In Nepal, the informal sector makes up the bulk of all enterprises

In Nepal, the informal sector makes up the bulk of all enterprises.

the informal sector

According to the Central Bureau of Statistics, there are 34,101 street enterprises that employ 45,330 people.

According to a new study, half of Nepal’s businesses are unregistered, unmonitored, and untaxed.

According to a recent Central Bureau of Statistics report on the informal sector, 49.9% of Nepal’s 923,027 commercial establishments, or 460,422, are not registered and are classified as informal enterprises.



According to the research, the informal sector employs 25.8% of the 3.22 million people employed in the country, or 832,187 people.

According to the report, these informal businesses play an essential role in the economy, particularly in terms of job generation, but they are a portion of the economy that is neither taxed nor supervised. It also represents a sector with bad working conditions and no social security protection.

According to the International Labour Organization, the informal sector employs roughly 2 billion people, or 60% of the global workforce aged 15 and up. According to recent estimates, the informal economy accounts for almost one-third of the global economy.

According to the International Monetary Fund, the informal economy has significant macroeconomic implications. For starters, informal businesses are typically small and low-productive, and therefore do not contribute to the tax base. As a result, countries or regions with higher informality grow at a slower rate.

Furthermore, they do not collect enough revenue and are unable to offer essential goods and services to the entire people, which contributes to informality.

Second, compared to their formal-sector counterparts, informal employees are more likely to be impoverished and receive lower salaries, both because they lack social protection and access to credit, and because they are less educated.

Third, because they do not have equal access to education and health facilities, women are more likely than males to be not only in informal employment, but also in the most risky and low-paying categories of informal employment.

According to economist Bishwambhar Pyakurel, Nepal’s informal sector is far from hidden—obvious it’s everywhere.

“In the short term, more young people participating in the informal economy helps the employment market; nevertheless, in the long run, they confront many issues such as aging without social security. In Nepal, the informal economy is expanding, producing social difficulties at the same time.”

According to the research, 458,258 (or 99.5 percent) of the 460,422 unregistered businesses are micro businesses employing no more than nine individuals.

According to the data, there are 2,032 unregistered small businesses that employ 10 to 49 people, accounting for 0.4 percent of all businesses. There are 88 non-registered medium establishments employing 50 to 99 people, and about 44 large establishments employing 100 people.

The number of people working in unregistered microbusinesses is 779,913, or 93.7 percent of the total. Non-registered small businesses employ 34,586 people, or 4.2 percent, and non-registered medium businesses employ 5,565 people, or 12.123 people.

According to the data, micro firms employ 46.6 percent of the 2.39 million workers employed in registered establishments, or 1.11 million people. Similarly, registered small establishments employ 27.3 percent of the workforce (653,532), medium establishments employ 6% of the workforce (144,137), and large scale industry employs 20% of the workforce (480,013).

Wholesale and retail commerce, as well as motor vehicle and motorcycle repair, account for 47.4% of the total 462,605 registered establishments, or 219,253.

Similarly, the manufacturing business has 10.9 percent, or 50,566 enterprises, the accommodation and food service industry has 10.4 percent, or 47,931 establishments, and the education industry has 8.5 percent, or 39,174 institutions.

Wholesale and retail commerce, as well as motor vehicle and motorcycle repair, account for 60.5 percent of the 460,422 unregistered establishments, or 278,747.

Similarly, the accommodation and food service business accounts for 17.9% of all firms (82,590), manufacturing accounts for 10.9 percent (53,458), and other service industries account for 8.5 percent (30,291).

Nepal has 34,101 street shops, employing 45,330 people, according to the survey. According to the research, 12,147 street enterprises generate less than Rs100,000 in annual revenue.

Similarly, 1,292 street shops made more than Rs1 million in annual revenue.

According to the report, 8,728 street enterprises earn revenues ranging from Rs50,000 to Rs99,999 every year. According to the survey, 1,494 street companies are losing money.

Other businesses include home businesses, businesses in buildings, businesses in traditional markets, businesses in modern retail malls, businesses occupying solely one block or one building, and more. They account for 96.3 percent of Nepal’s total registered and unregistered establishments.

Professor Puskar Bajracharya, the former head of the Central Department of Management at Tribhuvan University, attributed the rise in the informal sector to political uncertainty, which has harmed the economy’s growth potential. Bringing the informal sector into the formal economy, he argued, would be difficult.

“Because the informal sector contributes significantly to job creation and poverty alleviation, it is critical to formalize it by supporting these businesses in registering at the municipal or ward level and bringing them all under the government’s safety net.”

Small economic incentives, he believes, should be provided to persuade people to register. “To some extent, this will raise government revenue.”

Due to a lack of job stability, the impact on employment in the informal economy following the epidemic is significant. “The more the informal sector grows, the more problems it would cause in terms of livelihoods,” Bajracharya added.

To foster inclusive growth, the International Labour Organization has advised offering workers with adequate jobs and easing the transition of small businesses to formality, as stated in the United Nations’ Sustainable Development Goals.

The Covid-19 pandemic has further added to this sense of urgency.

“In countries like Nepal, where huge portions of the population are not covered by existing social protection programmes, the pandemic has decimated informal activities,” said Pyakurel.

Many people in the informal sector, including drivers, street and market vendors, construction workers, and bar and restaurant owners and staff, have lost their jobs as a result of the harsh lockdowns on two occasions.

According to Pyakurel, “the situation of female workers in the informal sector is worse than that of male workers.” “The government’s failure to incorporate the informal sector into the formal sector will have a greater impact on economic growth.”

“The estimates published by the Central Bureau of Statistics on the informal sector based on samples are not realistic, and do not represent the entire informal economy,” Pyakurel noted. Women’s contributions to household labour are not accounted for in the national accounting system or the gross domestic product.”

Source – The Kathmandu Post

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