The World Bank recently clarified the conditions accompanying the USD 1 billion loan provided to India in May 2020 specifically aimed at combating Covid-19. The key term is universal eligibility in procurements, which must be adhered to for accessing the funds.
Key Points of Clarification
The World Bank reserves the right to review procurement documents, inspect all project-related accounts, records, and files. Compliance with these conditions is mandatory for funding. Following this clarification, the Indian Government has requested its production units and other significant establishments to eliminate preferential references in tenders. Contractors must explicitly agree to meet the provisions outlined in the World Bank’s guidelines.
Impact on the Market
This condition means that any preferential market access policies will not apply to purchases made during the implementation of the national project. These policies include the Public Procurement (Preference to Make in India) Order, Micro Small & Medium Enterprises (MSME) Policy, and some benefits to start-ups. This condition could potentially impact the Make in India and Atmanirbhar initiative.
Background of the Loan
In May 2020, the World Bank announced a loan targeted at preventing, detecting and responding to the threat posed by the coronavirus and strengthening the national health systems. The focus of this loan is on migrants, unorganised workers, the informal sector, and the integration of safety nets like the Public distribution system, Jan Dhan, Aadhar & Mobile (JAM trinity).
The loan is set to be funded and implemented in two phases:
First Phase
The initial phase involves an immediate allocation of USD 750 million for the fiscal year 2020. Implemented through the Pradhan Mantri Garib Kalyan Yojana (PMGKY), this phase primarily benefits vulnerable groups like migrants and informal workers.
Second Phase
The second phase will see a USD 250 million allotment for the fiscal year 2021. It is aimed at deepening the social protection package by granting additional cash and in-kind benefits based on local requirements. It will be administered through state governments and portable social protection delivery systems.
World Bank Group
The World Bank Group is a global partnership consisting of five development institutions and 189 member countries. These institutions include the International Bank for Reconstruction and Development (IBRD), which provides loans, credits, and grants, and the International Development Association (IDA), offering low or no-interest loans to low-income countries.
Other members are the International Finance Corporation (IFC) that offers investment, advice, and asset management to companies and governments, the Multilateral Guarantee Agency (MIGA) provides insurance to lenders and investors against political risks such as war. Lastly, The International Centre for the Settlement of Investment Disputes (ICSID) handles investment-disputes between investors and countries. However, it’s noteworthy that India is not a member of ICSID.