Dubiously distinct

Published On: July 20, 2016 12:01 AM NPT By: Republica  | @RepublicaNepal

Rampant inflation of Nepal
It is hard to find a silver lining in the bleak skies over Nepal these days. Last year’s earthquakes, swiftly followed by the Indian border blockade, are together estimated to have pushed an additional two million Nepalis under the UN-defined ‘poverty line’ of US $2 a day. Even before the earthquakes, nearly one in four Nepalis (23.7 percent) was living under the ‘extreme poverty line’ of US $1.25 a day, while fully 56 percent Nepalis found themselves under the US $2 poverty line. With the two million new poor, Nepal, in the reckoning of many economists, is already the poorest country in South Asia (bar Afghanistan). Now, according to the Asian Development Bank, the country will also carry the dubious distinction of having the highest inflation rate in the South Asian region (including Afghanistan). The bank has projected 10.5 percent annualized inflation for the fiscal 2015-16 that has recently ended. This is easily the highest among the eight SAARC member states and more than double the regional average of 5.2 percent. The bank’s projected inflation for Nepal for the next fiscal, at 8.2 percent, is also the highest among the eight countries. This is an alarming prospect for low- and middle-income families in Nepal.  

If the current trend of unsustainable inflation growth continues, the vast majority of Nepalis could soon find themselves priced out of the Nepali markets. In a year’s time the prices of daily commodities like rice, lentils and vegetables have risen anywhere between 50 percent and 100 percent. But even as the prices of daily consumables inched up, the incomes of most Nepalis—bar the 500,000-odd civil servants whose salaries were increased by 25 percent this year—have been stagnant. As their salary growth failed to catch up with galloping inflation, they could either make do with less or consume substandard products. Since the bulk of the income of low- and middle-income households is spent on edibles, this meant compromising on the quality of the food they consumed. This in turn will translate into vastly different future health outcomes for the two sets of Nepalis.

Things won’t improve unless there is clear political commitment to take on the cartels and syndicates that artificially inflate market prices. For instance the daily edibles would be a lot cheaper if the freighters, all members of politically connected syndicates, didn’t charge through the nose for carrying these products to the market. Likewise, if the country could generate more electricity for its industries, their operating costs would tumble, which would ultimately reflect in cheaper prices for their final consumers. A stronger market monitoring mechanism would also help since many retailers and even some big supermarkets routinely charge their customers over and above the Maximum Retail Price (MRP). Hopefully, the country won’t see another hyperinflation-inducing earthquake or blockade in the immediate future. But even if that’s the case it will be cold comfort for millions of Nepalis already struggling to make their ends meet. The least the political class could do right now is to somehow together work out a consensual constitutional settlement. For unless there is first a semblance of political stability there is no way the national economy will improve for the benefit of the millions of poor and marginalized Nepalis.   


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