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Centre borrows another $1 billion from World Bank for COVID-19 relief

Funds to also be used for reforming social security net

May 15, 2020 10:51 pm | Updated 11:19 pm IST - NEW DELHI

The Centre is taking another $1 billion loan from the World Bank to support its COVID-19 relief measures and financial assistance for the poorest and most vulnerable communities.

The money will also be used for reforms in India’s social security net, making it more integrated, portable and focussed on the urban poor.

The loan was approved by the World Bank’s Board of Executive Directors on Thursday, according to an official statement.

The bank had already approved a $1 billion loan to support India’s health sector in April, taking its total commitment to India’s COVID-19 response to $2 billion.

The new support will be funded in two phases. An allocation of $750 million —more than ₹5,600 crore — will be made immediately to help fund the Pradhan Mantri Garib Kalyan Yojana, which the Centre announced in March to scale up cash transfers and free foodgrain distribution to vulnerable communities, pensioners and poor workers, and provide insurance support to health workers.

The second phase will provide $250 million — almost ₹1,900 crore — post July 2020, which will fund additional cash and in-kind benefits based on local needs through state governments and portable social protection delivery systems.

The money will also be used to implement reforms. “The COVID-19 pandemic has also put the spotlight on some of the gaps in the existing social protection systems,” said World Bank’s India director Junaid Ahmad.

“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,” he added.

The loan will help India move from more than 460 fragmented social protection schemes to an integrated system, which will be faster, more flexible and also acknowledge the diversity of needs across states, said the Bank. Geographic portability will be introduced to ensure that social protection benefits can be accessed from anywhere in the country, providing relief to inter-state migrant workers. There will also be a shift from the current rural focus of social protection schemes to include the needs of the urban poor as well.

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

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