Nepal’s rising cost of living is putting household incomes under growing pressure

Kathmandu, August 22, 2026 — For an ordinary Nepali household, the problem with rising prices is not simply that food, transport, rent, education and other necessities cost more than they did a few years ago. The bigger concern is whether household income has increased enough to keep pace with those costs.

Official data suggest that it has not always done so.

Nepal Rastra Bank’s National Salary and Wage Rate Index increased by 2.85 percent in the fiscal year 2024/25, while consumer prices increased by an annual average of 4.06 percent during the same fiscal year. In other words, the overall wage and salary index grew more slowly than consumer prices, indicating a decline in purchasing power at the aggregate level.

The difference becomes clearer when viewed over two years. The revised wage index stood at 95.22 in 2022/23 and reached 102.85 in 2024/25, an increase of about 8 percent. Over the same period, consumer prices rose by roughly 9.7 percent when the annual inflation rates of 5.44 percent in 2023/24 and 4.06 percent in 2024/25 are compounded. This means the overall wage index did not fully keep up with the rise in consumer prices during that period.

The pressure becomes particularly important when looking beyond averages. Nepal has a large informal and low-paid workforce, meaning many workers do not necessarily receive automatic annual salary adjustments when the prices of everyday goods rise.

The latest comprehensive Nepal Labour Force Survey available from the National Statistics Office found that average monthly earnings of employees in their main job were Rs. 17,809 in 2017/18. The median was lower, at Rs. 15,208. Male employees averaged Rs. 19,464 while female employees averaged Rs. 13,630.

The government has since raised the statutory minimum remuneration. From July 17, 2025, the minimum monthly remuneration for workers outside tea estates was fixed at Rs. 19,550, consisting of a basic remuneration of Rs. 12,170 and a dearness allowance of Rs. 7,380. The previous minimum was Rs. 17,300.

Against that benchmark, a single worker earning the current minimum monthly remuneration of Rs. 19,550 would have income far below the consumption level implied by the national average. The comparison is not a direct salary-to-expense calculation because the two figures come from different years and measure different concepts, but it demonstrates the scale of the challenge facing a household dependent on a single low-paid worker.

The problem is intensified by the fact that households do not spend their entire income on one average basket of goods. They must pay for specific necessities, some of which have experienced much sharper price increases than the headline inflation rate.

Nepal Rastra Bank's latest available figures show that by mid-June 2026, annual consumer inflation had reached 5.22 percent. Food and beverage prices were 4.95 percent higher than a year earlier, while non-food and services prices had risen 5.37 percent.

Several individual categories recorded substantially higher increases. Fruit prices rose 17.40 percent year-on-year, ghee and oil increased 15.10 percent, and meat and fish rose 5.26 percent. Among non-food and service categories, transportation prices increased 15.31 percent, miscellaneous goods and services rose 16.68 percent, and education prices increased 5.54 percent.

This matters because headline inflation is an average. A household that spends a large portion of its income on food and transportation can experience a much greater financial squeeze than the headline inflation figure suggests.

The structure of Nepal's consumer price index itself reflects the importance of these expenses. In the updated 2023/24 CPI basket, food and beverages account for 35.49 percent of the index. Housing and utilities account for 16.66 percent, transportation for 6.26 percent, health for 5.51 percent and education for 4.67 percent.

For a low-income family, these are not optional expenditures. A household may reduce restaurant visits, postpone buying clothes or delay replacing household equipment, but it cannot easily eliminate food, rent, transportation, schooling or medical expenses.

This is why a modest increase in nominal salary can still feel like no increase at all.

Suppose a worker receives a 5 percent salary increase while the prices of the goods and services that household regularly purchases rise by 7 percent. The worker is earning more rupees, but those rupees buy less than they did previously. The nominal salary has increased, while real purchasing power has fallen.

Nepal's official wage data show that this relationship has varied considerably between sectors. In the revised salary and wage index, the overall index increased 5.02 percent in 2023/24 but only 2.85 percent in 2024/25. During 2024/25, the index for agriculture, forestry and fishing increased 4.87 percent, information and communication 4.35 percent, human health and social work 4 percent and education 3.23 percent. Public administration and defence showed virtually no annual increase in the index during that year.

The longer-term wage picture also shows why averages can be misleading. Nepal's Living Standards Survey IV reported that daily wage earners received an average cash wage of Rs. 599 per day in 2022/23, with an additional Rs. 77 per day in kind. However, daily wage earners worked an average of only 72 days in the year, producing average annual earnings from daily wages of Rs. 54,632 when cash and in-kind earnings were combined.

That figure highlights a problem that a monthly salary statistic cannot capture: income stability.

A worker earning a reasonable daily rate but finding work only intermittently can face greater financial insecurity than a salaried employee receiving a smaller but predictable monthly income. Rising prices become particularly difficult when income itself is irregular.

Household income is also supported by remittances. The World Bank reported that remittances reached 16.6 percent of Nepal's GDP during the first half of fiscal year 2025/26. For many households, money received from family members working abroad provides an important buffer against rising domestic expenses.

But remittances cannot be treated as a substitute for domestic wage growth. Not every household receives them, and dependence on overseas employment also means household purchasing power can vary according to migration opportunities, employment abroad and the amount sent home.

The affordability problem is therefore better understood through real income rather than salary alone.

A salary of Rs. 20,000 today is not economically equivalent to a salary of Rs. 20,000 several years ago because the prices of the goods that salary purchases have changed. The same principle applies to the minimum wage, household income and daily wages.

This distinction is especially important when inflation slows. A fall in the inflation rate means prices are rising more slowly; it does not mean prices have returned to their earlier levels. A family that has already adjusted to higher food, rent, transport and education costs still faces those higher prices even after inflation falls.

Nepal's recent figures illustrate this clearly. Consumer inflation averaged 7.74 percent in 2022/23, declined to 5.44 percent in 2023/24 and fell further to 4.06 percent in 2024/25. Yet the price level accumulated during those years remained higher.

At the same time, the wage and salary index rose 9.90 percent in 2022/23, 5.02 percent in 2023/24 and 2.85 percent in 2024/25. The pattern shows that wages did rise, but the relationship between wage growth and inflation was uneven.

For ordinary households, that difference can translate into difficult choices: reducing savings, purchasing cheaper food, delaying healthcare, cutting discretionary spending, borrowing for major expenses or relying on additional income from another household member.

The situation is particularly difficult for a family supported by one low-paid worker. Nepal's current minimum remuneration of Rs. 19,550 may provide a legal wage floor, but it does not establish what a family actually needs to live comfortably. A statutory minimum wage and a living wage are two different concepts.

The evidence therefore does not support the simplistic claim that "Nepali salaries have not increased at all." Salaries and wages have increased, and the government has raised the minimum wage. The more important finding is that income growth has not consistently translated into greater purchasing power.

For many families, the question is no longer simply whether their salary is higher than it was before. It is whether that salary can still buy the same amount of food, pay the same share of rent, cover transportation, keep children in school, meet medical expenses and leave enough money for savings.

That is the real measure of Nepal's rising cost of living.

Nepal’s rising cost of living is putting household incomes under growing pressure

Nepal’s wages have increased, but recent wage growth has lagged consumer inflation, reducing purchasing power as food, transport, housing, education and other essential household costs continue rising.

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