Food Inflation in Nepal and Its Implications

  • Ramesh SharmaEmail author


This chapter presents an overview of the long-term trends in food and non-food inflation, and estimates the relative contributions of various food products to overall food inflation. Key findings are that the underlying character of inflation in Nepal changed fundamentally since around 2007 with food inflation becoming much more prominent and a large contributor to overall inflation, vegetables were the top contributor to food inflation, and that food prices are strongly cointegrated with Indian prices, but not non-food price. Unrecorded informal trade with India should explain much of the close price linkages. Food prices tend to be more volatile during periods of high prices and ensuring price stability is a matter of great concern. Further, price surges do not necessarily lead to positive supply response.

Abbreviations (Food Inflation in Nepal chapter)


Augmented Dickey–Fuller (test)


Consumer price index


Consumer price index for industrial workers (India)


Error-Correction Model


Fiscal year


Government of India


Government of Nepal


Informal Cross-border Trade


Nepal living standards survey


Nepal Rastra Bank


Per annum


Wholesale Price Index


  1. ADB. (2011). Global food price inflation and developing Asia. Manila: Asian Development Bank.Google Scholar
  2. Bhattacharya, R., & Gupta, A. S. (2015). Food inflation in India: Causes and consequences. Working Paper No. 2015-151, National Institute of Public Finance and Policy, New Delhi.
  3. Chand, R. (2010). Understanding the nature and causes of food inflation. Economic and Political Weekly, 45(9), 10–13.Google Scholar
  4. Chand, R., Gulati, A., Shinoj, P., & Ganguly, K. (2011). Managing food inflation in India: Reforms and policy options. Policy Brief No. 35. National Centre for Agricultural Economics and Policy Research, New Delhi.
  5. Dobrescu, G., Nelmes, J., & Yu, J. (2011). Inflation dynamics in Nepal. In Nepal: Selected Issues. IMF Country Report No. 11/319, November 2011, IMF.Google Scholar
  6. FAO. (2009). The state of agricultural commodity markets 2009: High food prices and the food crisis—Experiences and lessons learned. FAO, Rome. Scholar
  7. Ganguly, K., & Gulati, A. (2013). The political economy of food price policy: The case study of India. WIDER Working Paper 34/2013, UNU-WIDER.
  8. Ginting, E. (2007). Is inflation in India an attractor of inflation in Nepal? IMF Working Paper WP/07/269, November 2007.
  9. GoI (various years), Economic Survey. Ministry of Finance, Government of India, New Delhi. Available at
  10. Gulati, A., & Saini, S. (2013). Taming food inflation in India. Discussion paper no. 4. Commission for Agricultural Costs and Prices, India.Google Scholar
  11. Haile, M. G., Kalkuhl, M., & von Braun, J. (2014). Agricultural supply response to international food prices and price volatility: A cross-country panel analysis. Center for Development Research (ZEF), Bonn University, Germany.
  12. Kumar, R., Vashisht, P., & Kalita, G. (2010). Food inflation: Contingent and structural factors. Economic and Political Weekly, 45(10), 16–19.Google Scholar
  13. Nair, S. R., & Eapen, M. L. (2012). Food price inflation in India (2008–2010). Economic and Political Weekly, 47(20), 46–54.Google Scholar
  14. Mishra, P., & Roy, D. (2011). Explaining inflation in India: The Role of Food Prices. Mimeo: IMF and IFFPRI, October 31, 2011, Washington, D.C.
  15. NRB. (2007). Inflation in Nepal. Kathmandu: Research Department, Nepal Rastra Bank.–Inflation%20in%20Nepal.pdf.
  16. Sharma, R. (2017), The scale and drivers of informal trade in agricultural products across the Nepal-India borders. Paper prepared for the SAARC Agricultural Trade Forum, Organized by SAARC Agriculture Centre and FAO, 22–23 May 2017, Dhaka, Bangladesh.Google Scholar
  17. Sharma, R., Kumar, A., & Joshi, P. K. (2017). Nepal-India agricultural trade: Trends, issues, and prospects. Policy Reform Initiative Project (PRIP)-Nepal Report 3, IFPRI.Google Scholar
  18. Shrestha, M. B., & Chaudhary, S. K. (2012). The impact of food inflation on poverty in Nepal. Nepal Rastra Bank Economic Review, 24(2).Google Scholar

Copyright information

© Springer Nature Singapore Pte Ltd. 2019

Authors and Affiliations

  1. 1.Food and Agriculture Organization (FAO)KathmanduNepal

Personalised recommendations