January 28: Real estate transactions are found to be almost entirely informal. A study report published recently by the Central Department of Economics of Tribhuvan University mentions that most of the real estate transactions are done informally. According to the report, 99.97 percent of real estate transactions are informal.

It is mentioned in the report that since real estate transactions are done individually, the purchase and sale is done at a different amount than the price fixed by the government.  The contribution of individual houses, which are considered as service sector, is not evaluated and this sector is almost completely informal.

According to the report, 97.48 percent of transactions in agriculture, forestry and fisheries and 50.42 percent in accommodation and food are formal. The report mentions that 62.2 percent of the workforce is employed in the informal sector. There is 84.6 percent employment in this sector.

When measuring the informal economy, the study report has taken into consideration self-employed individuals who generate their own income by producing consumable goods as well as economic activities that could be either legal or illegal.

It is also mentioned in the report that the informal economy also contributes to the overall economy, so it is not correct to call such economy as shadow, underground, black, hidden or parallel.

The report shows that the share of informal transactions in Nepal's economy has been increasing in recent days due to the unstable policies of the government. The share of informal economy to Nepal's gross domestic product has reached about 43 percent.

The study has shown that the size of Nepal's informal economy is an average of 42.66 percent of the GDP in the last 19 years. Comparatively, the size of the world's informal economy is only 33 percent.

Professor Dr Shivraj Adhikari, the head of the Department of Economics, said that during the study, it was found that the informal economy has flourished due to political instability. "One of the policies of banning imports was found to increase smuggling in the border area," he said.

Data on the informal economy for the 10-year period covered by the report (from 2010/11 to 2020/21) also shows that its size is expanding.

According to the report, based on the national accounting method, the informal economy reached 41.31 percent in the year 2020/21, which was 37.60 percent in the year 2018/19. The study concluded that the size of informal economy exceeding 40 percent is a serious matter and should be reduced.