Thursday, June 16, 2016

Inflation still in double digits

Despite government's claims of having cracked its whip at price rises, the country's inflation is hovering at double digits.
According to the central bank's macroeconomic update, for the 10th month of the current fiscal year, consumer price inflation stood at 10 percent.
In mid-May, belying general expectations that inflation would follow the trend of continuous moderation seen from its peak of 12.1 per cent in mid-January, inflation stood at double digits, reads Nepal Rastra Bank's (NRB) monthly report published today.
"Despite the improved supply of fuel and other consumable items following the return of normalcy in the southern customs points, the reversal in the inflation trend occurred on account of rise in housing rents and education-related expenses," it says , adding, "Of the overall inflation, non-food and services group inflation of 10.4 per cent exceeded the food and beverage group inflation of 9.6 per cent in mid-May."
Among food and beverage items, the prices of pulses and legumes sub-group and the vegetables sub-group continued to remain at a higher level of 23.4 per cent and 20.1 per cent, respectively. The prices of the clothes and footwear sub-group, the housing and utilities sub-group and the alcoholic drinks sub-group saw increment of 17 per cent, 16.4 per cent and 15.9 per cent, respectively, according to the central bank.
Likewise, the report also revealed that Kathmandu Valley is the most expensive place to live in Nepal, geographically. The valley witnessed relatively higher rates of inflation at 11.5 per cent followed by the hilly region at 11 per cent, the mountain region at 9.1 per cent and the Tarai region at 8.6 per cent in mid-May.
Last year, the Kathmandu Valley, the hilly region and the Tarai region had experienced the inflation rates of 6.8 per cent, 7.7 per cent and 6.9 per cent, respectively, the report added.
Supply constraints due to the lingering impact of the April-May 2015 earthquakes and the obstruction at the southern trade routes also fuelled the inflation, widening the gap between prices in Nepal and India.
Year-over-year consumer price inflation of Nepal in the tenth month of the current fiscal year continued to remain at a higher level of 10 per cent compared to that of India at 5.8 per cent showing inflation wedge of 4.2 per cent, the report reads, adding that a year ago, such inflation in Nepal was 7.1 per cent compared to 5 per cent in India reflecting a narrower inflation wedge of 2.1 per cent only.
India's annual consumer price inflation accelerated to a near two-year high of 5.76 per cent in May, driven by surging prices of food products like pulses and sugar, which could dampen hopes of a rate cut at least during the next monetary policy review in August.
Likewise, the blockade during the Tarai-Madhesh protests also pulled the import and export figures down. According to the central bank, in the 10 months of current fiscal year 2015-16, merchandise exports decreased by 21.7 per cent to Rs 55.60 billion while merchandise imports dropped by 4.6 per cent to Rs 599.36 billion. "Exports to India and China decreased by 33.4 per cent and 35.6 per cent, respectively, whereas exports to other countries increased by 4.1 per cent in mid-May," the report says, adding that imports from China increased by 9.5 per cent whereas imports from India and other countries decreased 7.8 per cent and 4.1 per cent, respectively
Exports through Tribhuvan International Airport (TIA) and Dry Port customs office - Birgunj increased, whereas exports through other customs points decreased, the report says, adding, "On the import side, imports through Birgunj Customs Point decreased, whereas imports through other customs points increased. Likewise, trade has not yet resumed through Tatopani Customs Point."
Nepal's trade deficit also contracted – by 2.4 per cent – to Rs 543.76 billion in mid-May compared to an expansion of 10.1 per cent in mid-May last year.
The report also says that decrease in the number of outflow of the Nepali migrant workers has not hit remittance inflow hard yet. "The workers' remittances inflow grew by 10.2 per cent to Rs 538.87 billion till mid-May compared to a growth of 10 per cent in the previous year," it observed, adding that net transfer receipt increased by 11.8 per cent to Rs 628.07 billion. The number of Nepali workers seeking foreign employment, based on final approval, decreased by 22.2 per cent in the 10th month of the current fiscal year, compared to an increment of 8.9 per cent in the same period of last fiscal year.

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