The World Bank STRENGTHENING STATE CAPABILITY OF ODISHA FOR RESILIENCE (SSCOR) (P175811) Program Information Documents (PID) Appraisal Stage | Date Prepared/Updated: 19-Oct-2022 | Report No: PIDA270401 The World Bank STRENGTHENING STATE CAPABILITY OF ODISHA FOR RESILIENCE (SSCOR) (P175811) BASIC INFORMATION OPS_TABLE_BASIC_DATA A. Basic Program Data Country Project ID Program Name Parent Project ID (if any) India P175811 Strengthening State Capability of Odisha for Resilience (SSCOR) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) SOUTH ASIA 06-Oct-2022 15-Dec-2022 Social Protection & Jobs Financing Instrument Borrower(s) Implementing Agency Program-for-Results Financing Republic of India Ministry of Finance Proposed Program Development Objective(s) To protect poor and vulnerable households from the impact of economic and climate shocks in the state. COST & FINANCING SUMMARY (USD Millions) Government program Cost 4,164.85 Total Operation Cost 145.26 Total Program Cost 145.26 Total Financing 145.26 Financing Gap 0.00 FINANCING (USD Millions) Total World Bank Group Financing 100.00 World Bank Lending 100.00 Total Government Contribution 45.26 Decision The review did authorize the team to appraise and negotiate 1 The World Bank STRENGTHENING STATE CAPABILITY OF ODISHA FOR RESILIENCE (SSCOR) (P175811) B. Introduction and Context Country Context I. In India, the growth rebound in FY21/22 was quick, pulled up by investment, recovering consumer demand and, a low base. Real GDP growth moderated from an average of 7.4 percent during FY14/15-FY18/19 to an estimated 3.7 percent in FY19/20[1], mostly due to (i) shocks to the financial sector, and (ii) decline in private consumption growth[2]. Against this backdrop, the outbreak of COVID-19 had a significant impact, with real GDP contracting by 6.6 percent in FY20/21[3]. On the fiscal side, the general government deficit widened significantly in FY20/21, owing to higher spending and lower revenues[4]. However, with the easing of Covid-19 restrictions, Goods and Services Tax (GST) collections have crossed the INR 1 trillion mark every month since July 2021, reaching as high as INR 1.67 trillion in April 2022. The robust GST revenue collections are expected to continue as the economic recovery gathers momentum. The real GDP in FY21/22 expanded by 8.7 percent and exceeded the FY19/20 level, on the back of increased capital expenditure by the government and recovering consumer demand. Given the global concerns on significant uncertainty around the pandemic, elevated inflation, geo-political tensions, and extended supply disruptions, growth in FY22/23 is expected to be 7.5 percent[5]. The expected recovery will put India among the world’s fastest-growing emerging economies over the next two years II. Although India has made remarkable progress in reducing absolute poverty in recent years, the COVID-19 outbreak has delayed the course of poverty reduction[6]. Between 2011-12 and 2020- 21, India’s poverty rate declined from 22.5 percent[7] to values estimated to range between 9 to 12.3 percent[8]. However, projections of GDP per capita growth suggest that this estimated decline also includes a reversal of poverty reduction due to the pandemic[9]. Labor market indicators from high frequency surveys -including from the Centre for Monitoring Indian Economy (CMIE)- suggest that vulnerability has increased after the pandemic, particularly for urban households, with a moderate recovery in 2021. Overall, the pandemic and its economic impacts are estimated to have raised urban poverty, creating a set of “new poor� that are relatively more likely to be engaged in the non-farm sector and to have received at least secondary education. III. Odisha is the 9th poorest state in India according to the multidimensional poverty index (MPI).[1] Its headcount ratio, at 29.35 percent, is above the national average of 25.01 percent. Rural deprivation (32.6 percent) in the composite index is more than double that of urban areas (12.3 percent). Among the various individual indicators that make up the MPI, the contribution of nutrition is the highest as in the rest of the country. Labor market indicators see a marked [1] National Accounts Data, National Statistical Office, Ministry of Statistics and Program Implementation (MOSPI). [2] National Accounts Data, National Statistical Office, MOSPI. [3] National Accounts Data, National Statistical Office, MOSPI. [4] Union budget 2021, 2022, Ministry of Finance. [5] World Bank real GDP forecasts for FY22/23 published in June 2022. [6] World Bank projections. The Government of India has deployed significant resources for social assistance, including towards urban poor households and migrants. [7] Consumption Expenditure Survey 2011-12, National Sample Survey Office (NSSO), Government of India [8] World Bank estimates. Macro Poverty Outlook, October 2021. [9] World Bank estimates. Source: Macro Poverty Outlook, 2020. [1] India National Multidimensional Poverty Index Baseline Report, Niti Aayog (2021) 2 The World Bank STRENGTHENING STATE CAPABILITY OF ODISHA FOR RESILIENCE (SSCOR) (P175811) improvement in 2020-21. Relative to the previous year, unemployment reduced from 11.5 percent to 8.9 percent.2 IV. However, the pace of growth has slowed down in recent years and the state’s economic model remains concentrated and vulnerable to exogenous shocks. Primary sector economic activity accounts for approximately 30 percent of gross state value added (GSVA), while the secondary sector - which is dominated by large metals manufacturing firms - contributes a further 30 percent to state output. Economic activity in these sectors is frequently rocked by exogenous and policy related shocks. The precipitous decline in food commodity prices in 2008 and 2011 decimated agricultural markets, while the sharp declines and volatility in metal prices in 2008, 2011 and 2014 affected industrial output. V. The state’s fiscal position has improved considerably due to increased revenues from the mining sector. Odisha has managed to keep the fiscal deficit below the 3 percent target since the adoption of the FRBM Act in 2005. While there was a fiscal deficit of 1.8 percent of GSDP in FY20/21, the state actually recorded a fiscal surplus in FY21/22 as non-tax revenues increased by more than 150 percent, mainly due to the auction of mining rights and increased mining royalties. As a result, the state was able to pay down some of its outstanding debt and the debt to GSDP ratio fell from 19.2 percent in FY20/21 to 15.8 percent at the end of FY21/22 (compared with an all-state average of 28 percent. The state has also proposed to set up a Budget Stabilization Fund in its budget for FY22/23 where a certain share of its current surplus will be set aside as a buffer to deal with future revenue shocks. Sectoral and Institutional Context VI. State governments play a pivotal role in building local resilience in India. As highlighted in the India FY18-22 Country Partnership Framework (CPF Report No. 126667-IN, July 25, 2018), discussed at the Board on September 20 in 2018, investing in the capabilities of state governments in India is essential to the country’s development trajectory as states play a leading role in designing policies and implementation frameworks for service delivery. While there are myriad national programs for social protection, statistical systems, and disaster risk management, state governments implement these interventions through their functions and functionaries. Further, many states enjoy authority to innovate and create their own contextually specific solutions to build resilience and protect households. VII. However, effective implementation remains a challenge given limited capacity of state and sub- state local government bodies. Good quality digital data on risks, demography, jobs, social protection access is missing. These can help state governments in proactively including vulnerable groups into programs and allow for better future planning for a locally relevant mix of schemes in each budget cycle. Stronger and more timely information system would enable faster disaster alerts which would strengthen the first responder capacity of affected communities. However, data and technology are not enough. With greater decentralization, risk-mitigation and development outcomes at the state level are increasingly tied to the capabilities of the public sector at the state and local levels to plan, manage resources, deliver services, and monitor outcomes. Therefore, business process reform to underpin the design of technology tools, along with strengthening the involvement and capacities of sub-district cadres shall be critical. The proposed project will thus support decentralization as a key implementation principle. 3 The World Bank STRENGTHENING STATE CAPABILITY OF ODISHA FOR RESILIENCE (SSCOR) (P175811) VIII. Investments in social protection and human capital development are fragmented within the state, and access continues to be a challenge for the most vulnerable. The agenda for future resilience and jobs creation requires reforms that may entail workers to be supported in times of transitions or shocks. Social protection underpins the ability of households to invest in the capabilities of their young members and the state’s future workforce. Global evidence shows how a strategic combination of cash, in-kind support, services to address the barriers to paid work can unleash the productive potential of youth and marginalized communities. This is especially critical in a post-pandemic and climate change-affected world of precarity. While Odisha has made laudable progress in poverty reduction and outreach of several cash/food programs, the latest Periodic Labour Force Survey data, released in 2022, shows 55 percent of workers in non- agricultural jobs are outside any social security net. A responsive and adaptive social protection system is urgently needed. IX. Stubborn pockets of poverty and uneven patterns of development persist in Odisha. The state’s human development indicators remain among the worst in India. Tackling poverty in populations designated as Scheduled Tribes (ST) has been much slower than the statewide average, as evidenced by a poverty rate of 63 percent among ST populations compared to 33 percent for the state overall. This discrepancy accounts in part for the disproportionate concentration of poverty in the south and west of the state where a large share of the ST population resides. While Odisha has made remarkable progress in tackling infant mortality, at 44 deaths per 1,000 live births the state’s infant mortality rate (IMR) continues to be among the highest in the country. Malnutrition, as reflected in rates of stunting, remains below the national average, but is high for the bottom 40 percent of the households. In line observed patterns of spatial inequity, districts in the south and west of the state demonstrate significantly higher rates of stunting than the statewide average. X. Odisha is exposed to a wide range of disasters. Over the course of the last century, the coastal districts of the state were impacted by 263 cyclonic disturbances. A full 26 percent of all cyclonic disturbances that occur on the Indian subcontinent affect Odisha, with an average reoccurrence of one event every 15 months. Severe cyclonic storms affected the state in 1909, 1910, 1912, 1914, 1967, and 1971; Very Severe Cyclonic Storms occurred in 2013 (Phailin), 2018 (Titli), 2019 (Fani); and a ‘Super Cyclone’ made landfall in the state in 1999 resulting in severe damage to property and loss of life. Storms elevate risks to the state associated with inland floods, coastal flooding and chronic shore erosion. Due to its geographic location and associated meteorological conditions, Odisha is disproportionately affected by heavy rains, lightning, heatwaves, flash flooding. Additionally, in the new climate regime increased frequency and intensity of heatwaves, cold wave conditions, lightning, erosion, landslides, floods associated with reservoir release and sea level rise are emerging areas to tackle. Moreover, the state falls across moderate damage and low damage risk seismic zones. Odisha’s 480 km coastline is also exposed to tsunami. Recurrent disasters significantly impact economic and development related activities in the state and adversely affects agricultural production, marine fisheries, biodiversity, infrastructure, human health and development gains. This calls for continued efforts towards strengthening the disaster risk management systems in the state. XI. While the state operates large social protection schemes, statistical machineries and disaster management agencies, implementation gaps remain and synergies between these areas have not been adequately exploited. For example, disaster agencies do not coordinate for planning, 4 The World Bank STRENGTHENING STATE CAPABILITY OF ODISHA FOR RESILIENCE (SSCOR) (P175811) preparedness and delivery of benefits with the state’s statistical systems or social benefits platforms. Similarly, forecasting of disasters is not integrated into the design of cash transfer programs in coastal areas of the state. Good quality data to plan and prepare for social assistance needs and track delivery/risks can underpin successful implementation of an adaptive social protection system that responds effectively to disasters and climate risks. Proliferation of multiple social protection and other schemes to help citizens has led to increased overhead cost and lack of information amongst beneficiaries. Further, citizens lack a clear local point of contact to update information for their potential eligibility or registration for core safety nets implemented by the state. Benefit levels and targeting criteria are not based on high frequency dynamic data, and these could be strengthened through a consolidated social registry. On disaster risk, information alerts to citizens are not provided at scale and local governments are not engaged in planning for shocks and identifying needs for the state budget cycle. Overall, data quality and disaster planning remain rudimentary, and human resources in key implementing agencies need training and socialization to better use technology. XII. Better data can lead to stronger resilience. Odisha’s statistical system is foundational for various sectoral interventions in the state, while also helping improve risk mitigation and planning. Therefore, it is vital that the systems and methods used to generate statistics evolve to meet the demands and the opportunities of a changing economic and data environment. In an era of instant information and rapid technological change, policy makers and citizens need faster, better, and more granular statistics to make sound decisions and monitor outcomes. The development challenges of a diverse and disaster-prone state like Odisha make the need for a robust statistical system more pertinent. While there is proliferation of data sources due to the adoption of digital Management Information System (MIS) systems and digital transactions in service delivery, these data are often siloed, and of variable standards and quality. The mechanisms and capabilities to harness these digital data assets to produce statistics efficiently is lacking. The Directorate of Economics & Statistics (DES), the nodal agency for statistics in the state still relies on largely manual methods of data collection, analysis and dissemination that are time consuming, costly and less likely to satisfy rapidly changing user expectations. As a result, DES’ centrality and relevance as the most trusted source of statistical information has diminished. This lack of reliable, up-to-date socio-economic data at the state and sub-state level is particularly a problem for the targeting, design and implementation of programs in the key policy areas of social protection and disaster-risk management. XIII. Building resilience through a multi-pronged approach will be key in ensuring sustained economic and developmental progress. While resilience measures can be wide-ranging, the proposed PforR focusses on strengthening the capability of the state government to use technology enabled evidence-based systems for social protection and disaster risk management. Improving the quality of the statistical infrastructure shall be vital to achieve these objectives. The state is well-placed to leverage a legacy of successful reforms and contemporary economic conditions that lend themselves to an ambitious program to build resilience. The state government has realized that individual schemes and programs will not be enough. Transversal capability to plan at the sub-state level, make evidence-based decisions on budget envelopes for state schemes and associated eligibility criteria, and use ICT tools to anticipate and respond to crises will be critical. This operation supports a reform program that will allow the state to achieve these aims. 5 The World Bank STRENGTHENING STATE CAPABILITY OF ODISHA FOR RESILIENCE (SSCOR) (P175811) PforR Program Scope XIV. This PforR operation supports investments that protect poor and vulnerable households from the impacts of shocks. Transformative change in protecting poor and vulnerable households from shocks requires a concerted effort on multiple fronts, centered on the provision of resources and information to citizens, reforming the institutional structures and incentives for local government service providers. The main problem holding Odisha back in improving the speed, adequacy and coverage of risk-protection measures is not the intent, rather the implementation. The government has requested to partner with the WBG through the proposed Operation to address the fragmented mandates and limited institutional coordination across agencies, limited presence and use of front-line cadres and insufficiently integrated delivery chains. Coverage amongst the most vulnerable tribal and scheduled caste communities remains low due to cumbersome application and eligibility determination processes. Ad-hoc and siloed programs are not scaling adequately for impacts. In this context, the proposed Operation aims to build institutional platforms and integrated delivery systems which leverage technology-based solutions to streamline and improve targeting and benefit delivery processes, while simultaneously promoting deeper coordination across interventions. These systems strengthening efforts shall result in more robust social protection coverage, particularly for disaster prone communities. Figure 1: Protecting households XV. The PforR program comprises key social protection, disaster management and statistics subprograms, based on the criteria that these relax ‘state capability’ constraints to improve coverage and mitigation of shocks for poor and vulnerable households, with focus on disaster- prone regions. Anchored in the State government’s approach and strategic plan, the proposed Operation aims to support the Government of Odisha in using digital good quality data and technology tools to respond to the rising need for social assistance and preparedness for target vulnerable groups, with focus on disaster-prone regions. While the State’s social protection schemes serve multiple groups through nearly 400 programs, the proposed Operation will 6 The World Bank STRENGTHENING STATE CAPABILITY OF ODISHA FOR RESILIENCE (SSCOR) (P175811) support three largest schemes of KALIA1, Madhu babu pension2 and Biju Swastha Kalyan Yojna (BSKY)3 emphasis on disadvantaged disaster-prone communities. Using established platforms at the State level, the Operation will (i) support the objectives in protecting the poor and vulnerable groups through expanding coverage of the existing social assistance interventions at the State level and enabling improved delivery of cash transfers through an integrated registry that allows citizens to access programs and update their information through local centers; (ii) use technology tools combined with front-line cadres to improve the quality and use-cases of state statistical systems and (iii) create an institutional platform to improve planning, coordination and effectiveness of government interventions to tackle disaster relief through early warning systems, linking disaster payments with the integrated social protection delivery platform and capacity enhancements for key disaster management authorities. XVI. As the PforR operations involves system building and processing of data, the operation will support creation of a state data policy which will be guided by existing acts, rules and guidelines of Government of India to ensure data privacy and security. The current data protection regime is governed by the Information Technology Act, 2000 and the rules thereunder. In addition, the Aadhaar Act, 2016 provides for data security and protection of records linked to an individual’s record. Until the PDP is enacted, there are other data frameworks which have been notified by respective authorities. Ministry of Electronics & Information Technology (MeitY) had constituted a committee to explore the governance of non-personal data. The Committee published a report on Non-Personal Data Governance Framework4. In 2022, MeitY has published an India Data Accessibility and Use Policy. In 2020, NITI Aayog released a draft document for Data Empowerment and Protection Architecture (DEPA)5 to support acceleration of financial inclusion whilst ensuring data security and privacy of individuals. Further, Ministry of Health & Family Welfare (MoHFW) has created a National Digital Health Mission (NDHM) and in December 2020, MoHFW published the Health Data Management Policy (HDM)6. The objective of the policy is to enable a National Digital Health Ecosystem while ensuring the security, confidentiality, and privacy of health-related personal information. XVII. The Government Program (‘p’) largely overlaps with the PforR. Four guiding principles were used to determine the PforR Program boundaries and select the State-level interventions for PforR Program support. (i) First, while the government interventions focus on enhancing benefits to vulnerable populations, the PforR will support interventions that will increase ability of line departments and agencies to plan, monitor and deliver benefits using a social protection delivery platform; (ii) Two, the PforR will support interventions of the government to improve and deploy good quality data to plan social assistance programs, overall monitoring of SDGs; (iii) Finally, the 1 Krushak Assistance for Livelihood and Income Augmentation - KALIA Scheme, the State Government aims to lend farmers with an all-inclusive and flexible support system, ensuring accelerated agricultural prosperity. 2 It is a scheme with an objective to provide financial assistance to elderly, persons with disabilities and destitute. 3 It is a scheme launched by Government of Odisha to provide assurance of quality health care to all its citizen with a special focus on vulnerable population. Under the scheme, the state governments covers the full cost of all health services delivered to all patients. 4 https://static.mygov.in/rest/s3fs-public/mygov_159453381955063671.pdf 5 https://niti.gov.in/sites/default/files/2020-09/DEPA-Book_0.pdf 6 https://ndhm.gov.in/stakeholder_consultations/ndhm_policies 7 The World Bank STRENGTHENING STATE CAPABILITY OF ODISHA FOR RESILIENCE (SSCOR) (P175811) PforR program will support ongoing efforts of the government to increase capability of local agencies to plan for and respond quickly to disaster risk, and (iv) The PforR areas of support aim at enhancing coordination between these three critically interlinked pillars of data, disaster responsiveness ad adaptive social protection systems (v) While the Government Program implements safety nets and disaster relief payments across the state, the disaster-risk component of the PforR shall focus on coastal communities and districts. Figure 2: Theory of Change C. Proposed Program Development Objective(s) Program Development Objective(s) XVIII. To protect poor and vulnerable households from the impact of economic and climate shocks in the state. D. Environmental and Social Effects XIX. This is a capacity and systems improvement focused program, the outcomes of which are expected to have positive poverty and social impacts. The Environmental and Social Assessment of the program concludes that risks and impact of the program and interventions is low whereas the potential benefits for the implementing agencies, and ultimately, the end beneficiaries (i.e. the people of Odisha) to be largely positive. The interventions are largely targeted at improving the key implementing agencies’ – Odisha Computer Application Center (OCAC), Odisha State Disaster Management Authority (OSDMA) and Directorate of Economics & Statistics (DES) - systems and capacities to improve service delivery within their respective remits under the program. The key environment risks associated with the 8 The World Bank STRENGTHENING STATE CAPABILITY OF ODISHA FOR RESILIENCE (SSCOR) (P175811) program would be proper disposal of e-wastes and generation and disposal of plastic wastes post natural disaster events. The assessment found that all the agencies involved in the implementation of the program followed the national and state guidelines for e-waste disposal. Also, OSDMA avoids use of individual plastic packaging and provides disaster affected persons cooked food and bulk drinking water which are stored in-situ in individual containers. With regards to social risks, the assessment found a great deal of apprehension at the level of DES district level officials juxtaposed with cautious enthusiasm towards the use of IT and digital technology for improved data statistical data collection. To ensure the success of this intervention, it is recommended that any large-scale deployment of IT enabled digital data collection systems be preceded by a comprehensive ‘AS-IS’ assessment, focusing on human and contextual specificities, of the current system and processes associated with collection, compilation, analysis, storage and dissemination of statistical data followed by a comprehensive change management plan that addresses the key human and contextual weaknesses of the current system. From the perspective of the disaster management pillar, it is recommended that the disaster shelter management committees conduct annual audits of the disaster relief shelters and submits their findings and recommendations to OSDMA for improved management and upkeep of the shelters. E. Financing Table 1: Program Financing Source Amount (US$, millions) Percent of Total Government 45,261,193 31 IBRD 100,000,000 69 Total Program Financing 145,261,193 100 . CONTACT POINT World Bank Name : Shrayana Bhattacharya Designation : Senior Social Protection Specialist Role : Team Leader(ADM Responsible) Telephone No : 5778+79112 Email : sbhattacharya3@worldbank.org Name : Ambrish Shahi Designation : Senior Social Protection Specialist Role : Team Leader Telephone No : 5785+79180 Email : ashahi@worldbank.org Name : Samik Sundar Das Designation : Senior Rural Development Specialist Role : Team Leader Telephone No : 5785+47696 Email : sdas@worldbank.org Borrower/Client/Recipient 9 The World Bank ODISHA STATE CAPABILITY AND RESILIENT GROWTH (P175811) Borrower : Republic of India Contact : Hanish Chhabra Title : Director Telephone No : 23094140 Email : hanish.ias@ias.nic.in Implementing Agencies Implementing Ministry of Finance Agency : Contact : Vishal Kumar Dev Title : Principal Secretary Telephone No : 0674-2536950 Email : finsec.or@nic.in FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects