Money & Banking

World Bank to lend $1 billion to support India’s Covid fight

Our Bureau New Delhi | Updated on May 15, 2020

Junaid Ahmad, World Bank’s India Country Director   -  PTI

To revise GDP growth forecast down; to support MSMEs

The World Bank on Friday announced $1 billion (approximately ₹ 7,500-7,600 crore) loan for India to support its Covid-19 Social Protection Response Programme. Meanwhile, the Bank has said it is revising its India's GDP (Gross Domestic Product) growth estimate downward from the previous projection of 1.5 per cent.

Junaid Ahmad, World Bank Country Director in India, said that this support programme would leverage the package of $23-24 billion already announced by India. This new support will be funded in two phases – an immediate allocation of $750 million for the fiscal year 2020 (July 1, 2019-June 30, 2020) and a $250 million second tranche that will be made available for the fiscal year 2021 (July 1, 2020-June 30. 2021). With the latest tranche, total commitment from the Bank towards emergency Covid-19 response in India stands at $2 billion. A $1 billion support was announced last month towards immediate assistance to India's health sector.

The first phase of the operation will be implemented countrywide through the Pradhan Mantri Garib Kalyan Yojana (PMGKY). It will immediately 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); provide robust social protection for essential workers involved in Covid-19 relief efforts; and benefit vulnerable groups, mainly 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.

"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," Ahmad 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.

GDP Growth and Unemployment

As India is planning to enter another phase of lockdown after the end of 54 days nationwide lockdown on May 17, there is strong apprehension that India's GDP growth rate will take a severe hit and so unemployment. Ahmad said India's GDP growth rate is expected to go down from 6-7 per cent. "In the last estimates that we did around 1.5 per cent and now even revising it lower, because we're learning that the lockdown has to continue or the impact of the virus continues," he said while adding that because of the downturn, unemployment will go up.

Support for MSME

Ahmad informed that World Bank and Indian Government is in discussion for support to MSME. Taking note of policy measures announced for MSMEs, the Bank hoped that it would enable more and more liquidity for these enterprises. The challenge now is to take the liquidity and bring it into the hands of MSMEs. "There are several interventions already announced, interventions around guarantee schemes intervention around soft credit enhancement. We will be coming into support that. Where exactly and how much, these are something we are in discussion with Government," he said.

Published on May 15, 2020

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