’t always mean the economy is strong—it can also signal that growth is slowing.
Who wins—and who loses?
- Consumers: Families feel relief when prices rise more slowly.
- Farmers and small traders: They may struggle. If vegetable prices crash, farmers earn less, even though their costs for fertilizer, transport, and labor don’t fall as much. Over time, this can discourage investment in farming.
And remember, inflation isn’t the same everywhere. According to Nepal Rastra bank, the countrys central bank, provinces like Koshi (1.80%) and Madhesh (1.73%) saw higher inflation, while Sudurpashchim (0.26%) and Gandaki (0.37%) had much lower rates.
What Nepal should do now?
This drop in inflation gives policymakers some breathing room, but it’s not a reason to relax. Three smart moves stand out:
- Spend wisely on public projects: roads, irrigation, logistics—things that create jobs and boost productivity.
- Make credit flow to productive businesses: lower inflation alone won’t make companies expand. They need access to finance to grow.
- Support vulnerable households and farmers: but do it carefully, without distorting markets. Targeted help is better than blanket price controls.
The bottom line
A 1.11% inflation rate is great news for families managing daily expenses. But the bigger question is: are prices calm because the economy is healthy, or because demand is weak?
If Nepal treats low inflation as the finish line, it risks missing the real challenge - restoring confidence, investment, and broad-based growth.
Article by: Kriti Jha
