Government spending was slow despite early disbursement, price rise was minimal and exports to India continued to do well. That summarises Nepal Rastra Bank's brief on the state of the economy. The National Consumer Price Index (NUCPI)-a measure that indicates inflation-grew by 2.1 percent, compared to 4.2 percent in mid-October last year. The slow increase in the NUCPI is attributed to the fall in prices of items such as cereals, oils and pulses in the food and beverage basket. The prices in this category declined by 4.6 percent compared to an increase of 3.9 percent a year ago. The price index increased by 2.8 percent in Kathmandu, 3.9 percent in the hills and 1.1 percent in the Tarai.

Trade continues to boom, with exports growing by 24.9 percent to touch Rs 13.5 billion and imports by 7.5 percent to reach Rs 25.5 billion. Exports to India continued to grow but there was a decline in exports to other countries. There was a decline in traditional exports-readymade garments and carpets-while increases were recorded in the sale of tanned hide, pulses and pashmina. Pashmina sales in mid-October were worth Rs 3.3 billion. The central bank reported a balance of payments surplus of Rs 1.6 billion and a 38.4 percent increase in foreign exchange held by the banking system. Foreign exchange reserves in mid-October stood at Rs 99.4 billion, of which 83.3 percent was convertible currency.