Reference no: EM133637300

The y-o-y consumer price inflation stood at 5.97 percent in the seventh month of FY 2021/22 compared to 2.70 percent a year ago. Food and beverage inflation stood at 6.00 percent whereas non-food and service inflation stood at 5.96 percent in the review month. 2. Under the food and beverage category, the prices of ghee & oil, vegetable, and pulses & legumes sub-categories rose by 20.68 percent, 14.07 percent and 9.36 percent respectively on y-o-y basis. Likewise, under the non-food and services category, the prices of transportation, education and furnishing & household equipment subcategories rose by 15.87 percent, 7.86 percent and 5.92 percent respectively on y-o-y basis

The upward pressure on prices in Nepal began to unfold as the economy re-opened post Covid19 lockdown. Rather interestingly, and for the most part, this was not caused by supply shocks. In the developed countries such as the US, we have heard of congested ports, manufacturers not being able to fulfil demand because of chip shortages or insufficient truck drivers. Nothing of this sort was taking place in Nepal. Here, middlemen are notorious for raking in high spreads-producers getting paid less and retailers charged more. Covid-19 was used as an opportunity to squeeze consumers.

More importantly, dependence on imports is too high. And this may have something to do with the recent jump in inflation.

1. Based on the above mentioned facts, analyze the current situation of inflation in Nepal.

2. Examine the major factors responsible for supply side inflation in Nepal.

3. Suggest various policy measures to curb inflation.