Why is 1 INR always 1.6 NPR? Discover how Nepal’s fixed exchange rate with Indian currency affects trade, inflation & the real cost of INR to NPR today.

Ever wondered why 100 Indian rupees always equals 160 Nepali rupees no matter what’s happening in the world economy? If you’ve traveled to India or sent money back home, you’ve definitely used the INR–NPR exchange rate. And if you’re in business, especially trade, that fixed number probably runs your calculations.

But here’s the surprising part: That number hasn’t changed since 2049 BS.

Nepal officially pegged the Nepali Rupee (NPR) to the Indian Rupee (INR) decades ago, meaning we’ve locked the exchange rate at 1 INR = 1.6 NPR, no matter what’s happening in India, Nepal, or the rest of the world.

But is this still serving Nepal’s economy in 2082?

Let’s dive into what this peg means, why it was introduced, the benefits and problems it brings today, and most importantly, what the government’s high-level reform committee says we should do about it.

What Is an Exchange Rate (And Why Should You Care)?

Let’s say you have 160 Nepali rupees in your pocket and you want to exchange it for Indian currency. You’ll get exactly 100 Indian rupees.

That number 160 NPR = 100 INR is called the exchange rate. More simply, it's the price you pay in your own currency (NPR) to get foreign currency (INR).

But here’s something most people don’t realize:

All around the world, exchange rates are changing every day, sometimes even every hour. But Nepal’s exchange rate with India hasn’t changed in over 30 years.

How is that possible?

Because Nepal has a fixed exchange rate system with India. This means our government has decided that 1 INR will always equal 1.6 NPR no matter what.

But Wait, Don’t Most Countries Let It Change?

Yes! In most countries, exchange rates float, which means they go up and down depending on what’s happening in the market.

Think of it like a vegetable market:

If there’s more demand for tomatoes and fewer tomatoes in supply, the price goes up. If there's a bumper harvest, prices drop.

Currencies work the same way in a floating system:

• If a lot of people want Nepali Rupees, its value increases.
• If people are trying to exchange NPR for USD or INR too much, its value drops.

This “floating” system is based on supply and demand, and it adjusts automatically based on trade, investment, inflation, and global confidence in a country’s economy.

So Why Doesn’t Nepal Let It Float?

Good question. For many developing countries like Nepal, floating the currency sounds risky.

Imagine this:

• You’re a trader who imports goods from India.
• One day, 1 INR = 1.6 NPR.
• Next month, it suddenly jumps to 1.8 or falls to 1.4.
• That small difference could wipe out your profits, or even push prices up for everyone.

To avoid this kind of uncertainty, Nepal decided to fix the INR to NPR rate, a system also known as a currency peg.

How the INR–NPR Peg Came to Be

Nepal started officially linking the Nepali Rupee with the Indian Rupee back in 2017 BS. At the time, the exchange rate wasn’t fixed, it moved around depending on policies and market trends.

But in 2049 BS, Nepal made a clear decision:

Lock the rate at 1 INR = 1.6 NPR  and keep it there.

Why? Because India is Nepal’s biggest trade partner. We buy most of our daily-use goods, fuel, machinery, and raw materials from India. We also share open borders, family ties, and cultural links.

A fixed INR to NPR rate made everything simpler for traders, workers, travelers, and the government.

Why the INR to NPR Fix Helped Nepal (At Least Back Then)

Here’s how fixing the exchange rate helped the Nepali economy, especially in the 1990s and 2000s:

1. Stable Trade with India

Nepali businesses that import goods from India could plan better. No fear of sudden exchange rate hikes. That meant lower risk and more confidence for cross-border trade.

2. Predictable Prices

When you know the INR to NPR rate will stay the same, it’s easier to price your goods. For example, if you’re a shopkeeper importing rice or clothing from India, you know what your costs will be next month, no nasty surprises.

3. Lower Risk for Workers and Travelers

Millions of Nepalis travel to India for work, health treatment, or religious visits. A fixed rate makes it easier to budget. It also helps remittance flows from Indian jobs to families back home.

4. Inflation Control

India, being a much bigger economy, generally has more stable prices. By linking our currency to Indian currency, Nepal benefited from that price stability, it kept our inflation from going out of control.

5. Simpler Government Planning

The government and Nepal Rastra Bank didn’t have to constantly adjust monetary policy or intervene in currency markets. With the INR to NPR rate fixed, they could focus on other priorities.

So yes, the fixed rate with Indian currency worked well for Nepal during a time when our economy was smaller, less open, and highly dependent on India.

But That Was Then, What About Now?

Fast forward to today, 2082 BS.

A lot has changed, especially in India.

India is now one of the world’s top economies. It’s growing fast, producing more, exporting more, and becoming more competitive globally.

Nepal? We’re still importing more than we export, especially from India. We rely heavily on Indian food, fuel, construction materials, medicines, and more.

That creates a few problems.

The Hidden Costs of a Fixed INR–NPR Rate

At first glance, fixing the exchange rate between Indian currency and Nepali currency sounds like a smart move.

And to be fair, it did bring a lot of stability in the past.

But over time, this same policy has started to create new problems. The world is changing fast, and Nepal’s economy needs more room to adapt.

Let’s break down the downsides of sticking to a fixed INR to NPR rate.

1. Nepali Products Are Losing the Price War

India is making things faster, cheaper, and better. As their economy becomes more efficient, Indian goods get cheaper, even when converted into Nepali currency (NPR).

But because the exchange rate is fixed, Nepal can’t adjust its currency to make our own products more attractive.

This means Nepali goods are:

• More expensive than Indian alternatives
• Harder to sell even in our own markets
• Less competitive in the global market

So we end up importing more and exporting less, not great for a country trying to grow its economy.

2. Imports from India Just Keep Rising

Because of the fixed rate, Indian goods feel cheaper in NPR.

So what happens?

• Nepali consumers prefer Indian items
• Businesses rely more on Indian suppliers
• Our trade deficit with India keeps growing (we’re buying way more than we’re selling)

And since the INR to NPR rate doesn’t shift, we have no pricing tool to slow this down.

To read more about the trade deficit of Nepal, head to- Nepal’s Trade Deficit Shrinks: But Is It A Good Sign for Our Economy

3. We "Inherit" India’s Inflation and Interest Rates

Let’s say prices go up in India for petrol, food, or raw materials.

Because we import most of these from India, and because of our fixed exchange rate, Nepal also ends up paying more, even if our economy didn’t change.

We can’t raise or lower the exchange rate to soften the blow. So the rising prices in India come straight into Nepali households and markets.

Same goes for interest rates: when India makes money more expensive or cheaper to borrow, Nepal feels the effects, too.

4. Things Get Complicated When Dollars Are Involved

Nepal doesn’t just trade with India, we also deal with countries like China, the UAE, and the US. And their currencies, like the US Dollar (USD) move up and down. (For example, recent changes in US tariffs could open big opportunities for Nepal. Here's how that might play out.)

Now here’s the problem:

• If the Indian Rupee weakens against the Dollar, the Nepali Rupee also weakens automatically (because we’re tied to the INR).
• So, even if prices in dollars don’t change, everything from laptops to fuel to online services becomes more expensive in NPR.

And that’s not all.

Our foreign loans (which we usually repay in USD) get costlier, too. So the fixed INR–NPR system quietly increases Nepal’s burden on the global stage.

Why It Affects Us, Not Just Economists

Still thinking this sounds like a government problem?

Let’s make it personal:

Imagine you're:

• A student paying tuition in Australia
• A shopkeeper importing electronics from China
• A startup buying cloud services in USD
• A migrant worker sending money home from Dubai

In every one of these cases, the fixed INR to NPR exchange rate impacts your wallet, even if you’ve never exchanged INR yourself.

If the Indian currency drops in value, the Nepali currency drops with it, whether we like it or not. That means:

• You pay more for the same dollar
• You get less when converting remittances
• Prices for imported goods quietly creep up

All without a single change in Nepal’s economy.

So Why Stick With It?

To be fair, there are real advantages to keeping a fixed INR to NPR system, especially for a country like Nepal.

Let’s look at them.

1. It Keeps Trade with India Smooth

India makes up more than 60% of Nepal’s total trade. A fixed rate removes surprises. Business owners don’t have to worry about fluctuating exchange rates while buying or selling goods.

2. It Helps Keep Prices Stable

Because Indian currency is relatively stable, Nepal indirectly benefits too. Essential goods like grains, fuel, and medicine don’t see wild price swings, which helps control inflation.

3. It Makes Life Easier in Border Areas

Millions of people live near the Nepal–India border. They cross over daily to buy goods, go to school, visit relatives, or seek medical care.

A fixed rate makes day-to-day transactions smoother and avoids confusion. It’s especially helpful for people who don’t use banks and rely on cash exchanges.

But Is It Still the Right System Today?

According to the High-Level Economic Reform Committee, it’s time for Nepal to at least ask that question seriously.

Their recommendation is clear:

“Nepal should begin research and open discussions on whether this fixed exchange rate system with Indian currency is still the best option for our future.”

What Should Nepal Do Next?

The Economic Reforms Committee says: don’t panic, don’t change it overnight.

But start preparing now. Here’s what they suggest:

1. Reevaluate the Fixed Rate Policy

Nepal needs to seriously study:

• How much the fixed system is helping us today
• What alternatives might work better
• What risks we face if we never update it

2. Build Competitiveness First

Before moving away from the peg, Nepal must:

• Upgrade roads, electricity, and digital infrastructure
• Lower production costs for factories and farms
• Train skilled workers
• Support businesses to make things people want to buy

Because unless our economy becomes stronger and more self-reliant, a floating currency might create more problems than it solves.

3. Control Inflation Effectively

If Nepal wants to manage a more flexible exchange system in the future, we’ll need:

• A solid plan to control price rises
• Stronger banking regulations
• Good coordination between the central bank and the government

4. Fix the Real Value of the Nepali Rupee

Even if 1 INR = 1.6 NPR officially, the real global value of the Nepali Rupee might be lower because we import so much and export so little.

This is what economists call an "undervalued currency", and it can harm exports while encouraging imports. The World Bank has already warned that Nepal may be facing this issue.

What Does This Mean for Nepal’s Future?

Nepal is no longer a small, closed-off economy.

We’re:

• Trading globally
• Sending workers abroad
• Bringing in foreign investments
• Paying for services and loans in Dollars and Euros

To keep up, we need an exchange rate system that’s flexible, smart, and built for today’s economy, not the 1990s.

A more responsive NPR to INR policy could: 

• Help Nepali businesses sell more products abroad
• Reduce the trade gap with India
• Strengthen Nepal’s foreign currency reserves
• Encourage long-term investors
• Make our currency reflect Nepal’s real economic strength

But it won’t happen overnight. It needs planning, reforms, and a step-by-step approach.

Final Thoughts: Stability vs. Strategy

Yes,  the fixed INR to NPR rate gave us stability.

But in a fast-changing world, stability without flexibility is a trap.

Nepal’s economy has new challenges, new opportunities, and a growing global presence. The way we manage our exchange rate, especially with Indian currency, needs to evolve with the times.

Smart countries don’t just react to change.
They prepare for it.
They lead it.

FAQs

Q. Why does Nepal fix its currency to Indian currency?
To ensure trade stability with India, prevent exchange rate volatility, and maintain inflation control.

Q. What is the current INR to NPR rate?
It is fixed at 1 INR = 1.6 NPR and has remained unchanged since 2049 BS.

Q. Can Nepal change the INR to NPR rate?
Yes, technically the Nepal Rastra Bank can change it, but doing so would require serious economic planning, political consensus, and public support.

Q. What are the risks of changing the exchange rate?
Currency volatility, trade disruption, and inflation risks, unless the change is well-managed and timed with strong economic reforms.

Additional Resources:

• Nepal’s Trade Deficit Shrinks: But Is It A Good Sign for Our Economy
• The Great Nepali Paradox: Issuance of Labour Permit Increases while Remittance Inflows Take A Dip
•  10 Ways to Earn Money Online in Nepal Without Investment (2025)
• Nepal vs USA Trade: Why Nepal Might Win Big Under New US Tariff Policy