Examine the following statements and choose the correct answer:
Assertion (A): Informal sectors were not included in the Global Ease of Doing Business (EoDB) rankings.
Reason (R): This is because informal businesses cannot be uniformly assessed across different countries.
Which of the following is correct?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. Both A and R are true, and R correctly explains A..
Both Assertion (A) and Reason (R) are true, and R correctly explains A. The Global Ease of Doing Business (EoDB) rankings, earlier published by the World Bank, focused mainly on the formal sector because data collection relied on standardized indicators like contract enforcement, property registration, and credit access—areas where reliable official records exist. Informal enterprises, which form a large share of economies in developing countries, operate outside regulatory frameworks and lack consistent documentation. This makes cross-country comparison difficult and often unreliable. Hence, the EoDB index excluded them. Studies suggest that in India alone, the informal sector contributes nearly 45% of GDP, highlighting a major gap in global assessments.