World Bank approves $1 bn to protect India’s poorest from COVID-19

New Delhi (NVI): The World Bank today approved another USD 1 billion funds to accelerate India’s COVID-19 ‘Social Protection Response Program’ to support the poor and vulnerable households in the country that are severely impacted by the COVID-19 pandemic.

This is another billion-dollar support to India by World Bank to help combat Covid-19. The bank had approved USD 1 billion emergency funds for India on April 3.

“This takes the total commitment from the Bank towards emergency COVID-19 response in India to $2 billion. A $1 billion support was announced last month towards immediate support to India’s health sector,” the World Bank said in a statement.

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

The first phase of the operation will be implemented countrywide through the Pradhan Mantri Garib Kalyan Yojana (PMGKY). It will help scale-up cash transfers and food benefits, using a core set of pre-existing national platforms and programs such as the Public Distribution System (PDS) and Direct Benefit Transfers (DBT).

The fund will also provide 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.

With the second tranche of USD 250 million, the program 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.

“The response to the COVID-19 pandemic around the world has required governments to introduce social distancing and lockdowns in unprecedented ways. These measures, intended to slow down 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,” said Junaid Ahmad, World Bank Country Director in India.

“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,” he added.

Social protection is a critical investment since half of India’s population earns less than USD 3 a day and are precariously close to the poverty line, the World Bank statement said.

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, it said.

This program will create a system that will strengthen the delivery of India’s safety nets program. It will help India to move from more than 460 fragmented social protection schemes to a single integrated system that is fast and more flexible, acknowledging the diversity of needs across states.

Furthermore, it will enable geographic portability of social protection benefits that can be accessed from anywhere in the country, despite the state from which the worker belongs, ensuring food, social insurance and cash-support for all, including for migrants and the urban poor.

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

He further added, “This program 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 21st 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.”

Out of the USD 1 billion commitment, USD 550 million will be financed by a credit from the International Development Association (IDA) – the World Bank’s concessionary lending arm and USD 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 USD 250 million will be made available after June 30, 2020 and would be on standard IBRD terms. The program will be implemented by the Union Ministry of Finance.

The World Bank is rolling out a total of USD 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.