Question

Read the below statements marked as Assertion (A) and Reason (R), Mark the correct options:

Assertion (A): Global Ease of Doing Business (EoDB) indicators excluded informal sectors.

Reason (R): Informal enterprises are difficult to measure consistently across nations.

• A. Both A and R are true, and R is the correct explanation of A
• B. Both A and R are true, but R is not the correct explanation of A.
• C. A is true, but R is false.
• D. A is false, but R is true.

Answer 1

Answer:

A. Both A and R are true, and R is the correct explanation of A

• Global Ease of Doing Business (EoDB) Overview: The EoDB index was an annual report published by the World Bank Group from 2003 until its discontinuation in 2021.
• Exclusion of Informal Sectors: The methodology for calculating EoDB rankings explicitly focused on the regulatory environment for domestic small and medium-sized enterprises (SMEs) operating in the formal economy. Activities occurring within the informal sector were systematically excluded from the assessment.
• Reasons for Exclusion: The primary justification provided by the World Bank was the lack of reliable data and the extreme difficulty in achieving consistent, standardized measurement of informal economic activities across diverse national economies.
• Methodological Limitations: Informal sectors vary significantly in structure, legality, and registration status between countries, making it impossible to apply a uniform set of regulatory indicators (such as 'Starting a Business' or 'Paying Taxes') to them.
• Data Reliability: Measuring informality relies on estimates rather than formal documentation, which conflicts with the EoDB objective of using verifiable, evidence-based data regarding government regulations and administrative processes.
• Legacy and Controversy: Due to data irregularities and methodological challenges, the World Bank officially discontinued the EoDB report in 2021, and has since moved toward a new project titled Business Ready (B-READY) to assess the business and investment climate globally.