World Bank Approves $500 Million Program to Protect India’s Informal Sector Workers
NEW DELHI— The World Bank Board of Executive Directors has approved a $500 million program to support India’s large informal workforce and create greater flexibility for states to cope with the ongoing pandemic, future climate, and disaster shocks.
Creating a Coordinated and Responsive Indian Social Protection System (CCRISP) builds on the $1.15 billion Accelerating India’s COVID-19 Social Protection Response Program to support schemes under the Pradhan Mantri Garib Kalyan Yojana (PMGKY).
With the new program approved today, states will get greater flexibility and more money in their hands. Devolution of funds under the 15th Finance Commission recommendations will help states create a more adaptive social protection system, provide support to excluded groups and cater to context-specific needs, not only for COVID-19 but also for any future crisis, ecological risk, or natural disaster.
Enhanced disaster relief funds to geographically targeted hot-spot districts will support states during the current phase of the pandemic and any future waves. Finally, the government has announced new urban platforms. The program will strengthen these platforms to deepen social protection coverage in urban areas.
The total World Bank funding towards strengthening India’s social protection programs to help the poor and vulnerable households since the start of the COVID pandemic stands at $1.65 billion.
The first two operations approved last year provided immediate emergency relief cash transfersto about 320 million individual bank accounts identified through pre-existing national social protection schemes and additional food rations for about 800 million individuals. States can now access flexible funding from disaster response funds to design and implement appropriate social protection responses.
Two issues emerged following the onset of the pandemic in 2020. First, the rural focus of India’s safety net program and the lack of portability of benefits led to increased suffering for urban and migrant informal workers.
Second, the crisis has brought to the fore the urgent need for greater decentralization and increased coordination for designing future relief measures and state-specific safety nets to tackle shocks.
The government’s ongoing reforms are attempting to address the issue of a centralized one-size-fits-all social protection approach. The focus is on creating mechanisms for the efficient delivery of these reforms. It will help India build back better, create an adaptive, decentralized, coordinated, and responsive social protection system to meet the evolving needs of the Indian economy.
“India’s social protection architecture stands at an important crossroad, poised to transform from a set of siloed schemes to a system capable of responding to the needs of a federal nation,” said Junaid Ahmad, World Bank Country Director in India.
“It is pivoting from being a highly rural to a pan-India system aimed at addressing the issues of urbanization, informality, and importantly, portability of benefits for migrant workers. In a context where countries are increasingly facing cycles of economic, pandemic, and climate shocks, investment in social protection is aimed at building the resilience of economies and livelihoods of communities. This is the broader objective of the social protection programs supported by the World Bank in India.”
For strengthening the nuts and bolts of cash delivery and identification of the vulnerable in cities and municipalities, the operation will invest in social protection programs for urban informal workers, gig-workers, and migrants.
A National Digital Urban Mission will create a shared digital infrastructure for people living in urban areas through investments at the municipal level. The digital platform will help to scale up urban safety nets and social insurance for informal workers.
It will also include gender-disaggregated information on women workers and female-headed households. This will allow policymakers to address gender-based service delivery gaps and effectively reach the unreached, particularly widows, adolescent girls, and tribal women.
Street vendors are an integral part of India’s urban informal economy. The program will give street vendors access to affordable working capital loans of up to Rs10,000. Urban Local Bodies (ULBs) will identify them through an IT-based platform. Some five million urban street vendors could benefit from the new credit program.
“India is overhauling its social protection financing and delivery architecture in response to the diverse needs of states. The operation will enhance the capability of states to use resources based on an assessment of local risks and expand the social protection net for underserved urban informal workers while laying the groundwork for a more climate-responsive social protection system,” said Qaiser Khan, Lead Economist and Shrayana Bhattacharya, Senior Social Protection Economist and World Bank’s Task Team Leaders for this operation.
Of the $500 million commitment, $112.50 million will be financed by a credit from the International Development Association (IDA) – the World Bank’s concessionary lending arm an
$387.50 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.