The World Bank recently sanctioned a USD 500 million loan program aimed at bolstering India’s informal working class, which has been heavily hit by the ongoing pandemic. This loan will provide states with increased flexibility to deal with not only the current health crisis but also future climate and disaster shocks.
Breakdown of World Bank’s Financial Support
Out of the USD 500 million commitment, the International Development Association (IDA) – the World Bank’s concessionary lending arm – will finance USD 112.50 million. The rest will come as a loan from the International Bank for Reconstruction and Development (IBRD). This loan carries a maturity period of 18.5 years and includes a grace period of five years.
Since the beginning of the pandemic in 2020, the World Bank has provided immediate emergency relief cash transfers to approximately 320 million individual bank accounts using pre-existing national social protection schemes. It also facilitated additional food rations for around 80 crore individuals.
Significance of the Loan for India
With this loan, states will have access to flexible funding from disaster response funds, enabling them to design and implement apt social protection responses. The funds will be directed towards social protection programs for urban informal workers, gig-workers, and migrants.
These initiatives are intended to strengthen the resilience of economies and livelihoods of communities. At the municipal level, the funds will back the National Digital Urban Mission, aiming to create shared digital infrastructure for urban residents. The focus will also be on scaling up urban safety nets and social insurance for informal workers while shedding light on women workers and female-headed households.
Much-Needed Boost for Street Vendors
Street vendors form a vital part of India’s urban informal economy. This program will facilitate working capital loans of up to Rs 10,000, thereby offering financial aid to around five million urban street vendors.
Informal Sector Workers in India
In India, the informal sector is untaxed and unmonitored by the government. This sector provides critical economic opportunities for the poor and is largely characterized by skills gained outside of formal education, easy entry, unstable employer-employee relationships, and small-scale operations.
India’s estimated 450 million informal workers comprise 90% of its total workforce, with 5-10 million workers added annually. As per Oxfam’s latest global report, out of the total 122 million jobs lost in 2020, 75% were from the informal sector.
Government Initiatives To Support The Informal Workforce
The Indian Government has rolled out several initiatives to protect and uplift the informal workforce, including Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM), Labour Reform, Pradhan Mantri Rojgar Protsahan Yojana (PMRPY), PM SVANidhi: Micro Credit Scheme for Street Vendors, Atmanirbhar Bharat Abhiyan, and Deendayal Antyodaya Yojana National Urban Livelihoods Mission.
About The World Bank Group
The World Bank Group is a distinctive global partnership comprising five development institutions. Members include the International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International Finance Corporation (IFC), Multilateral Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID).
The Way Forward
Going forward, the strengthening of Micro, Small, and Medium Enterprises (MSMEs) that employ nearly 40% of the informal workforce will lead to economic recovery and employment generation. Large corporate houses should also contribute to skilling people in the unorganized sectors under Corporate Social Responsibility (CSR) Expenditure. Additionally, recognizing the invisible labor of domestic workers through a national policy would help ensure their rights and better working conditions.