Although about two-thirds of Nepal’s population is dependent on agriculture, farm yield is not sufficient for farmers to even feed themselves, let alone sell their produce to the market. The government’s chronic failure to import chemical fertiliser means that harvest has declined.
India has begun to control its export of wheat and sugar, and is said to be moving to control rice exports next. As of April 2022, Nepal imported rice worth Rs42 billion, sugar worth Rs4.7 billion, and wheat worth Rs6.32 billion from India. So far, New Delhi has spared Nepal from grain export bans, but that could easily change and spell disaster for Nepal.
Indeed, the disruption of the supply chain has raised fears of a global food crisis, with the worst case scenario being famine in parts of Africa and Asia. The Global Hunger Index 2021 ranked Nepal 76th out of 116 countries in terms of food insecurity. UNICEF figures show that even before this crisis, 43% of children under the age of five in Nepal are undernourished.
Meanwhile, Biswash Gauchan, executive director of the Center for Comprehensive Development Studies, argues that further inflation is inevitable because of the deteriorating international economic situation as Russia’s war on Ukraine drags on and keeps fuel prices high.
“It is normal for inflation rates to be higher in developing countries than in developed ones,” explains Siddharth Bhatt, deputy director of the NRB’s Economic Research Department. “Inflation does not have to always be detrimental if it is in the 2-4% range.”
An NRB study concluded that an annual inflation rate of up to 6.5% will help boost Nepal’s economy. Numbers beyond that would be harmful, says Nara Bahadur Thapa, a former NRB executive.
Read also: “Economy in trouble but no need to panic yet”, Nepali Times