World Bank Approves $500 Million Loan To Support India’s Informal Sector Workers

The World Bank has approved a $500 million (about Rs 3,717.28 crore) loan programme to support India’s informal working class hit by the Covid-19 pandemic.

This came a day after the Supreme Court of India expressed displeasure over the failure of the Centre and state governments to provide succour for migrant workers and labourers in the unorganised sector affected by the pandemic.

The programme, approved by the World Bank board of executive directors on Tuesday (29 June) aims to support India’s vast informal workforce and create greater flexibility for state governments to cope with the Covid-19 crisis, as well as future climate and disaster shocks.

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 the pandemic but also for any future crises, ecological risk, or natural disaster.

Enhanced disaster relief funds to geographically targeted hotspot districts will support states during the current phase of the pandemic and any future waves.

The programme called Creating a Coordinated and Responsive Indian Social Protection System (CCRISP) builds on the $1.15 billion Accelerating India’s Covid-19 Social Protection Response Programme to support schemes under the Pradhan Mantri Garib Kalyan Yojana (PMGKY).

The funds, the World Bank said, will strengthen the capability of the central and state governments in India to respond to the needs of informal workers through a resilient and coordinated social protection system.

India’s informal sector is struggling to cope with the pandemic-induced economic downturn and income loss during the past two waves of the health crisis. In the past few weeks, the Supreme Court has also asked the government to step up efforts to address the plight of migrants and informal workers.

Finally, the government has announced new urban platforms. The programme will strengthen these platforms to deepen social protection coverage in urban areas.

The total World Bank funding towards strengthening India’s social protection programmes to help the poor and vulnerable households since the start of the pandemic stands at $1.65 billion.

The first two operations approved last year provided immediate emergency relief cash transfers to 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 programme 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 decentralisation 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 centralised one-size-fits-all social protection approach. The focus is on creating mechanisms for the efficient delivery of these reforms.

"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 highly rural to a pan-India system aimed at addressing the issues of urbanisation, informality, and importantly, portability of benefits for migrant workers,” he said.

“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 programmes supported by the World Bank in India,” Ahmad said.

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 programmes 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 programme will give street vendors access to affordable working capital loans of up to Rs 10,000. Urban local bodies will identify them through an IT-based platform. Some five million urban street vendors could benefit from the new credit programme.

Of the $500 million commitment, $112.50 million will be financed by a credit from the International Development Association — the World Bank’s concessionary lending arm and $387.50 million will be a loan from the International Bank for Reconstruction and Development, with a final maturity of 18.5 years including a grace period of five years.