How World Bank’s $1 Billion Aid Will Support India’s Social Protection Programme

How World Bank’s $1 Billion Aid Will Support India’s Social Protection ProgrammeThe World Bank Group’s headquarter in Washington DC.
Snapshot
  • The World Bank aid will serve as a critical investment in India’s social protection delivery programmes.

With the aim of supporting India’s efforts at providing social assistance to the poor and vulnerable households, severely impacted by the Covid -19 pandemic, World Bank today (15 May) approved $1 billion aid taking the total commitment to $2 billion for the emergency response to the crisis.

A $1 billion support was announced last month towards immediate support to India’s health sector.

This new support will be funded in two phases – an immediate allocation of $750 million for fiscal year 2020 and a $250 million second tranche that will be made available for fiscal year 2021.

Of the $1 billion commitment, $550 million will be financed by a credit from the International Development Association (IDA) – the World Bank’s concessionary lending arm and $200 million will be a loan from the International Bank for Reconstruction and Development (IBRD), with a final maturity of 18.5 years including a grace period of five years.

The remaining $250 million will be made available after 30 June 2020, and would be on standard IBRD terms.

The response to the Covid-19 pandemic around the world has required governments to introduce social distancing and lockdowns in unprecedented ways, said Junaid Ahmad, World Bank Country Director in India.

These measures, intended to contain the spread of the virus have, however, impacted economies and jobs – especially in the informal sector. India with the world's largest lockdown has not been an exception to this trend, Ahmad said.

Approving the “Accelerating India’s COVID-19 Social Protection Response Program", the World Bank’s board of executive directors took note of the Pradhan Mantri Garib Kalyan Yojana (PMGKY) as the first phase of the operation will be implemented countrywide through this scheme.

It will immediately help scale up cash transfers and food benefits, using a core set of pre-existing national platforms and programmes such as the public distribution system (PDS) and direct benefit transfers (DBTs).

It is expected to facilitate providing robust social protection for essential workers involved in Covid-19 relief efforts; and benefit vulnerable groups, particularly migrants and informal workers, who face high risks of exclusion under the PMGKY.

In the second phase, the programme will deepen the social protection package, whereby additional cash and in-kind benefits based on local needs will be extended through state governments and portable social protection delivery systems.

Social protection is a critical investment since half of India’s population earns less than $3 a day and are precariously close to the poverty line.

Over 90 per cent of India’s workforce is employed in the informal sector, without access to significant savings or workplace based social protection benefits such as paid sick leave or social insurance.

Over 9 million migrants, who cross state borders to work each year, are also at greater risk as social assistance programmes in India largely provide benefits to residents within states, without adequate portability of benefits across state boundaries.

Importantly, in an urbanising India, cities and towns will need targeted support as India’s largest social protection programmes are focused on rural populations.

The World Bank country director further said, “in this context, cash transfers and food benefits will help the poor and vulnerable access a ‘safety bridge’ towards a time when the economy will start to revive”.

The programme is expected to create a system that will strengthen the delivery of India’s safety nets programme and it will help the country move from 460 plus fragmented social protection schemes to an integrated system that is fast and more flexible, acknowledging the diversity of needs across states.

Enabling geographic portability of social protection benefits that can be accessed from anywhere in the country, ensuring food, social insurance and cash-support for all, including for migrants and the urban poor; and move India’s social protection system from a predominantly rural focus to a pan national one that recognises the needs of the urban poor.

"The Covid-19 pandemic has also put the spotlight on some of the gaps in the existing social protection systems,” added Ahmad.

Acknowledging India's efforts, he said, "this programme will support the government of India’s efforts towards a more consolidated delivery platform – accessible to both rural and urban populations across state boundaries.

The platform draws on the country’s existing architecture of safety nets – the PDS, the digital and banking infrastructure, and Aadhaar – while positioning the overall social protection system for the needs of a twenty-first century India.

"Importantly, such a system will need to leverage India’s federalism enabling and supporting states to respond quickly and effectively in their context.”

The programme will be implemented by the Finance Ministry of the government.

World Bank Group Covid-19 Response

The World Bank Group is rolling out a $14 billion fast-track package to strengthen the Covid-19 response in developing countries and shorten the time to recovery.

The immediate response includes financing, policy advice and technical assistance to help countries cope with the health and economic impacts of the pandemic.

The International Finance Corporation, part of the World Bank Group, is providing $8 billion in financing to help private companies affected by the pandemic and preserve jobs. IBRD and IDA are making an initial $6 billion available for the health response.

As countries need broader support, the World Bank Group will deploy up to $160 billion over 15 months to protect the poor and vulnerable, support businesses, and bolster economic recovery.

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