On March 24, 2020, India announced a nation-wide lockdown to contain the spread of the coronavirus. In a land of over 1.3 billion people, this was one of the largest lockdowns in the history of any country.
By mid-May, the World Bank approved $2 billion in emergency lending to support India’s health sector needs and tide the poor and vulnerable over difficult times until the economy recovers.
Supporting India’s health sector
On April 2nd, to help India meet its emergency medical needs and ramp up its preparedness for future outbreaks of disease, the World Bank sanctioned a $1 billion loan in a record 12 days. This is the largest World Bank loan for the health sector in India.
In less than a month, $500 million was disbursed to help India strengthen health facilities in states, procure essential medical supplies such as testing-kits, PPEs, masks and ventilators, and insure all urban and rural health workers.
A further $200 million will help India bolster its program for disease surveillance, revamp its infectious disease hospitals and build a network of containment laboratories that have a high level of biosafety.
Helping protect India’s informal workers
On the economic front, although the lockdown has helped slow the spread of the virus, it has amplified old economic vulnerabilities and thrown up new challenges.
A second $1 billion World Bank loan is now helping India boost the benefits for its poor and vulnerable and enabling millions of internal migrants to access food from anywhere in the country.
Over time, the program will help create a system that will strengthen the delivery of India’s safety nets program. It will:
- Help India’s social protection system move from a collection of 460 plus fragmented schemes to an integrated system that is fast and more flexible, acknowledging the diversity of needs across states
- Enable the geographic portability of benefits - food, social insurance and cash-support - so that migrants and the urban poor can access them from anywhere in the country
- Move India’s social protection system from one that was predominantly focused on the rural areas to a pan national safety net that recognizes the needs of the urban poor
Supporting economic stabilization
The $750 million MSME Emergency Response Program is supporting the third phase of our partnership with economic support to MSMEs – the backbone of India’s economy – and under severe stress. This program will address the immediate liquidity and credit needs of some 1.5 million viable MSMEs to help them withstand the impact of the current shock and protect millions of jobs. It will:
- Unlock liquidity - channel existing liquidity to the MSME sector by de-risking lending from banks and Non-Banking Financial Companies (NBFCs) to MSMEs through a range of instruments, including credit guarantees.
- Strengthen NBFCs and SFBs – Help key market-oriented channels of credit, such as the NBFCs and Small Finance Bank (SFBs) respond to the urgent and varied needs of the MSMEs. This will include supporting government’s refinance facility for NBFCs.
- Enable financial innovations - Today, only about 8 percent of MSMEs are served by formal credit channels. The program will incentivize and mainstream the use of fintech and digital financial services in MSME lending and payments.