The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Document of The World Bank FOR OFFICIAL USE ONLY Report No: 147337-IN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL DEVELOPMENT ASSOCIATION PROGRAM DOCUMENT FOR A PROPOSED LOAN IN THE AMOUNT OF US$ 200 MILLION A PROPOSED CREDIT IN THE AMOUNT OF SDR 226.80 MILLION (US$ 309.53 MILLION EQUIVALENT) AND A PROPOSED CREDIT IN THE AMOUNT OF US$ 240.43 MILLION TO INDIA FOR ACCELERATING INDIA'S COVID-19 SOCIAL PROTECTION RESPONSE PROGRAM April 30, 2020 Social Protection & Jobs Global Practice South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. . The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) India FISCAL YEAR April 1 – March 31 CURRENCY EQUIVALENTS Exchange Rate Effective March 31, 2020 Currency Unit = Indian rupee US$1= 75.4 INR SDR 1 = US$ 1.365 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank MHA Ministry of Home Affairs AFD Agence Francaise de Developpement MIS Management Information System APY Atal Pension Yojana MOF Ministry of Finance BC Business Correspondent MTEF Medium-Term Expenditure Framework CAG Comptroller and Auditor General of NDMA National Disaster Management India Authority CCT Conditional Cash Transfers NFSA National Food Security Act CMIE Center for Monitoring the Indian NIPFP National Institute of Public Economy Finance and Policy COVID-19 Coronavirus Disease 2019 NPA Non-performing Assets CPF Country Partnership Framework NSAP National Social Assistance Program CPGRAMS Centralized Public Grievance Redress PDS Public Distribution System and Monitoring System DBT Direct Benefit Transfer PEFA Public Expenditure and Financial Assessment DFS Department of Financial Services PER Public Expenditure Review EPFO Employees' Provident Fund PFMS Public Financial Management Organisation System EPF Employee Provident Fund PMGKAY Pradhan Mantri Garib Kalyan Ann Yojana FPS Fair Price Shops PMGKY Pradhan Mantri Garib Kalyan Yojana FRBM Fiscal Responsibility and Budget PMJDY Pradhan Mantri Jan Dhan Yojana Management Act GDP Gross Domestic Product PMJJBY Pradhan Mantri Jeevan Jyoti Bima Yojana GFS Government Finance Statistics PM-KSN Pradhan Mantri-Kisan Samman Nidhi GNP Gross National Product PMSBY Pradhan Mantri Suraksha Bima Yojana GOI Government of India PMUY Pradhan Mantri Ujjwala Yojana GRS Grievance Redress Service SCD Systematic Country Diagnostic IBRD International Bank for Reconstruction SDR Special Drawing Rights and Development IDA International Development Association SDRF State Disaster Response Funds IFC International Finance Corporation SFC State Food Corporations IMF International Monetary Fund SP Social Protection JBSY Janani Baal Suraksha Yojana TPDS Targeted Public Distribution System KfW Kreditanstalt Fur Wiederaufbau UCCT Unconditional Cash Transfer LDP Letter of Development Policy UT Union Territory MAPS Methodology for Assessing Public WB World Bank Procurement Systems MGNREGS Mahatma Gandhi National Rural WBG World Bank Group Employment Guarantee Scheme . Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Regional Director: Lynne D. Sherburne-Benz Practice Manager: Stefano Paternostro Task Team Leaders: Qaiser M. Khan, Shrayana Bhattacharya The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) INDIA ACCELERATING INDIA'S COVID-19 SOCIAL PROTECTION RESPONSE PROGRAM TABLE OF CONTENTS SUMMARY OF PROPOSED FINANCING AND PROGRAM .......................................................................1 1. INTRODUCTION AND COUNTRY CONTEXT ...................................................................................4 2. MACROECONOMIC POLICY FRAMEWORK.................................................................................. 13 2.1. RECENT ECONOMIC DEVELOPMENTS......................................................................................... 13 2.2. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY ...................................................... 15 2.3. IMF RELATIONS ........................................................................................................................... 21 3. GOVERNMENT PROGRAM ........................................................................................................ 21 4. PROPOSED OPERATION ............................................................................................................ 23 4.1. LINK TO GOVERNMENT PROGRAM AND OPERATION DESCRIPTION .......................................... 23 4.2. PRIOR ACTIONS, RESULTS AND ANALYTICAL UNDERPINNINGS .................................................. 24 4.3. LINK TO CPF, OTHER BANK OPERATIONS AND THE WBG STRATEGY .......................................... 34 4.4. CONSULTATIONS AND COLLABORATION WITH DEVELOPMENT PARTNERS ............................... 34 5. OTHER DESIGN AND APPRAISAL ISSUES .................................................................................... 35 5.1. POVERTY AND SOCIAL IMPACT .................................................................................................... 35 5.2. ENVIRONMENTAL, FORESTS, AND OTHER NATURAL RESOURCE ASPECTS ................................. 37 5.3. PFM, DISBURSEMENT AND AUDITING ASPECTS .......................................................................... 37 5.4. MONITORING, EVALUATION AND ACCOUNTABILITY .................................................................. 40 6. SUMMARY OF RISKS AND MITIGATION ..................................................................................... 42 ANNEX 1: POLICY AND RESULTS MATRIX .......................................................................................... 45 ANNEX 2: FUND RELATIONS ANNEX .................................................................................................. 49 ANNEX 3: LETTER OF DEVELOPMENT POLICY..................................................................................... 52 ANNEX 4: ENVIRONMENT AND POVERTY/SOCIAL ANALYSIS TABLE .................................................. 54 The Accelerating India’s COVID-19 Social Protection Response Program was prepared by a team led by Shrayana Bhattacharya and Qaiser Khan and including Ambrish Shahi, Ritu Sharma, Jorge Coarasa, Toni Koleva, Aurelien Kruse, Helene Bertaud, John Blomquist, Philip O Keefe, Dewen Wang, Anindo Chatterjee, Manoj Jain, Sutirtha Sinha Roy, Deepak Singh, Adarsh Kumar, Ugo Gentilini, Krishna Raj and Satyanarayan Panda. The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) SUMMARY OF PROPOSED FINANCING AND PROGRAM BASIC INFORMATION Project ID Programmatic If programmatic, position in series P173943 Yes 1st in a series of 2 Proposed Development Objective(s) The Program Development Objective of the proposed operation is to strengthen the capability of state and national governments in India to provide coordinated and adequate social protection to the poor and vulnerable from the impacts of the COVID-19 pandemic Organizations Borrower: REPUBLIC OF INDIA Implementing Agency: DEPARTMENT OF ECONOMIC AFFAIRS, MINISTRY OF FINANCE PROJECT FINANCING DATA (US$, Millions) SUMMARY Total Financing 750.00 DETAILS International Bank for Reconstruction and Development (IBRD) 200.00 International Development Association (IDA) 550.00 IDA Credit 550.00 INSTITUTIONAL DATA Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks Overall Risk Rating Page 1 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) . Results Indicator Name Baseline Target Adequacy of benefits provided through the COVID-19 Social Protection Support Program measured by Pradhan Mantri Garib Kalyan Yojana (PMGKY) transfers as a percent share of total [0][2020] [40][2021] household consumption expenditures for the poorest quintile in India. Access to essential food supplies provided through the COVID-19 Social Protection Program measured by percentage share of poor households receiving the additional food ration entitlement for a [0][2020] [60][2021] three-month period as outlined by Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY). Access to wage protection measures provided through the COVID-19 Social Protection Program measured by percentage share of low- wage (as defined and identified by Government program) workers [0][2020] [25][2021] withdrawing funds from Employee Provident Fund Accounts citing the COVID-19 pandemic as a reason for withdrawal. Timeliness of wage-loss compensation measures guaranteed by COVID-19 Social Protection Program for low-wage workers measured [0][2020] [60][2022] by percentage of low-wage workers in SME’s* receiving additional contribution announced within eight-weeks of the announcement. Utility of health insurance measures provided through the COVID-19 Social Protection Program measured by percentage share of essential [0][2020] [30][2021] service workers infected with COVID-19 using the Special Health Insurance Scheme. Access to support provided through the COVID-19 Social Protection Program for informal workers measured by percentage share of [0][2020] [50][2021] construction workers registered with Building and Other Construction Workers Fund receiving cash transfers. Migrant-neutrality of support provided through the COVID-19 Social Protection Program measured by percentage of India’s population [0][2020] [33][2022] able to access to portable food benefits through the Public Distribution System (PDS). Migrant-neutrality of support provided through the COVID-19 Social Protection Program measured by percentage of India’s vulnerable [15][2020] [45][2021] population in urban areas covered by portable life and accident insurance through Department of Financial Services (DFS) Page 2 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Timeliness of cash-transfers provided through the COVID-19 Social Protection Program measured by percentage of poor households who [0][2020] [60][2021] have received at least one PMGKY benefit within eight-week period of program announcement. . Page 3 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) 1. INTRODUCTION AND COUNTRY CONTEXT 1. The proposed operation aims to support India’s response and recovery from the devastating economic impacts of the Coronavirus Disease 2019 (COVID-19) pandemic, with emphasis on accelerating social assistance through adequate safety nets for the poor and vulnerable. The operation is based on Government of India’s overall strategy to fight COVID -19 through three phases. In the first phase, the Government of India (GoI) intervened to tackle the health aspects of the pandemic, these public health measures included imposing a total lockdown of 1.3 billion people as part of its social distancing strategy. The Bank partnered with India in the first phase through a US$ 1 billion health project. In this second phase, GoI is investing in an extraordinary social protection program to bridge the poor and vulnerable communities through the lock down period – which has led to a slowdown of the economy – towards a gradual revival of the economy. GoI is investing US$23 billion and the Bank will partner with a Development Policy Financing program of US$ 1 billion. Social protection is critical as India stands to lose its hard-won gains against poverty as nearly half the households in India are vulnerable – between the poverty line and twice the poverty line; and majority of the workforce is informal without formal social security benefits. These households face the dire prospect of falling back into poverty and need strong support to weather the COVID-19 crisis. Following social protection, a third phase of the government’s COVID-19 strategy will comprise of economic support to micro, small, and medium enterprises and their workers to support them through the lockdown period and in anticipation of an economic stimulus. The Bank is also supporting the preparation of this third phase with approximately US$ 500 million in financing. Taken together, India’s three-pronged strategy aims at ensuring that tackling COVID-19 does not lead to a stark policy choice between lives and livelihoods, thereby forging an approach that seeks to protect both. 2. This operation specifically draws on the Government of India’s existing infrastructure of social protection aimed at households and workers. These combine accountability mechanisms and technology innovations for transparent delivery and targeting. India’s program relies on a unique identification system linked to over three hundred million bank accounts, a massive food distribution network, e-payments, and a comprehensive rural safety net that focuses on public works. It is aimed at supporting households and workers by delivering cash, in-kind support, and “stop-gap” jobs. This approach complements the collective and local public goods offered through India’s system of self -help groups, community-based organizations, local governments, all across its federal system of governance. Overall, the proposed program not only provides emergency support but moves India’s fragmented social protection schemes towards an integrated and adaptive system, and starts to tackle many of the existing fault lines in the current system around migrants, workers in the informal sector, and last-mile delivery challenges. In partnering with GoI in this program, the Bank has leveraged several years of analytical and operational work and ongoing collaboration with state governments, think-tanks, and development partners. Structural and policy shifts that the Bank expected to see evolve over several years have become possible today as a result of the COVID-19 crisis. Through this program, the Bank has partnered with GoI to respond to this important policy opening to bolster India’s response to COVID -19 and it’s future resillience. 3. The program is part of a series of policy operations. This is the first Development Policy Operation in a planned programmatic series of two operations (for Fiscal Years 2020 and 2021, with an allocation of US$750 million and US$250 million respectively). The second operation is expected to Page 4 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) follow in six months. At the request of the Government of India, the program has been prepared in collaboration with the Asian Development Bank (ADB), Agence Française de Développement (AFD) and Kreditanstalt Fur Wiederaufbau (KfW). The design draws on the World Bank’s deep country knowledge on social protection in India, gained through technical assistance and analytics over the recent years. The approach is consistent with the India Country Partnership Framework’s focus o n building systems of social protection – and supporting India to shift away from fragmented and individual schemes -- which can help the poor and vulnerable weather shocks and enhance their resilience. 4. Even though this program is being prepared to respond to a national emergency, it draws on extensive knowledge work by the World Bank during the last few years. Over the years, the Bank has worked closely with national and state authorities to understand the strengths and lacuna of existing social protection programs in India. Improvements in last mile delivery of cash transfers have been facilitated by providing technical support to the Direct Benefit Transfer Mission which is responsible for digital payments into beneficiary bank accounts. The Bank has also been providing technical support to the Ministry of Rural Development on leveraging the Socio-Economic Census (SEC) data for targeting, which has improved transparency of beneficiary identification for programs in India through use of digitized asset and socio-demographic data. State governments are the focal point for delivery of social benefits. Several state level delivery innovations have contributed to reducing system leakages and improve efficiency of delivery. The Bank has been providing ‘nuts and bolts’ support to six state governments to strengthen delivery systems. Finally, the Bank has anchored knowledge exchange across stakeholders by organizing a ‘Schemes to Systems’ workshop in Delhi in December 2019 to examine social protection reforms and last mile delivery issues, which was attended by top officials from state and national government agencies, along with keen participation from global experts, civil society, media and academics. It is this depth of country systems knowledge that has enabled the Bank to respond so quickly but strongly in this emergency. 5. The program crowds in financing and support from biliteral and multilateral agencies. The COVID-19 crisis has triggered a coordinated mobilization of development partners in support of the Government of India’s response. This includes parallel financing of 200 million Euros from Agence Francaise de Developpement (AFD) and 460 million Euros from the German Kreditanstalt Fur Wiederaufbau (KfW). This is in addition to US$1 billion parallel financing from the Asian Development Bank (ADB) to the social protection response of GOI. The Japanese International Cooperation Agency (JICA) and the New Development Bank (NDB) are also exploring potential parallel financing. Implementation of the government program supported by this DPO series will require intensive Technical Assistance (TA) to the central and state governments. Discussions are ongoing to expand the World Bank’s TA through additional funds from the Bill and Melinda Gates Foundation (BMGF). In addition, partners have expressed interest in setting-up a multi-donor trust fund to support an expanded scope and scale of TA. 6. Importantly, the proposed reforms are integral to the World Bank Group’s approach towards phasing COVID-19 response and recovery measures. The first phase focused on supporting health systems, while the second phase prioritizes building resilience at multiple levels – tackling shocks to real economy, as well as their consequences for households, communities and firms. While this operation – following support by the World Bank for India’s COVID -19 health program -- focuses on households and vulnerable communities, a third operation for India will focus on firms with particular emphasis on micro, Page 5 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) small and medium enterprises (MSME) and key affected corporate sectors and their workers. This sequenced approach of health interventions followed by a focus on social protection and economic support reflects Government of India’s strategy to help bridge households, communities, and workers through the ensuing economic slowdown into a phase of economic stimulus and recovery. It is designed to balance the unprecedented economic impacts of COVID-19 and stands in sharp contrast to the approach adopted by countries to the 2008 financial crisis where governments immediately responded with an expansionary stimulus program. 7. The program draws on the World Bank’s rich global and Indian experience in social protection and community-driven development to help the Government of India link the emergency COVID-19 response with a broader social protection and resilience agenda. While the financial contribution of the World Bank to the Government Program is small, the operation aims to invest in strategic shifts in India’s social protection architecture. In triggering a social protection response program for COVID-19, India has relied on in-kind support and cash transfers through its various schemes and platforms. By doing so, the country is leveraging different mechanisms of service delivery including piggy-backing on state government systems in the context of federal India, large rural safety nets, food distribution outlets, community organizations and self-help groups, and bank accounts linked to the unique Aadhar sytem. This operation supports such an approach while adding to the program in three different ways: (i) Moving from a scheme-based fragmented social protection architecture towards an integrated approach, blending multiple instruments to provide a fast and flexible social protection response, and reducing administrative duplication and inefficiencies (ii) Building an adaptive social protection system which can quickly provide support to excluded groups and cater to the diversity of social protection requirements and delivery needs across states and communities, not only for COVID-19 but also for any future crisis (iii) Creating a portable social protection platform in India to ensure food, social insurance and cash- support for migrants across state boundaries. The proposed program not only provides emergency support to households to weather the COVID-19 crisis, it simultaneously paves a path for India’s fragmented social protection schemes to become an integrated and adapative system, which leverages decentralization and community-driven approaches for last-mile delivery, enables portable benefits for migrants and incentivizes context-specific solutions. 8. India’s public health response to the COVID -19 pandemic comprises a strong focus on social distancing. This has resulted in one of the largest lockdowns in the world, unparalleled in human history. While China has focused on specific regions and USA has seen different States adopting different approaches to social distancing, India has taken a country-wide approach. The extraordinary public health measures taken by national and state governments in India to counter the spread of the COVID- 19 pandemic – from social distancing, restricting economic activities, curtailing the movement of people and goods through a complete lockdown impacting 1.3 billion persons– are anticipated to disrupt the supply and demand shocks in the economy. Given the continent-like size and heterogenity in India, these shocks will manifest differently at the sub-national, community and household levels, depending on local economies and socio-demographic profiles. The impacts in India will be particularly sharp given that the workforce is predominantly informal and there were concerns of an economic slowdown prior to COVID- 19. Responses to the pandemic will require a comprehensive approach with solutions anchored by national and sub-national governments, blending active participation from households, communities, streel level bureaucracies (district, block and Panchayat administration), civil society organizations and the private sector. Page 6 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) 9. The poverty and equity impacts of COVID-19 are anticipated to amplify old vulnerabilities faced by Indian households. Between FY11/12 and 2015, poverty declined from 21.6 to an estimated 13.4 percent at the international poverty line (2011 PPP US$1.90 per person per day), continuing the earlier trend of fast poverty reduction. However, preliminary analysis following the national COVID-19 lockdown suggests that these gains against poverty will be eroded. A recent telephonic survey across ten states in India finds that poor households will lose 61 percent of their average monthly income in April following the national lockdown. Latest Center for Monitoring the Indian Economy (CMIE) survey data for April 2020 finds 45 percent of households report a fall in household income in the post lockdown period. Prior to COVID-19, despite absolute poverty reduction in the past two decades, half of India’s population was vulnerable with consumption levels precariously close to the poverty line. Contraction in high-frequency consumption indicators, such as quarterly sales of two-wheeler vehicles, fast-moving consumer goods and retail personal credit disbursements, also suggests increased vulnerabilities for poorer households. These households are likely to slip back into poverty due to income and job losses triggered by COVID-19. Analysis from NSSO data suggest that a 30 day period without work, as created by the lockdown, can reduce household consumption expenditures for the poorest quintile by 10%. Impacts of the global COVID-19 pandemic will also compound pre-existing concerns that the pace of poverty reduction had been disrupted by implementation challenges of indirect tax reforms, stress in the rural economy and high youth urban unemployment rates. Social inequalities in poverty, well-being and access to jobs, particularly for women and tribal communities, are expected to amplify differences in how the evolving economic crisis impacts different social groups. 10. Labour market informality further constrains the ability of Indian households to cope and recover from livelihood shocks triggered by COVID-19 lockdowns. Ninety percent of the Indian workforce is informal, without access to significant savings or work-place based social protection benefits such as paid sick leave or social insurance. The latest Indian Periodic Labour Force Survey (2017-18) finds that only 47% of urban workers have regular, salaried jobs. Even among workers in formal employment, over 70% do not have contracts, 54% are not entitled to paid sick leave and 49% do not have any form of social security benefits. These workers are at risk of falling into poverty due to wage and livelihood losses triggered by shrinking economic activity, government-imposed closures and social distancing protocols. 11. In India, inter-state migrants are at acute risk of increased poverty and destitution. Seasonal migrants dominate low-paying, hazardous and informal market jobs in key sectors in urban areas, such as construction. Estimates from the Economic Survey highlight that the magnitude of inter-state labor migration in India was close to 9 million annually between 2011 and 2016. Migrant remittances are vital for lower-income Indian states. For example, studies show that in Bihar, remittances accounted for 35.6 percent of gross state domestic product (GSDP) in 2011–12. Low income states such as Uttar Pradesh and Bihar are the biggest source states for migrants, followed closely by Madhya Pradesh, Punjab, Rajasthan, Uttarakhand, Jammu and Kashmir and West Bengal; the major destination states are Delhi, Maharashtra, Tamil Nadu, Gujarat, Andhra Pradesh and Kerala. COVID-19 cases have largely been concentrated in high-income migrant destination states such as Delhi, Kerala, Tamil Nadu and Maharastra. Media reports and civil society groups are highlighting how migrants relying on ad-hoc construction or service jobs in these states have been displaced due to the lockdown. Following the loss of employment due to COVID-19 lockdowns, such migrant workers are at increased risk of falling into Page 7 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) poverty. Lack of portablity in social protection benefits across state boundaries exacerbates the risks faced by migrants. With unemployment increasing, and decline in earnings and remittances, inter-state migrant workers will need targeted support. Box 1: India’s Effort to Protect the Vulnerable from COVID-19 Lockdown The first COVID case was reported in Kerala on January 13, 2020 among Indian students who had returned from Wuhan. Kerala initially had the largest number of cases and first started implementing social distancing. As cases were reported across India, many state governments started social distancing as well. Several state governments proactively started early social safety net measures using their own resources. India’s focus on social distancing as a national public health measure will have devastating impacts for the poor and vulnerable: Following the WHO declaration of a global pandemic on March 11, 2020 the national government declared a COVID emergency on March 14, 2020 and decided to implement what was initially a 21-day national lockdown (later extended to 42 days) on March 21, 2020. Recognizing that the national lockdown would severely impact the poor and the vulnerable, the national government launched an important and ambitious social protection initiative called the Pradhan Mantri Garib Kalyan Yojana (PMGKY). The PMGKY program is not a new scheme, rather an integrated package scaling up cash and food assistance through pre-existing programs which have large outreach and strong delivery mechanisms: The PMGKY package is expected to cost the Government approximately USD 23 billion. It uses India’s well-developed Direct Benefit Transfer (DBT) system to transfer benefits directly to the bank accounts of beneficiaries from the treasury, thereby ensuring timely payments to those in need. The identification of beneficiaries relies on India’s near -universal programs, supplemented by digitized Socio-Economic Census data, state level databases and the Aadhaar digital ID network. The reform program provides near-universal and robust support for a three-month period till June 2020; however measures may be expanded in specific states or clusters depending on how the COVID-19 crisis evolves: At present, the government plans to provide scaled up benefits for COVID-19 relief for a three month period only. Following these three months, the next phase of social protection support will be geographically targeted to regions and sectors where lockdowns continue. The social protection program will work in tandem with health surveillance efforts, targeting hot spot districts and clusters. For a period of three months, PMGKY delivers cash transfers to 320 million beneficiary bank accounts (30% of India’s population). To ensure supply of food and fuel through the national lockdown, the program provides additional food rations to 234 million households, covering nearly 90% of India; and LPG gas cylinders to 80 million households. The total transfer size is approximately USD 44 per month, nearly 68% of the Indian rural poverty line and 47% of the average monthly consumption expenditure of the poorest quintile of households in India. The program also allows states to expand benefit levels, as needed, through use of State Disaster Response Funds. The program also tops-up government contributions to social insurance funds (EPFO) for low-wage workers in small and medium enterprises and provides portable in-kind and cash support to migrants through a sub-national umbrella disaster fund (NDMA and State Disaster Response Funds). 12. As India prepares its macro-fiscal stimulus to support firms and stabilize the economy, social protection is a critical bridge which can help carry vulnerable households through the current and future crises. As economic impacts of the COVID-19 pandemic sharpen, timely and adequate social protection measures can help cushion shocks and prevent further destitution. Following the COVID-19 pandemic, nearly 126 countries have scaled-up coverage and benefits for social protection programs. Evidence shows that timely delivery of social assistance support can forestall losses and protect the poor. Page 8 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) In particular, direct cash transfers to households can serve as an important stimulus for economic stability following COVID-19 outbreak, especially if these are targeted to informal and lower-income households who will face disproportionate troubles. Cash transfers can supplement household coping strategies as income support, help workers out of work who fall sick, or help them access essential goods. 13. In response to the urgent social protection needs resulting from the COVID-19 pandemic, the Indian government has announced the Pradhan Mantri Garib Kalyan Yojana (PMGKY), which provides a package of cash and in-kind social assistance to protect poor and vulnerable households . These measures are expected to cost the Government 170,000 crore INR (approximately USD 23 billion), nearly 0.9% of GDP at current prices, demonstrating the Government’s strong commitment to ensure that the poor and displaced are protected during this massive economic turmoil. In-kind benefits for food will be delivered to all poor and vulnerable households identified by the Targeted Public Distribution System (TPDS) using pre-existing channels of Fair Price Shops (FPS) across the country, maintaining social distancing norms. Cash transfers will be made directly into the bank accounts of beneficiaries identified by five of the country’s largest cash-transfer programs, thereby ensuring timely payments to those in need. The identification of beneficiaries and bank accounts relies on India’s near -universal benefit transfer and financial inclusion programs, supplemented by the Aadhaar digital ID network. Self-help groups, local governments, postal workers and district administration are being leveraged by state governments as the front-line for providing food security, delivery of benefits, awareness generation and tackling needs of excluded groups such as migrants. Technical details are provided in Section 3. 14. The Program Development Objective of the proposed operation is to strengthen the capability of state and national governments in India to provide coordinated and adequate social protection to the poor and vulnerabe from the impacts of the COVID-19 pandemic. “Coordinated” means fostering an integrated institutional framework to implement a whole-of-society and whole-of-government approach for social protection and resilience, whereby pre-existing programs and platforms are leveraged by engaging all tiers of government including community groups. The program also aims to ensure an “adequate” package of social protection, meaning that the size of the benefits transferr ed should compensate for losses in consumption expenditures and prevent households from falling below the poverty line. The program will accelerate the delivery of social assistance announced under the PMGKY package at the state and national level through three pillars: (i) Accelerating the provision of adequate social protection for the poor and vulnerable by scaling up cash/in-kind assistance through pre-existing national platforms and programs (safety nets, e-payments architecture, self-help groups and disaster management protocols); (ii) Providing robust social protection for essential workers involved in COVID-19 relief efforts; and (iii) Ensuring vulnerable groups have access to PMGKY benefits through reform measures aimed at expanding points of last-mile delivery. The third pillar is critical to ensure migrants and informal workers - at risk of exclusion – can avail of social protection at this time of crisis. 15. Building resilience of households and communities against the impacts of COVID-19 will require two phases of social protection reform. As the pandemic evolves, a blend of different types of instruments will be needed. In the short term, poor and vulnerable households will need protective instruments which can provide ex-post relief through immediate cash or in-kind assistance. To ensure speed and scale, leveraging decentralization and pre-existing programs will be key. Further, direct in- kind provisioning of essential food and fuel supplies will become important as supply chains maybe disrupted and social distancing protocols may constrain the ability of households to purchase goods and Page 9 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) services. Simultaneously social protection for informal workers, particularly for those engaged in essential services, needs to be augmented by coverage under preventive instruments for ex-ante risk coping through social insurance (for life, health and accidents). In the medium-term, as the government embarks on geographically targeted containment measures based on the spatial concentration of COVID- 19 cases, the duration and impacts of the crisis will vary across states and districts. This will require deeper institutional reforms to enable a geographically diverse approach for social protection. The national government will need to empower state governments with finances and support to blend the use of safety nets, self-help groups, local governments and other innovations to provide fast, flexible and context-specific measures, with additional support for hot-spot districts and clusters. For long run recovery, as lockdown measures are relaxed and community-driven approaches become scaleable, safety nets and social insurance will need to be complemented by promotional interventions to rebuild livelihoods and jobs. Table 1 outlines a sequence of reforms proposed by the programmatic series, and draws links between COVID-19 emergency measures and broader medium-term institutional reforms. Table 1: Sequencing of COVID-19 Social Protection Interventions and Reforms Emergency COVID-19 Reforms (April-July 2020) Medium Term SP Reforms (July-Nov 2020) Scaling-up a core set of pre-existing food/cash PMGKY will trigger a fundamental shift in the social programs announced through PMGKY for protection system from scheme-based silos immediate COVID-19 relief towards a more coordinated approach engaging key line departments and state governments anchored by Ministries of Finance and Home Affairs By notifying COVID-19 pandemic as a ‘disaster’, the The use of SDRF will trigger the creation of an national government enables state governments to adaptive and disaster responsive social protection access funds from the State Disaster Response system in India. This will be operationalized Funds (SDRF) to implement and deliver COVID-19 through reforms which create a social protection relief window in the current disaster management system, enabling states to use State Disaster Response Funds/National Disaster Response Funds to deliver context-specific packages of social assistance for COVID-19 and future disasters. At present, rules/financing formulae/ processes for disaster management focus on physical infrastructure without any provisions for social protection. Such an approach will allow states to provide support to any excluded groups and provide income-support in hot-spot clusters/districts where lockdowns will be prolonged. Provide access to portable food and in-kind COVID-19 response for migrants can trigger a benefits to migrant workers through state codified policy framework defining how the machinery and State Disaster Response Funds national government and states finance and coordinate a basic package of benefits (food and social insurance) for migrants across state boundaries. This will remedy current program architecture where only state residents receive benefits from programs. Page 10 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Door-step delivery of information/cash/in-kind relief Build state level government capacities to by states leveraging post offices, fair price shops implement digitized payments which can leverage and community-based machinery community-based organizations and front-line workers to improve last-mile delivery of cash in areas with weak financial access. Quasi-income support measures through welfare At present, India has a large share of cash transfer funds and EPFO to provide informal workers COVID- programs operating at scale in rural India. Within 19 relief the year, through the proposed Jansuraksha Mission, India will rebalance the mix of cash and social insurance scheme support provided to citizens by (i) Campaign to expand coverage to informal workers by leveraging linkages between Aadhaar, PDS and PMJDY (ii) Triggering a strong co- contributory urban safety nets platform to complement robust rural income-support programs like PM-KSN. 16. The COVID-19 pandemic is highlighting the structural deficiencies in India’s social protection system, which is fragmented and functions largely through scheme-based silos. Historically, India has provided social protection through a large and complex set of centrally sponsored schemes. These schemes are financed by the center and implemented by state governments. They include large-scale community-driven livelihoods programs (National Urban and Rural Livelihoods Mission), Panchayati Raj insitutions, self-help group initiatives, financial inclusion programs, safety nets, subsidies, public works, social pensions, quasi-income support and social insurance schemes. In addition, digital innovations for cash delivery and beneficiary identification also function as independent schemes under the purview of discrete line ministries. Ideally, these schemes can serve as building blocks of an integrated system where the whole is greater than the sum of its parts. For example, self-help groups can help last-mile delivery of social assistance in concert with technology innovations. However, at present, there is no overarching institutional framework for coordinating these multiple scheme-based mechanisms. Faced with the COVID-19 crisis, the Government of India’s PMGKY has helped build an implementation framework whereby multiple schemes work together through leadership anchored by the Government of India. Such an approach can transform social protection in India from scheme-based silos towards an integrated system. The reforms supported will help India coordinate six existing schemes—accounting for about 70 percent of social protection spending in India —to urgently provide a package of near universal social protection support. This will allow provision of immediate cash transfers to about 320 million individual bank accounts identified through pre-existing national social protection schemes; additional food rations for about 800 million individuals; top-up government contributions to social insurance funds for low- wage workers in small and medium enterprises; and in-kind and cash support to migrants through a sub- national umbrella disaster fund. 17. The proposed program not only enhances coordination across schemes and ministries to build a disaster responsive social protection system, it also expands the ability of India’s safety nets architecture to become more inclusive by catering to a diversity of needs across states and vulnerable groups. Specific social groups are at risk of exclusion from accessing resources and government programs. The program directly transfers majority of benefits to women, thereby redressing gender- based vulnerabilities during a time of isolation. Tribal communities, who report the highest poverty rate Page 11 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) in India, are accorded extra weightage in the way social protection measures are targeted, thereby bolstering their inclusion. Migrants and the urban poor have been at great risk during the COVID-19 crisis as social assistance programs in India largely target rural populations without portability across state boundaries. Even prior to COVID-19, India needed to pivot its social protection system to address the needs of a more urban, mobile and diverse population. The onset of the pandemic has escalated the urgency of this reform agenda. Most social protection schemes operating in modern India are designed for a rural, agrarain and chronically poor country. That India now only exists in pockets – the majority of the country has seen booming tele-digital and transport connectivity, sharp declines in income poverty and new neglected sources of risks related to climate, urbanization and migration. State capability and the delivery landscape are deeply different across regions. With economic growth, states have also diverged in their social protection needs and riks-profiles. India’s response to COVID-19 and future resilience depends on how its social protection system responds to this heterogeneity. The proposed program enables flexibility for state governments to cater to their contexts, while ensuring the needs of migrants, informal workers and the urban poor are addressed. Despite fiscal stress, state governments have proactively expanded support for the poor during the COVID-19 crisis. The proposed reforms will allow states to access flexible funding and support to design and implement appropriate social protection responses to COVID-19 and future disasters. Given that larger shares of COVID-19 cases in India are currently in urban and peri-urban areas, geographically targeted support to these hot-spot districts will help deepen social protection coverage in urban areas. Box 2: Technology and Accountability Tools have Transformed Targeting and Delivery of Social Protection in India since the early 2000s PMGKY shall benefit from several technology innovations and accountability reforms in India over the past decade. Successive state and central governments in India have invested in important building blocks of a social protection system. The biggest challenge impeding the transparency of programs has been the reliance on paper-based registers for payments and targeting, which enabled abuse and discretion in who received benefits from the government. In response, state and national governments have aggressively focussed on ensuring inclusion and reduction in leakages through rights-based entitlements, community-based accountability and technological innovations. Three reform areas have been key: (i) Making food, public works and time-bound service delivery rights-based entitlements, which has helped balance power asymmetries between clients and service providers as citizens can complain regarding any abuse or service denial in courts. Further, making core programs near-universal has placed greater citizen pressure on service providers to improve delivery. This has particularly been the case for India’s Public Distribution System which has witnessed expansion in coverage and simultaneous decline in leakage in low- income states. (ii) The Socio-Economic Census (SEC) in 2011 -- which collected new census data on asset and socio- demographic information has made the beneficiary identification process more transparent. Prior to SEC, India’s social protection programs largely used regressively targeted paper based ‘Below Poverty Line’ cards to identify beneficiaries. The use of these BPL cards has largely been phased out by state and central programs in favour of digitized targeting tools. Nearly six states have developed their own social registries for dynamic targeting of programs (iii) Moreover, government-to-person payments have received strong impetus through campaigns to open bank accounts and the large-scale transition to digital payments through the Direct Benefit Transfer (DBT) initiative. In 2010, Government of India launched the Unique ID (Aadhaar) and Public Financial Management Page 12 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) System (PFMS). Introduction of these platforms enabled India to leapfrog from paper-based identification and payments in schemes to end-to-end digitization. These reforms have accelerated transparent and direct delivery of cash into bank accounts : In FY 2019-20, India transferred over USD 42 billion through digital payments into Aadhaar authenticated beneficiaries’ accounts. Government of India has issued over 1.1 billion Aadhaar numbers and institutionalized digital payments by onboarding over 434 Centrally Sponsored Schemes for digital payments. Government of India has mandated the use of Socio-economic Census (SEC) 2011 data for improved targeting of beneficiaries in respective programs. This is further complemented by the fact that Government of India has provided flexibility to the State governments to include and exclude beneficiaries. India’s COVID-19 Social Protection Program (PMGKY) includes programs like the PDS and UJJWALA which are leveraging the SEC data. Government of India in-line with the Supreme Court judgement on Aadhaar, requires welfare schemes to link Aadhaar numbers from respective beneficiaries to ensure uniqueness, thereby reducing ghost and duplicate records. All programs under PMGKY use digital modes of targeting and delivery: Programs like NSAP, MGNREGS, UJJWALA, PDS leverage digitized databases to identify beneficiaries and use Aadhaar numbers and digital payments to seamlessly transfer benefits, attempting to minimize leakages through tech-enabled transparent processes. 70% of all food ration delivery is digitized as 85% of Fair Price Shops are using Aaadhar enabled point of sale devices for authenticated and automated delivery. Food supply distribution is also digitized and tracked through geo-coding in many states to check against abuse. 18. Translating the potential of these reforms into impacts will require complementary investment programs focused on implementation support to states. As Box 2 highlights, India has made significant strides in using technology and accountability tools to improve payments and targeting. All programs being leveraged for PMGKY use digital modes of targeting and delivery. However, there is great heterogeneity in implementation capacities across states in India, and the proposed policy reforms will need to be supported through state level assistance through investment lending and technical assistance. These programs will need to ensure states are supported in designing delivery systems for social assistance, identifying excluded groups and reinforcing linkages between community-based organizations and social protection programs. 2. MACROECONOMIC POLICY FRAMEWORK 2.1. RECENT ECONOMIC DEVELOPMENTS 19. Over the past decade India has been one of the fastest growing emerging market economies, however, output growth has slowed in recent years. Real Gross Domestic Product (GDP) growth has moderated from an average of 7.4 percent during FY16-FY19 to an estimated 5.0 percent in FY19/20, and it is expected to slow further during the current fiscal year. The growth deceleration is due to the combined effects of (i) unresolved domestic issues, namely impaired balance sheets in the banking and corporate sectors, compounded by stress in the non-banking segment of the financial sector, and (ii) significant headwinds following the COVID-19 outbreak, the resulting global slowdown and domestic social distancing measures. 20. The COVID-19 pandemic has brought about major disruptions to economic activity, including as a result of deliberate global and domestic policy actions to contain it. Until mid-March 2020, India was impacted mostly indirectly. External spillover effects dominated as key imported inputs to domestic Page 13 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) production (especially from China1) were impeded, supply chains were disrupted, and global trade slowed. Specific sectors were also impacted including aviation, tourism and other hospitality activities. Thereafter, increasingly stringent restrictions on the movement of goods and people within India affected domestic supply and demand across the economy. As of March 25, the union government implemented a ‘lockdown’ of the country to contain domestic contagion, and several states imposed additional curfew measures. As a result, economic activity -particularly outside of agriculture - slowed sharply. Emerging high frequency data are pointing to significant slumps in indicators such as electricity consumption, petroleum consumption, increasing inventories with coal companies, and a collapse in demand for steel products. Finally, as in many other emerging market economies, there has also been a large negative impact on financial markets via dented investor sentiment, which impacted capital flows and capital markets negatively. In the month of March, Foreign Portfolio Investors (FPI) pulled out a record Rs 1.1 trillion on net basis from Indian markets (both equity and debt). Meanwhile, since the beginning of March 2020, the NIFTY-50 Equity Index has declined by more than 18 percent, reflective of the weak investor sentiment in the economy. 21. The Reserve Bank of India (RBI) has relaxed its stance to address the fallout from the COVID-19 outbreak. Inflation averaged 3.3 percent in the first half of FY19/20 allowing the RBI to ease monetary policy, through repo rate cuts. Following a large spike in food prices and inflation (which averaged 6.3 percent in the second half of FY19/20), the RBI eschewed further monetary easing until March 2020. With core inflation declining, low oil prices and the onset of the national lockdown in the wake of the COVID- 19 outbreak, the RBI, as part of a broader package of measures, undertook significant easing. Measures included: (i) cutting the repo rate by 75 basis points (to 4.4 percent); (ii) targeted long-term repo operations (TLTRO) of up to INR 1 trillion; (iii) cutting the cash-reserve ratio (CRR) by 100 basis point, and (iv) easing borrowing requirements under the marginal standing facility (MSF) window. 22. Credit growth in the economy has declined substantially because of a high degree of risk aversion by financial institutions, in spite of excess liquidity in the market. Credit to industry remained burdened by a legacy of Non Performing Assets (NPAs) in the banking sector, and fragility in the non- banking segment of the financial sector. Bank credit growth slowed from 13.3 percent in nominal terms in FY18/19 to 6.1 percent in FY19/20, which is particularly low. While the government introduced measures to address the prevalence of NPAs in the banking sector,2 the financial weaknesses of one of the largest private banks in March 2020 and the lingering impact of the earlier failure of a large non- banking financial company (NBFC)3 in late 2018 have continued to weigh on the credit market. The effects of the COVID-19 outbreak has exacerbated these persisting weaknesses. Consequently, elevated risk aversion levels in the banking sector and severe constraints to accessing liquidity for financial institutions and firms have prompted the RBI to not only ease overall liquidity via open market operations, but also to relax regulatory requirements, including a 3-month moratorium on outstanding loans. Despite these measures, the bank credit growth remains low at around 7.2 percent (as of April 10, 2020). 23. Partly as a result of the growth slowdown, India’s external position remained robust. The current account deficit has narrowed significantly as a result of muted import demand and low oil prices. India’s external position improved significantly during the first three quarters of FY19/20, with the current 1 which accounts for about 15 percent of total imports and supplies key inputs in pharmaceuticals, auto, electronics and apparels sectors 2 including the Insolvency and Bankruptcy Code, combined with a ₹ 2.1 trillion bank recapitalization program 3 Infrastructure Leasing and Financial Services (IL&FS) Page 14 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) account deficit declining to 1.0 percent due to a reduction in the trade deficit, as a result of a large contraction in imports. On the capital account, net FDI inflows stood at US$ 40.6 billion over April- February of FY19/20, higher than the US$ 30.0 billion recorded over the corresponding period of the previous year. Meanwhile, there was a net inflow of US$ 15.9 billion in portfolio flows, as compared to an outflow over the same period of the previous year. As a result, as of end-February 2020, foreign reserves stood at a comfortably high level of US$ 481.5 billion (equivalent to around 10 months of imports). With the onset of the COVID-19, India experienced net capital outflows, but the effect on the Balance of Payments (BOP) has been offset by a decline in imports (relatively more significant than the decline in exports). The RBI, meanwhile, has made calibrated interventions in the market to prevent a sharp fall in the value of rupee, which has depreciated, relative to the US dollar, by around 7 percent between end- January and mid-April 2020. 24. India’s fiscal balances have come under stress as a result of the growth slowdown in FY19/20 and early impacts of the COVID-19 outbreak. Prior to the COVID-19 outbreak, lower than expected growth and shortfalls in revenue had prompted the union government to invoke a provision of the fiscal rule to deviate from the expected consolidation path4. In the FY20/21 budget, presented in February 2020, the estimates of the FY19/20 fiscal deficit were revised to 3.8 percent of GDP (from 3.3 percent planned)5. At the subnational level, the combined deficit of states is expected to have remained high in FY19/20, at around 2.9 percent of GDP, on account of lower-than-expected growth and the early impacts of COVID- 19 related restrictions (in the last months of the fiscal year). As a result, the general government (center and states) fiscal deficit is estimated to have widened to 7.5 percent of GDP in FY19/20. Consequently, the general government debt, though being largely domestic and long term, is also believed to have risen6. 2.2. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY 25. India’s economy is expected to be significantly affected by the impact of the COVID -19 outbreak, including by policy measures that entail upfront economic costs to avoid much larger downstream damage. The national lockdown -implemented by the union government with the backing of states- is expected to significantly depress activity during the first quarter of FY20/21 (from April to June 2020). Moreover, since it is likely that social distancing provisions -of varying stringency will need to remain in place even beyond the lockdown period-, the recovery is also expected to be gradual. Mutually reinforcing disruptions in domestic supply and demand (on the back of particularly weak external trade activity) are expected to result in a growth deceleration in FY20/21, with considerable margins of uncertainty around any point estimate projection. On the supply side, the services sector will be particularly impacted. On the demand side, any revival in domestic investment is likely to be significantly delayed, given enhanced risk aversion on a global scale, renewed concerns about financial sector resilience, and deteriorated corporate and household balance sheets. The World Bank’s latest forecasting cycle -concluded on April 11 2020- projected growth at 2.8 percent in FY20/21, with a downside scenario of 1.5 percent in the event that (i) lockdown measures were extended and mobility remained significantly constrained over the second quarter of the fiscal year (July-September), and (ii) the global outlook deteriorated further. Some of these outcomes are unfolding. The lockdown has already been extended 4 As per the medium framework of the 2019/20 Union Budget 5 The deficit for FY20/21 was budgeted at 3.5 percent (versus an earlier target of 3.0 percent) 6 This implies that the baseline numbers for central government finances have changed compared to those presented in the Union Budget 2020-21 in February. Table 2 reports the new baseline. Page 15 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) once and further extensions in certain districts are likely until infection rates are significantly curtailed. Meanwhile, forecasts for global growth are being revised downwards as the depth of the crisis within countries and its breadth across regions are being reassessed upwards. Therefore, risks to forecast ranges are tilted heavily to the downside. In FY21/22, growth is expected to rebound – thanks in part to a significant base effect- but it is likely to take several quarters or even years to return back to long term rates. 26. The RBI has already relaxed the monetary policy stance and extended regulatory forbearance, and indicated its readiness to do more as needed. While India was in the midst of an economic and credit slowdown even before COVID-19, the immediate liquidity impact of COVID-19 on financial institutions has been mitigated through the injection of liquidity through policy rate cuts, lower reserve requirements and TLTROs. However, liquidity is not being passed on to final borrowers due to risk aversion by financial institutions. With the inflation outlook improving on the back of low oil prices and aggregate demand likely to remain impaired over several quarters, the RBI is expected to remain accommodative. Several members of the Monetary Policy Committee have indicated the importance taking into account the deteriorating growth outlook and financial stability considerations, in addition to inflationary dynamics, in the formulation of monetary policy. Reflecting subpar economic activity, inflation is expected to fall to an average of about 3.0 percent in FY20/21 before rising gradually in following years. 27. The government is expecting Public Sector Banks (PSBs) to lead the revival of credit growth. The PSBs’ share in incremental lending has grown in the past two quarters. The share of PSBs in total fresh rupee loans sanctioned by scheduled commercial banks increased to 52.8 per cent in February 2020 from a low of 39.7 percent in August 2019. Post-merger of PSBs on April 1,2020, which gives them higher regulatory and growth capital, the government expects PSBs to play a more active role in credit recovery. The Ministry of Finance has asked PSBs to ensure timely credit to sectors that need it the most. In a recent letter to PSBs, the ministry stated that the timely origination, sanction and disbursement of fund and non- fund-based credit is critical for revival of economic activity. PSBs are expected to be in a better funding and liquidity position than smaller private banks, as depositors exit private banks for perceived to be safer PSBs. 28. In the financial sector, the onset of COVID-19 has magnified some of the pre-existing fragilities, including: the legacy of NPAs in the banking sector and the fallout from crises in the non-bank segment. The RBI’s Financial Stability Report, (December 2019), observed that profitability ratios of Public Sector Banks (PSBs) had remained weak due to muted credit-uptake and slow resolution of NPAs. Even as the gross NPA (GNPA) ratio for scheduled commercial banks remained unchanged at 9.3 percent over March and September 2019, stress tests indicated that the ratio may rise to 9.9 percent by September 2020 under a business as usual economic scenario. As for the stressed NBFC sector, the GNPA ratio increased over March-September 2019, but only slightly. The disruptions caused by the outbreak of COVID-19 to households and businesses are expected to result in significant additional weakness for all segments of India’s financial sector. This is likely to require significant policy action in the coming quarters thereby implying a much longer than earlier expected process of normalization. 29. The current account deficit is expected to narrow further to 0.2 percent in FY20/21. The decline in economic activity and the weak external environment are expected to continue to depress both imports and exports with the latter having a much greater overall impact on the trade balance. The decline in the Page 16 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) CAD, in turn, should offset significant net capital outflows to ensure that the level of foreign exchange reserves remains comfortable over the medium term. 30. A large fiscal slippage is expected in the wake of the COVID-19 outbreak. The Union budget FY20/21 envisaged that the fiscal deficit of the central Government would narrow to 3.5 percent in FY20/21 and further to 3.3 and 3.1 percent in FY21/22 and FY22/23, respectively. This was to be achieved thanks to increases in tax revenues (reflecting an anticipated recovery in overall growth7 and private consumption), and mostly through significant increases in capital receipts, in line with the GoI’s ambitious dis-investment program. These expectations were already optimistic, even before the COVID-19 outbreak, given the slow growth momentum, and the effects of an earlier cut in corporate taxes8 and modifications in personal income tax rates.910 In the wake of the COVID-19 outbreak, this expected scenario no longer appears possible. The slowdown in growth is now projected to depress revenue collections by over 3 percentage points (relative to the budget targets). Given unprecedented financial market volatility, it is also doubtful that planned dis-investments will proceed as expected. Dis-investment receipts are now expected to reach 0.3 percent of GDP (as opposed to 0.9 percent targeted in the budget). As a result, the fiscal deficit and debt of the central government are likely to increase sharply over the next two years. In a baseline scenario, which takes into account revised growth projections, lower than expected divestment proceeds, and the fiscal measures adopted to date (including those supported by the current operation) plus additional spending to the extent of 0.5 percent of GDP, the fiscal deficit of the central government would increase to 6.1 percent of GDP in FY20/21 and remain at a high 5.0 in the following year. Assuming that the combined deficit of the states is contained within a 3-4 percent of GDP band (which is in line with the hard limits to borrowing by states)11 the deficit of the general government would rise to between 9 and 10 percent in FY20/21. These ratios would increase mechanically in the event further countercyclical fiscal stimulus measures are adopted. 31. Risks stemming from contingent liabilities exist and may need to be reassessed in light of the COVID-19 outbreak, but they are believed to be manageable. Public sector undertakings and other public agencies have accumulated significant liabilities (with borrowing by public sector undertakings alone amounting to over 14 percent of GDP) but risks are considered limited given the low probability of materialization in the short term. Additional risks come from the financial sector, namely from a buildup of NPAs in PSBs that could eventually lead to another large scale recapitalization. The government has recapitalized PSBs in the past few years (Rs.70,000 crore in 2019-20) and may be willing to do the same, if needed, due to the impact of COVID-19. Large scale failures of financial institutions are considered low; however, a clearer estimate of potential solvency issues for banks and NBFCs will emerge after the loan 7 The expected nominal growth rate in the Union Budget was 10 percent for FY20/21 8 The annual turnover threshold for firms to pay a lower Corporate Income Tax rate of 25 percent, was raised from INR 2500 million to INR 4000 million. Consequently, almost all corporate entities were liable to pay 25 percent tax. 9 As per the Union Budget 2020-21 the personal income tax (PIT) rates applicable for most slabs were lowered. However, the new rates will be applicable only to those individuals who do not avail of certain exemptions. An individual is free to choose whether to continue to avail exemptions or to shift to the new regime. This step comes in with a simultaneous abolition of about 70 types of PIT exemptions. 10 Prior to the onset of COVID-19, central government revenue was expected to increase due to anticipated divestment and a gradual pickup in economic activity. 11 India’s states are required to obtain clearance from the GoI for their borrowing plans, and in doing so – broadly speaking - they are required to target fiscal deficits not exceeding 3 percent of state GDP. The XVth Finance Commission is expected to finalize its report and recommendations for the next 5 years, including so called “revenue deficit” grants for those states facing particular and unavoidable fiscal stress. Page 17 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) moratorium and NPL recognition standstill expire12. Other contingent liabilities that would entail significant fiscal cost could emerge if there are sector- or industry-wide calls on the MSME guarantees by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). However, the scope of calls on the scheme will not be known until the full extent of NPAs will be known in the next quarter. 32. According to the Bank’s debt sustainability analysis, which updates the IMF’s latest Article IV estimates to reflect post-COVID-19 developments, India’s debt is projected to increase while remaining sustainable. India’s public debt is mostly denominated in domestic currency, of long/medium-term maturity, and predominantly held by residents. Given that a captive market for debt caps the interest cost, the sustainability of debt is mostly contingent upon shocks to real GDP growth and fiscal slippages. The DSA baseline scenario reflects the COVID-19 shock, including a significant deceleration in GDP growth and a sharp increase in the primary deficit during FY20/21. Under the baseline, the general government debt-to-GDP ratio is projected to peak at about 80 percent in FY22/23 before gradually declining to below 78 percent by FY24/25. Under a further combined growth and fiscal shock13 the ratio would rise to over 85 percent of GDP around FY23/24, and decline thereafter. India’s external debt (both public and private), at around 20 percent of GDP and predominantly of long duration, remains sustainable. Figure 1. India Public Debt Sustainability: Baseline and Stress-Test Scenarios Source: World Bank staff calculations based on International Monetary Fund (IMF) Article IV 2019. Note: In the above charts “2019” stands for fiscal year 19/20, “2020” stands for fiscal year 20/21 and so on. 33. Although downside risks have increased significantly due to the onset of the COVID-19 pandemic, India’s macroeconomic policy framework is considered adequate for the proposed DPO. Economic expansion is expected to be affected in FY20/21, but growth should remain positive and 12 After the RBI’s directive, Banks and NBFCs can offer a three-month moratorium to borrowers and do not have to categorize these accounts as NPLs for the duration of the moratorium. As a result, the impact on NPLs and solvency can be determined only after the moratorium, when banks can track their borrowers individually to determine and segregate the permanent impact from the temporary impact and make appropriate provisions 13 The combined shock models a larger fiscal deficit (by 1pp of GDP over FY21 and FY22) and lower growth (by about 1.4 percentage points over FY21 and FY22) relative to the baseline. Page 18 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) gradually pick-up from FY21/22 onwards. The deviation from the pre-COVID planned path of fiscal consolidation, including on account of countercyclical measures, is needed given the imperative to protect the poor and sustain economic activity. Moreover, these measures are expected to be in the form of one- off additional expenditures, such that fiscal consolidation can resume as of FY21/22, and public debt eventually return to a declining trajectory from FY22/23 onwards. In view of recent measures by the RBI to mitigate the fallouts of COVID-19, ample domestic funding is available and refinancing risks are still moderate. In recent years, the monetary policy framework has been strengthened and, while India’s exposure to external volatility has increased, high reserve levels and limited external financing needs provide adequate buffers. While risks stemming from a massive deterioration in global economic conditions remain, the main downside risk is a large scale and persisting domestic COVID-19 contagion scenario -in case lockdown restrictions are lifted too early and need to be re-imposed-, which would further affect growth. However, there is broad consensus to date that the response of the government and regulatory agencies (RBI and SEBI) so far has been swift and adequate. Table 2. India Selected Economic Indicators FY16–FY23 FY23 FY16 FY17 FY18 FY19 FY20 est FY21 est FY22 est est Real Economy (Annual percentage change unless otherwise Indicated) Nominal GDP (local currency) 10.5 11.8 11.1 11.0 7.8 5.8 7.8 9.6 Real GDP 8.0 8.3 7.0 6.1 5.0 2.8 5.0 7.0 Per Capita GDP (real USD) 1607.9 1719.4 1816.8 1906.8 1979.9 2013.7 2093.4 2218.7 Contributions to growth (percentage points) Consumption 5.2 5.2 5.0 5.0 3.9 2.1 3.6 4.5 Investment 2.0 2.6 2.2 3.0 -0.3 0.2 0.7 1.5 Net exports 0.1 0.1 -2.8 0.4 1.1 0.4 0.6 0.7 GDP deflator growth 2.3 3.2 3.8 4.6 2.8 3.0 2.6 2.4 Consumer price index inflation (CPI 4.9 4.5 3.6 3.4 4.1 3.0 3.5 4.0 av.) Fiscal accounts (general government) (Percent of GDP) Overall balance −6.9 -6.9 -5.8 -6.2 -7.5 -9.6 -8.9 -7.7 Total Liabilities 68.5 68.9 69.5 70.2 72.3 77.3 79.5 79.9 Selected monetary accounts (Annual percentage change unless otherwise indicated) Base money (M0 or reserve money) 13.1 -12.9 27.3 14.5 — — — Credit to nongovernment 10.6 4.4 9.5 12.7 — — — Interest rate (Repo rate and period 7.0 6.4 6.1 6.3 — — — average) Balance of payments (Percent of GDP, unless otherwise indicated) Current account balance −1.1 -0.6 -1.8 -2.1 -1.0 -0.2 -0.3 -0.3 Imports 22.9 21.3 22.1 23.7 21.6 20.3 19.5 19.3 Exports 20.0 19.4 19.0 20.1 19.1 18.6 18.8 19.7 Foreign direct investment (net) 1.7 1.6 1.1 1.1 1.3 0.9 1.1 1.5 Page 19 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Gross reserves (in US$ billion, eop) 360.2 370.0 424.4 412.0 480.0 — — — In months of next year's imports 8.4 7.4 — — — — — — External debt 23.4 20.0 20.1 19.7 20.8 — — — Terms of trade (FY2000=100) 71.8 71.1 73.3 — — — — — Exchange rate (INR/US$1, average) 64.2 67.2 64.5 69.9 — — — — Other memo items Nominal GDP in INR (trillions) 137.7 153.9 171.0 189.7 204.6 216.5 233.3 255.7 Source: India Central Statistics Office, Staff calculations. Table 3. India’s Selected Fiscal Indicators FY15–FY23 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Key Fiscal Indicators Actual Actual Actual Actual Actual Estimate Forecast Forecast Forecast Central Government Overall balance -4.1 -3.9 -3.5 -3.5 -3.4 -4.6 -6.1 -5.4 -4.5 Primary balance −0.9 −0.7 −0.4 −0.4 −0.4 -1.6 -2.9 -2.1 -1.1 Total Revenues 12.0 12.9 13.3 13.0 12.8 9.9 9.3 11.7 12.9 (revenue + capital) Tax revenues 10.0 10.6 11.1 11.2 11.0 7.9 7.6 9.7 10.9 Taxes on goods and 2.9 3.6 4.2 4.6 4.3 3.6 3.5 4.6 4.7 services Taxes on income and 5.5 5.4 5.4 5.8 6.0 3.8 3.6 4.6 5.5 profits Taxes on international 1.5 1.5 1.5 0.8 0.6 0.5 0.4 0.6 0.7 trade Other taxes 0.1 0.1 0.0 0.0 0.1 0.0 0.0 0.0 0.0 Non-tax revenues 1.6 1.8 1.8 1.1 1.2 1.5 1.3 1.5 1.5 Non-Debt Capital 0.4 0.5 0.4 0.7 0.6 0.4 0.4 0.5 0.5 receipts Expenditures 16.1 16.7 16.8 16.5 16.2 14.5 15.4 17.2 17.3 Current expenditures 14.5 14.9 15.0 14.9 14.6 13.5 14.9 15.4 15.7 Interest payments 3.2 3.2 3.1 3.1 3.1 3.1 3.2 3.3 3.4 Others (salaries, 8.5 8.0 7.9 7.9 7.5 7.7 9.0 8.7 8.4 supplies, and so on) Tax transfers to states 2.7 3.7 4.0 4.0 4.0 2.8 2.7 3.4 3.8 Capital expenditures 1.6 1.8 1.8 1.5 1.6 1.0 0.5 1.7 1.7 Central Government 4.1 3.9 3.5 3.5 3.4 4.6 6.1 5.4 4.5 Financing External (net) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Domestic (net) 4.1 3.9 3.5 3.5 3.4 4.6 6.1 5.4 4.5 State Governments FY19 RE FY20 BE Overall balance -2.6 -3.0 -3.5 -2.4 -2.9 -2.9 -3.5 -3.5 -3.2 Revenues 13.0 13.7 13.7 13.8 15.4 14.7 14.0 14.5 15.0 Page 20 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Expenditures and net 15.6 16.7 17.2 16.2 18.3 17.6 17.5 18.0 18.2 lending Total Liabilities FY19 RE FY20 BE General Government 66.6 68.5 68.9 69.5 70.2 72.3 77.3 79.5 79.9 Source: India Central Statistics Office, Staff calculations. Note: The general government deficit may not necessarily equal the sum of the central and state government deficits as the general government deficit is reported net of intergovernmental transfers. The combined state government deficit is reported with a lag. Table 4. India Balance of Payments and External Financing Requirements FY16/17 FY17/18 FY18/19 FY19/20 FY20/21 FY21/22 FY22/23 External financing requirements Actual Actual Actual Est. Est. Proj. Proj. (percent of GDP unless otherwise indicated) Financing Requirements 2.5 3.5 3.6 2.5 1.7 1.6 1.5 Current Account Deficit 0.6 1.8 2.1 1.0 0.2 0.3 0.3 External Debt Amortization 1.9 1.7 1.5 1.5 1.4 1.3 1.2 Net Errors and Omissions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financing Sources 2.5 3.5 3.6 2.5 1.7 1.6 1.5 Capital Account Balance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net Foreign Direct Investment 1.6 1.1 1.1 1.3 0.9 1.0 1.0 Net Portfolio Investment 0.3 0.8 0.0 0.0 0.6 0.5 0.6 Net All Other Flows 1.6 3.1 2.4 2.4 1.7 1.6 0.9 Change in reserve assets -0.9 -1.6 0.1 -1.2 -1.5 -1.5 -1.0 External Financing Gap 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Nominal GDP (USD billion) 2294.9 2653.0 2713.3 2924.9 3027.6 3405.1 3734.5 Source: Reserve Bank of India and staff calculations. 2.3. IMF RELATIONS 34. The IMF does not have an active lending program in India. However, it carries out regular macroeconomic supervision and Article IV consultations twice yearly. The World Bank and IMF teams regularly exchange views and information. The IMF provided an assessment letter which is attached as Annex 2. 3. GOVERNMENT PROGRAM 35. India has implemented stringent public health measures to flatten the spread of the COVID-19 pandemic. The Government of India executed the world’s largest lockdown on March 23, 2020, bringing economic activity to a halt in a country of 1.3 billion people. The measures have led to serious disruptions specially impacting the livelihoods of the poor and marginal workers and their families. The pandemic has been notified by the national and state governments as a ‘disaster’, thereby enabling the use of funds Page 21 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) and protocols under the national disaster management regulations. 36. To counter the impacts on the poor, vulnerable and informal workers, the Government of India launched the Pradhan Mantri Garib Kalyan Yojana (PMGKY), an important and ambitious initiative to protect the poor and others who lost their livelihoods due the Coronavirus Containment Measures . These measures are expected to cost the Government 170,000 crore INR (approximately USD 23 billion), demonstrating the Government’s strong commitment to assure that the poor and displaced are protected during this massive economic turmoil. The Government is ready to provide more funding if needed to assure this goal. 37. The Government PMGKY package, anchored at the Ministry of Finance, uses India’s well - developed Public Distribution System (PDS) and Direct Benefit Transfer (DBT) system to transfer food and cash benefits respectively. In-kind benefits for food will be delivered to all poor and vulnerable households identified by the PDS using pre-existing channels of Fair Price Shops across the country, maintaining social distancing norms. Cash transfers shall be made directly into the bank accounts of beneficiaries identified by five of the country’s largest cash-transfer programs from the treasury, thereby ensuring timely payments to those in need. The identification of beneficiaries relies on India’s near - universal programs, supplemented by the Aadhaar digital ID network. The key elements of the measures announced on March 25, 2020 are as follows: • Scaling up Public Distribution System (PDS) allocations for all AAY, Priority households for three months (1kg pulses per household, 5kg wheat or rice per individual in the household) • Advance payment under Pradhan Mantri-Kisan Samman Nidhi (PM-KSN) by INR 2000 for 8.7 crore farmers for three months • Increasing Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) wage rates from 180 INR to 202 INR • Transferring 1000 INR to all beneficiaries under the National Social Assistance Program (NSAP) for elderly, widows and disabled receiving social pensions (3.5 crore beneficiaries) • Transferring 500 INR per month to all female Jan Dhan Accounts for three months • Scaling up UJJWALA: Providing free cylinders for three months to poor UJJWALA beneficiaries. This expected to cover 8.3 crore households • Encouraging States through advisories to use Construction Workers Welfare Funds for covering the unorganized sector: Union Government intends to issue directives to state governments to use the INR 31,000 crore funds in the Building and Other Construction Workers Welfare Fund to finance support for COVID-19 response to 3.5 crores registered construction workers. • The Central Government will pay Employee Provident Fund (EPF) contributions for employees and employers for the next 3 months. This is targeted to establishments with up to 100 workers and where 90% of workers earn less than INR 15,000 per month. This is expected to cover 18 lakh employees and 4 lakh establishments. • The Central Government will amend EPF regulations to allow workers to access a non-refundable advance from their accounts. The regulations will allow workers to withdraw 75% of their provident fund savings or 3-months wages (whichever is lower). This is expected to benefit 4.8 crore workers covered by the Employees' Provident Fund Organisation (EPFO). Page 22 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) 38. Following the PMGKY announcement, which focused on emergency supplemental support to beneficiaries of existing programs, the Government has approved additional provisions to ensure that migrant workers receive access to food and shelter where they are currently resident. The Government is also aware that there are critical challenges which need to be addressed quickly to ensure full portability of benefits regardless of location or the sector in which workers are engaged. The Government also recognizes that while the National Disaster Management Fund can fund one-time relief payments it cannot finance a series of short-term safety net payments which are necessary to respond to extended disasters such as COVID-19. In response, the government plans to open a new window for adaptable social safety nets funding by allowing states to use SDRF/NDRF to provide immediate cash support for the COVID-19 disaster and future disasters whether local or national. 4. PROPOSED OPERATION 4.1. LINK TO GOVERNMENT PROGRAM AND OPERATION DESCRIPTION 39. Program Development Objective of the proposed operation is to: strengthen the capability of state and national governments in India to provide coordinated and adequate social protection to the poor and vulnerabe from the impacts of the COVID-19 pandemic. By ‘coordinated’, the program implies fostering an integrated institutional framework to implement a whole-of-society and whole-of- government approach for social protection and resilience, whereby pre-existing programs and platforms are leveraged by engaging all tiers of government including community groups. The program also aims to ensure an ‘adequate’ package of social protection, implying that size of the benefits transferre d should compensate for losses in consumption expenditures and prevent households from falling below the poverty line. 40. The proposed DPO supports all aspects of the the Government ’s COVID-19 social protection efforts through a series of reforms. The reform package is designed to improve efficiency of delivery and to address problems which have emerged such as lack of geographic portability of benefits and specific needs to support migrant workers. By supporting this critical government priority, the proposed operation reinforces the GoI’s focus on social protection and strengthens the prospects of results being achieved successfully. Beyond emergency support to households to tackle impacts of lockdowns, the focus of the Bank’s policy dialogue links the social protection response to COVID-19 with broader social protection and resilience agenda. 41. Personal data collection and processing. The portion of the Program supported under the first DPO of the series will not require the collection on new data but will exclusively rely on existing data collected by the various existing social protection programs involved. However, for the second DPO in the series, large volumes of personal data, personally identifiable information and sensitive data are likely to be collected, exchanged and used in connection with the management of the COVID-19 outbreak under circumstances where measures to ensure the legitimate, appropriate and proportionate use and processing of that data may not feature in national law or data governance regulations, or be routinely collected and managed in health information systems. The technical assistance to be provided to the Page 23 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) social protection sector alongside this DPO series, will seek to incorporate good international practice for dealing with such data in such circumstances. Such measures may include, by way of example, data minimization (collecting only data that is necessary for the purpose), data accuracy (correct or erase data that are not necessary or are inaccurate), use limitations (data are only used for legitimate and related purposes), data retention (retain data only for as long as they are necessary), informing data subjects of use and processing of data, and allowing data subjects the opportunity to correct information about them, etc. 4.2. PRIOR ACTIONS, RESULTS AND ANALYTICAL UNDERPINNINGS Pillar I: Leveraging Pre-Existing Social Protection Measures for COVID-19 Relief Prior Action 1: The Borrower through Ministry of Finance, Government of India has approved the Pradhan Mantri Garib Kalyan Yojana, an integrated COVID-19 social protection relief cash-transfer package which: (a) increases benefit levels for MGNREG; (b) allocates LPG and gas cylinders for below- poverty line households for three months through UJWALA; (c) provides additional allowance for elderly, widows and disabled through the NSAP; (d) triggers cash transfers to women bank account holders under the PMJDY; and (e) outlines benefit levels, implementation guidelines, fund-flow mechanism and governance rules for coordination and monitoring across multiple state governments and line ministries for roll-out of the PMGKY package. Indicative Trigger 1A. The Borrower through Ministry of Home Affairs, Government of India expands the ability of state governments to provide adequate social protection during disasters through executive orders which enable use of National Disaster Response Funds/State Disaster Response Funds for social protection requirements with outlined regulations/manuals/procedures for state governments to access financing to provide context-specific, adequate and agile safety nets for disaster relief (such as COVID- 19 and future health/natural disasters) which can include community-driven approaches. 42. India’s COVID-19 Social Protection Program (PMGKY) leverages its strong e-payments platforms to re-enforce social assistance by approving additional cash payments to the poor and vulnerable identified by national programs. Instead of creating a new pipeline to deliver cash or in-kind assistance, India is uniquely placed to use its large-scale pre-existing safety nets -which target the poor and vulnerable in large numbers -to deliver disaster responsive social protection. Scaling up through existing national programs provides a stable and functional pipeline to transfer cash to households as these delivery systems are tried and tested. Further, these programs use India’s pioneering e -payments architecture whereby bank account information has been verified through recent use, DBT programs rely on Aadhaar for authentication as well, thereby limiting double-dipping of PMGKY benefits. 43. Through Prior Action# 1, the PMGKY package shall provide additional cash assistance to poor households and vulnerable groups already receiving benefits from five major national social protection programs: (i) Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the largest public works program in the world; (ii) Pradhan Mantri Ujjwala Yojana (PMUY), which provides gas cylinders and subsidies to 80 million below poverty line households in 2019; (iii) National Social Assistance Program (NSAP), which provides social pensions to 30 million below poverty line widows, Page 24 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) disabled and elderly; and (iv) Pradhan Mantri Jan Dhan Yojana (PMJDY), a pan-national financial inclusion platform focused on low-income clientele transfers cash assistance to 204 million female account holders. While the above measures, captured in Prior Action 1, scale-up cash transfers, the government is also providing advance payments under the Pradhan Mantri Kisan Samman Nidhi (PM-KSN), a quasi- basic income support program operating for poor and vulnerable rural agriculture workers, covering 87 million farmers. Combining these elements, the PMGKY program will accelerate near-universal social protection support through cash transfers to 320 million beneficiaries identified by pre-existing national programs. 44. State governments will play a crucial role in minimizing exclusion and ensuring speedy delivery of social protection for COVID-19 relief. Each program being leveraged by PMGKY to scale up social protection for the poor relies on state governments for delivery and implementation. While evidence suggests that MGNREGS, NSAP and UJJWALA report pro-poor targeting, programs such as PM-KSN exclude landless farmers. Further, migrants are at risk of being left-out from the current universe of beneficiaries identified by the national programs being leveraged for PMGKY as these provide benefits to residents of states only. There may also be a sizeable share of destitute persons and the lower middle- class who are not enrolled in the PMGKY scheme universe and require support. According to a recent survey by Dalberg Asia, 14% of below-poverty-line households are not enrolled in any of the five cash transfers being used to provide COVID-19 relief. States should be able to cater to these left-out groups by deploying community-based organizations available through National Rural Livelihoods Mission (NRLM) and other cooperatives to reduce exclusion and enhance the speed and scale of the social protection measures rolled out as part of the COVID emergency response measures. However, given that many states are facing fiscal stress, state governments will need additional support and financing from the national government to tackle additional demands for support. Further, agro-climatic variation and diversity of the delivery landscape across states in India will require an enabling policy and financing regime whereby state governments have greater flexibility in shaping their social protection response to COVID-19 and future disasters, while the national government focuses on monitoring and coordinating interventions and facilitating cross-state learning. 45. State governments are best placed to design and tailor the COVID-19 response to their own communities and contexts. As the India CPF reflects, political economy and the design of Indian administration make state governments an ideal focal point for decision making on a range of critical delivery issues in India. States are entrusted with disaster management, in coordination with the national government. Even in the context of COVID-19, states are leveraging programs, local governments and community-based organizations for service delivery. As part of the COVID response measures, Self-Help Groups (SHGs) have also been tasked with running community kitchens and delivering prepared meals. Approximately 10,000 community kitchens have been set up so far primarily across 75 districts in the five states of Bihar, Jharkhand, Kerala, Madhya Pradesh and Odisha providing meals twice a day to more than 70,000 vulnerable individuals. In Jharkhand, the SRLM has also established a call-centre to tackle problems faced by migrants. States are also tailoring their approaches to delivering cash assistance based on local context. Accessing cash from bank accounts is challenging given social distancing protocols and lockdowns. These delivery challenges are compounded in areas which are remote and rural. Different states are using different delivery models. For example, in Kerala, the state government is relying on post- office personnel to deliver payments at the beneficiary’s door-step. In other states, micro-ATMs and the Fair Price Shop network are being activated to make sure cash benefits are accessible for households. Page 25 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) States have also expanded social assistance by providing additional benefits beyond the national social protection package. For example, Uttar Pradesh has announced income-support measures for informal workers. 46. Through Indicative Trigger #1A, the proposed program will enable state governments access to funds and flexibility in how they roll-out disaster responsive social protection interventions through use of State and National Disaster Response Funds. COVID-19 has been notified as as ‘disaster’ as per India’s national disaster management protocols. The National Disaster Managem ent Authority (NDMA) under Ministry of Home Affairs has notified State governments and Union Territories to use 80% funds from State Disaster Response Fund (SDRF) and 20% funds from State Disaster Mitigation Fund (SDMF) for COVID-19 efforts. The NDMA provides guidance and regulations for disaster management in India, and outlines mechanisms for states to access funding for disaster relief. A core source of funding for managing disasters is the National Disaster Response Fund and the State Disaster Response Funds. The Disaster Management Act, 2005 created the State Disaster Relief Fund (SRDF) which is the primary response fund available with the State governments to tackle needs from any notified disaster. However, thus far, these funds are not availabe to states for social protection in the context of disasters, and focus largely on providing infrastructure and relief materials. This reform will notify rules whereby states can access the State Disaster Response Funds for social protection, creating rules and regulations for states to draw down on funds for social assistance in hot-spot clusters or for excluded groups. The national rules shall also offer options to states, with detailed standard operating procedures, on how social assistance can be delivered to target groups through use of digital payments, local governments and community-based organizations for delivery. Such ‘nuts and bolts’ guidance will be helpful for low capacity contexts. The proposed reform path will help forge a new relationship between the national government and states for effective social protection financing and delivery. It will enhance India’s preparedness for the current and future health/natural disasters by reorienting the focus of the national Prior Action 2: The Borrower through Ministry of Consumer Affairs, Food and Public Distribution, Government of India has approved the provision of free food rations for a three-month period delivered under PMGKAY’s public distribution system, outlining benefit levels and implementation guidelines for delivery. Indicative Trigger 2A. The Borrower through Ministry of Consumer Affairs, Food and Public Distribution, Government of India amends and expands the PMGKAY package and issues government orders notifying release of three-month additional grains to all AAY (chronic poor) households in hot- spot districts. rules/regulations on disaster management from protecting physical infrastructure towards social protection, thereby leading the way for an adaptive social protection system for India. States have been using existing disaster management infrastructure to tackle the threat of COVID-19. For example, in Odisha, cyclone shelters are being used as quarantine centers or relief centers to host the stranded migrant workers. This reform area builds on such efforts and will be complemented with state level technical assistance and operations which help NDMA create a social protection window, and help states create delivery systems which re-inforce links between social protection and community-based organizations. 47. Expected Results: An adequate social protection response to the COVID-19 pandemic calls for Page 26 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) an adaptive program which is fast and flexible, nationally coordinated, and tailored to the specific needs of states. The PMGKY roll-out and additional support to states to top-up and ensure effective delivery is expected to leverage decentralization and digital delivery systems to ensure that exclusion is minimized, and transfers provided to the poor and vulnerable are adequate to prevent households from being impoverished. Prior Action 3: The Borrower through Ministry of Labour and Employment, Government of India has amended the Employees’ Provident Fund Regulations to include pandemic as a reason to allow workers to withdraw from their Provident Fund account a non-refundable advance of 75% of the balance in the account or three months of the wages, whichever is lower. Prior Action 4: Under its PMGKY, the Borrower through Ministry of Labour and Employment, Government of India contributes 24% of monthly wages for low-wage workers in small and medium enterprises1 for a three months period into their Provident Fund account. 48. Through Prior Action#2, the PMGKAY package shall provide additional three months food rations to nearly 800 million people covered by the Public Distribution System. Food expenditures account for 56% of spending for India’s poorest households. India’s food subsidy distribution program continues to be one the largest safety nets in the world. The Targeted Public Distribution System (TPDS) has near-universal coverage and currently targets nearly 800 million people, providing subsidized grain through a network of over half a million fair price shops (FPSs) across the country. The distribution of subsidized cereals through the TPDS was and remains the center-piece of the Indian social protection system, becoming a rights-based entitlement following the passage of the National Food Security Act (NFSA) in 2013. Delivery of the program has also improved with pan-national increase in coverage and strong decline in leakage in low-income states. Food security will remain critical in the context of the COVID-19 crisis. As social distancing and lockdowns are anticipated to continue in hot-spot districts, Trigger 2A proposes expanding the food ration supply for an additional three months for chronically poor households (as identified by the state PDS machinery through the program database) in hot-spot districts, where lockdown periods will be prolonged. The action and trigger aim to ensure that the poor and vulnerable have access to a food supplies during the ongoing crisis. It is important to note that the additional food rations are a temporary measure for three months, and maybe continued within certain districts and states where the lockdown and containment measures continue due to heavy COVID-19 cases. A major reason to provide in-kind transfer of food instead of cash is because state governments in India have struggled with indexing the cash transfer amount to food inflation, as there is great volatility in prices even within states. Therefore, in-kind transfers will ensure the consumption basket is adequate and consistent. Also, purchasing grains from the local market is constrained due to social distancing. Finally, in-kind support is an essential part of the program transfer package to conserve the cash injection into the local economy, which could yield an upward pressure on local prices. 49. The PMGKY program reforms the Employee Provident Fund Act to increase cash availability for workers in the organized sector, with additional support for low wage workers. The EPF is a defined benefit retirement savings scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The scheme is managed under the aegis of Employees' Provident Fund Organization (EPFO). It covers every establishment in which 20 or more persons are employed. At present, the EPF does not allow Page 27 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) workers to access their savings during health disasters. Through PA 3, the EPF Act will be amended to enable workers to withdraw savings citing ‘pandemics’ as a reason. Following global practice, to disincentivize workers from depleting their savings, the reform places a ceiling on the amount a worker can withdraw from their provident fund accounts. Further, allowing workers during a crisis to withdraw a limited share of savings from defined benefit programs is consistent with the Bank’s technical advice to countries. At present, employers are expected to match contributions of the employee. However, the ability of employees and employers in small business establishments to contribute their share maybe severely compromised by lockdown measures. To address this liquidity gap and provide additional relief to low-wage workers and small business establishments, through PA 4, the national government will also notify a special scheme wherein it will contribute 24% of an employee’s monthly wages for three months into their PF accounts. The scheme is targeted for low-wage workers earning less than Rs 15,000 to tide over the impact of COVID-19 on small establishments. These reforms will allow stressed workers and businesses to bear shocks from the lockdown. Prior Action 5: The Borrower through Ministry of Health and Family Welfare, Government of India has established a special health insurance scheme for health workers providing essential care/medical services to COVID-19 patients. Pillar II: Protecting Workers in Essential Service Supply Chains during COVID-19 Pandemic 50. Through Prior Action 5 the government will provide health care and important mental assurance to those who are providing health care and essential services to COVID-19 patients. The scheme will cover health professionals tackling COVID-19 cases such as sanitation workers (Safai karamcharis), ward-boys, nurses, community health workers (ASHA workers), paramedics and technicians. This program goes beyond coverage of public sector doctors which is already provided by the government. The aim is to provide cover for those who are in direct contact and care of COVID-19 patients and who may be at risk of being impacted. The scheme covers private hospital staff, volunteers, local urban bodies, contract-workers, daily wage workers and outsourced staff requisitioned by States/ Central hospitals/ autonomous hospitals of Central/ States/UTs, All India Institute of Medical Sciences (AIIMS) and Institution of National Importance/ hospital of Central Ministries can also be drafted for COVID-19 related responsibilities. These additional groups covered by the new scheme are low paid temporary workers hired directly or through contractors and cannot afford health insurance. The insurance scheme will leverage existing health insurance program systems managed by government and utilize common delivery mechanisms. This measure will be critical to ensure that all those workers providing essential services to coronavirus patients are protected and covered by health insurance. Pillar III: Improving Access and Delivery for Vulnerable Populations Prior Action 6: The Borrower through Ministry of Labour and Employment, Government of India has issued advisories to all State governments on how to use the Building and Other Construction (Workers Welfare Fund) to provide relief materials and cash to registered construction workers. 51. Migrants and the urban poor are at risk of exclusion from receiving adequate social protection Page 28 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) through PMGKY. This is because none of the six national social assistance programs being leveraged to provide additional support are portable as they only provide benefits to state residents. Also, the PMGKY package has lower coverage in urban areas. Programs such as PM-KSN and MGNREGS only operate in rural India. Programs such as UJJWALA, NSAP and PDS report a larger beneficiary base in rural India. Given that shocks in urban areas are transmitted to rural areas through a drop-in demand and remittances, PMGKY coverage in rural India remains critical. However, the rural-urban gap is a major service constraint as COVID-19 has disproportionate number of cases in urban districts. While reforms through Pillar I will allow more urbanized states to develop their own approach using relevant delivery channels, this pillar emphasizes reforms to ensure vulnerable groups are able to access social protection support through a targeted approach. 52. National sample survey data highlights that majority share of urban daily-wage labor in India is engaged in the construction sector. As per the latest round of employment data, 15 percent of India’s informal workers are engaged in construction activities, and 40 percent of these workers earn daily- wages. Prior Action 6 builds income-support measures for unorganized constructions workers through triggering the use of Building and Other Construction Workers Welfare Funds. These funds were created at the state level under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 to provide support and assistance to construction workers. The Act applies to every establishment employing ten or more building workers in any building or other construction work for a period of 12 months. All construction workers between the ages of 18 to 60 years who have worked for a period greater than 90 days in a year are eligible to register as beneficiaries. Registered workers have to pay a monthly contribution towards the fund as per rates decided by state governments. The Building and Other Construction Workers Welfare Cess Act, 1966, mandates that all construction activities incurring cost above a threshold are bound to deposit a cess to the State Building & Other Construction Welfare boards. State governments levy a 1% cess on construction cost and the proceeds are collected in the Fund. Unfortunately, due to the COVID-19 pandemic, all on-going construction work has been suspended and many millions of such unorganized construction workers are facing financial crisis. As per Union Ministry of Labor & Employment, there is approximately USD 742 million[1] of unspent cess funds available with different State governments and Union Territories and about 35 million workers registered with respective Building & Other Construction Welfare boards of different state and union territories. 53. Through Prior Action # 6, Government of India will provide greater flexibility to State governments through a Government Advisory which guides state governments to use the Building & Other Construction Workers Fund for providing relief materials and cash to registered construction workers. This will enable states to use funds available for direct cash transfers. Implementation guidelines by Union Ministry of Labor & Employment will suggest an approach to be adopted by different States and Union Territories to transfer funds to unorganized construction workers through respective State and Union territories Welfare boards. 54. Expected Result: The advisory will provide implementation guidelines to states and union territories to transfer cess funds to the unorganized construction workers in a seamless and accessible manner. The proposed measures will account for benefits to nearly 35 million registered workers, and [1] https://pib.gov.in/PressReleasePage.aspx?PRID=1607911 Page 29 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Prior Action 8: The Borrower through Ministry of Finance, Government of India has issued guidance largely adopted by public sector banks to waive ATM charges for all cash withdrawals to facilitate access to cash and PMGKY payments. Indicative Trigger 8A: The Borrower through Department of Financial Services, Government of India issues government orders notifying information campaign and methods of alerting PMGKY beneficiaries of the status of their benefit delivery. enhance access to social protection for informal workers, particularly in urban areas. Prior Action 7: The Borrower through Ministry of Home Affairs, Government of India has enabled the States’ government to use finances from the State Disaster Response Funds to provide migrant workers relief materials and in-kind support, with flexibility for States in the modality of delivery. Indicative Trigger 7A: The Borrower through Ministry of Consumer Affairs, Food and Public Distribution, Government of India approves and adopts a framework for pan-national portable PDS access, which clearly outlines fund-sharing and coordination mechanisms for states to support food rations for all migrants across state boundaries. 55. In response to the needs of migrant workers, the Government of India shall expand the migrant- neutrality of its social protection approach through a series of reforms. Through PA 7, the government intends to enable state governments to make flexible use of State Disaster Response Funds to provide in- kind and lump-sum cash support to migrants irrespective of their state of residence. This is a vital reform to allow states to provide shelter and food-aid to destitute migrant groups. Further, through Trigger 7A, the government shall reform the PDS to be portable, whereby migrants can access food supplies through Fair Price Shops across state boundaries. Such reform in the food subsidy system will not only be beneficial to tackle food security concerns from the COVID-19 crisis, but any future shocks as well. Portability within the PDS shall require affiliated reforms in procurement of grains and management of food stocks. These shall be enabled by current modes of digitized grain procurement and deliveries, which can allow the national government to track and estimate costs per state. These frameworks are being tested in twelve states. Lessons from these pilots shall be incorporated into technical design. The reforms are expected to expedite migrant access to food and adequate social protection relief. 56. Through the proposed operation, the Government of India will rebalance its social protection system towards urban areas and social insurance support. Two critical challenges lie ahead for India’s social protection path in responding to COVID-19 and future shocks. First, while India has an elaborate set of program databases which enable immediate release of cash-transfers in rural areas due to extensive reach of rural safety nets, parallel platforms in urban areas are missing. Urban platforms which link beneficiary information with bank details are critical to ensure rapid delivery of income-support in the case of any future crisis. The building blocks for such a platform already exist through (i) Department of Financial Services ambitious financial inclusion (PMJDY) program (ii) near-universal PDS database which contains poverty status and (iii) community-based organizations which can be enlisted for citizen interface through DDU-NULM. Second, while the immediate response to COVID-19 will require direct provision of Page 30 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) cash/in-kind transfers through government financing, long run resilience will necessitate a reorientation towards more co-contributory approaches. The reform area proposed for Triger 7B addresses these two concerns. Through Trigger 7B, the government will codify a Jansuraksha Mission (Social Protection Mission) with detailed implementation frameworks to link PDS with beneficiary bank account details through community-based outreach with urban livelihoods programs, with emphasis on urban poor and female-headed households14. The initiative will also pursue the design of incentive mechanisms to bolster demand for core social insurance schemes for life (Pradhan Mantri Jeevan Jyoti Bima Yojana)(PMJJBY), accidents (Pradhan Mantri Suraksha Bima Yojana) (PMSBY) and old-age (Atal Pension Yojana) (APY) for all PDS ration card holders. The objective is to scale-up social insurance coverage and simultaneously create a delivery platform for urban areas, with focus on slums and low-income settlements, which can quickly release income-support to vulnerable groups in urban areas at times of crisis. This area will be complemented by technical assistance and a Program For Results Operation as it requires support on incentive design, data exchange, business protocols and project management challenges. 57. The final set of reforms aim to ensure timely access to benefits through banking and e-payment channels. On-time access to cash transferred by PMGKY will be critical to provide effective protection against ongoing shocks. In response, the Ministry of Finance has issued guidance to all banks to waive ATM use charges on customers to ensure lower transaction costs in accessing benefits. The guidance has been reinforced by the Reserve Bank of India. Through PA8, majority of public sector banks -which serve the poor and vulnerable- have accepted and adopted the ATM charge waivers. As per the data available with Department of Financial Services, out of the 380 million PMJDY accounts which were opened, 80% of such accounts were opened by public sector or nationalized banks. As a result, the reform focusses on adoption of guidance from Ministry of Finance by public sector banks. Trigger 8A creates a framework whereby all citizens receiving PMGKY transfers are notified to ensure information gaps are addressed, and households are able to access cash once they receive an alert. The campaign will also enable government to stagger payments given social distancing requires crowd-management at points of financial access. Last-mile access to cash will not only be resolved through this reform area. These actions will be complemented by Pillar I reforms which will enable states to design their own door-step delivery solutions to ensure payments are made using multiple options such as self-help groups, post-office networks, PDS network, e-wallets or micro-ATMs. The reforms aim at ensuring timely delivery of cash benefits through PMGKY. Table 4: DPF Prior Actions and Analytical Underpinnings Analytical Underpinnings Prior Actions (be specific about the key findings informing the prior action) Operation Pillar 1: Leveraging Pre-existing Social Protection Measures for COVID-19 relief Prior Action 1: The Borrower through Pathways to Reducing Poverty and Sharing Prosperity in India: Lessons Ministry of Finance, Government of India, from the Last Two Decades, Poverty and Equity Global Practice, World Bank, has approved the Pradhan Mantri Garib 2016 Kalyan Yojana, an integrated COVID-19 social protection relief cash-transfer India Poverty and Equity Brief, Poverty and Equity Global Practice, World 14 Last Mile Delivery Options for COVID-19 Note World Bank SPJ 2020 and DDU-NULM Mission Document Page 31 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) package which: (a) increases benefit levels Bank, October 2019 for MGNREG; (b) allocates LPG and gas cylinders for below-poverty line The Efficacy of Government Entitlements in Helping PL Families Navigate households for three months through the Financial Impacts of COVID-19, Dalberg Asia, April 15th 2020 UJJWALA; (c) provides additional allowance for elderly, widows and disabled through White Paper on PM Garib Kalyan Yojana: Coverage, Identification and the NSAP; (d) triggers cash transfers to Implementation, IDFC Institute, 11th April 2020 women bank account holders under the PMJDY; and (e) outlines benefit levels, Social Protection Financing and COVID-19 Policy Note, Centre for Policy implementation guidelines, fund-flow Research, 11th April 2020 mechanism and governance rules for coordination and monitoring across Social Protection and Jobs Responses to COVID-19: A Real-Time Review of multiple state governments and line Country Measures A “living paper”, World Bank Social Protection and Jobs ministries for roll-out of the PMGKY Global Practice, v.1 March 20, 2020 package. Schemes to Systems: Social Protection in a Transforming India, World Bank Social Protection and Jobs Practice 2019 Social Protection for a Changing India, World Bank Social Protection and Jobs Prior Action 2: The Borrower through Practice 2011 Ministry of Consumer Affairs, Food and Public Distribution, Government of India Migration and COVID-19, World Bank Social Protection and Jobs Global has approved the provision of free food Practice, March 31st 2020 rations for a three-month period delivered under PMGKAY’s public distribution Last-Mile Delivery Options for COVID-19 Relief in India, World Bank Social system, outlining benefit levels and Protection and Jobs Practice, March 28th 2020 implementation guidelines for delivery. Data Privacy and Regulations for India COVID-19 Program, World Bank Social Protection and Jobs Practice, March 29th 2020 Prior Action 3: The Borrower through Ministry of Labour and Employment, Government of India has amended the Employees’ Provident Fund Regulations to include pandemic as a reason to allow workers to withdraw from their Provident Fund account a non-refundable advance of 75% of the balance in the account or three months of the wages, whichever is lower. Prior Action 4: Under its PMGKY, the Borrower through Ministry of Labour and Employment, Government of India contributes 24% of monthly wages for low- wage workers in small and medium Page 32 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) enterprises for a three months period into their Provident Fund account. (*Wage-earners below Rs 15,000 per month in businesses having less than 100 employees) Operation Pillar 2: Protecting Workers in Essential Service Supply Chains during COVID-19 Pandemic Prior Action 5: The Borrower through Ministry of Health and Family Welfare, Government of India has established a special health insurance scheme for health workers providing essential care/medical services to COVID-19 patients. Operation Pillar 3: Improving Access and Delivery for Vulnerable Populations Prior Action 6: The Borrower through Ministry of Labour and Employment, Leveraging Community-Based Organizations in COVID-19 Emergency Government of India has issued advisories Operations in India, Agriculture and Environment Global Practices, World to all State governments on how to use the Bank 14th April 2020 Building and Other Construction (Workers Welfare Fund) to provide relief materials White Paper on PM Garib Kalyan Yojana: Coverage, Identification and and cash to registered construction Implementation, IDFC Institute, 11th April 2020 workers. Social Protection Financing and COVID-19 Policy Note, Centre for Policy Prior Action 7: The Borrower through Research, 11th April 2020 Ministry of Home Affairs, Government of India has enabled the States’ government Economic Survey of India 2016, Ministry of Finance, Government of India to use finances from the State Disaster Response Funds to provide migrant India’s Internal Labor Migration Paradox, FCI Practice, World Bank Policy workers relief materials and in-kind Paper 8356, February 2018 support, with flexibility for States in the modality of delivery. Schemes to Systems: Social Protection in a Transforming India, World Bank Social Protection and Jobs Practice 2019 Prior Action 8: The Borrower through Ministry of Finance, Government of Social Protection for a Changing India, World Bank Social Protection and Jobs India has issued guidance largely Practice 2011 adopted by public sector banks to waive ATM charges for all cash withdrawals to Migration and COVID-19, World Bank Social Protection and Jobs Global facilitate access to cash and PMGKY Practice, March 31st 2020 payments. Last-Mile Delivery Options for COVID-19 Relief in India, World Bank Social Page 33 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Protection and Jobs Practice, March 28th 2020 Data Privacy and Regulations for India COVID-19 Program, World Bank Social Protection and Jobs Practice, March 29th 2020 Report of the High Level Committee on Deepening of Digital Payments, Reserve Bank of India, May 2019 4.3. LINK TO CPF, OTHER BANK OPERATIONS AND THE WBG STRATEGY 58. World Bank program in India is being adjusted to respond to the COVID-19 crisis. The World Bank in consultations with the Indian Government has developed a three stage COVID response strategy. The first stage has been supporting the health system to help fight the pandemic and a billion-dollar program was approved by the World Bank to support the health response. The health response has required the Government to effectively shut down large chunks of the economy for social distancing to slow the spread of the epidemic. This slowdown has displaced hundreds of millions of workers. Migrant labor and the poor -who have little or no capacity to weather loss in earnings- are severely impacted. The second stage of the World Bank response to provide social protection to those displaced by the economic shut down, with emphasis on the poor and vulnerable, through the proposed two DPO series providing a billion dollars for social protection. The third phase of the World Bank COVID-19 response will to help revive the economy through another billion-dollar program to support Micro-small and Medium Enterprises (MSME) and possibly support the financial system on which MSME depends. 59. While the current DPO is a direct response to the COVID-19 crisis, it is consistent with the approach of the India Country Partnership Framework (CPF)15. A key goal of the CPF is to promote human capital investments by strengthening the coverage and coordination of state level social protection delivery systems. The CPF supports the development agenda of India through a balanced focus on what areas of intervention are critical, while also identifying pathways which outline how to engage India to deliver results. This operation supports the CPF focus on strengthening public sector institutions and engaging a Federal India through its emphasis on decentralization. Finally, it supports a cross-cutting theme of the CPF on reducing gender-based inclusion gaps. 4.4. CONSULTATIONS AND COLLABORATION WITH DEVELOPMENT PARTNERS 60. The proposed DPO relies on extensive consultations with Bank clients in state governments and national programs in India. The proposed operation has benefitted from the Bank’s extensive analytical work on India’s social protection architecture with various academics and experts. The design incorporates lessons from engagement in several states and with the national DBT Mission on social protection reform through operations and technical support. The design also incorporates rapid reviews conducted by two national think-tanks for the World Bank. Despite the emergency processing, the Bank has been able to discuss parallel financing with three development partners who are planning to support the reform program outlined in this document. They include the Asian Development Bank which is 15 India: FY18-22; Report No. 126667-IN, July 25, 2018 discussed at the Board on September 20, 2018. Page 34 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) considering providing US$1 billion from their countercyclical facility; KFW is considering a loan of 460 million Euros in two phases to match the two World Bank phases; and French Development Agency (AFD) has proposed a loan of 200 million Euros. AFD is also considering a similar amount to parallel the second DPO of this series. AFD and KFW plan to support the reform program supported by this DPO series. 5. OTHER DESIGN AND APPRAISAL ISSUES 5.1. POVERTY AND SOCIAL IMPACT 61. The program’s development objective is to support vulnerable groups through near -universal and portable social assistance, as it recognizes that pre-existing vulnerabilities (based on social identities) can be amplified during lockdowns and periods of social isolation. The Bank recognizes that the COVID-19 crisis is a difficult period to address social fault lines fully and satisfactorily. Overall, the program enables states to access monies from Disaster Response Funds to provide benefits to those at risk of exclusion – thus leveraging India’s federalism. The focus on portability of benefits is an important strategy to cover left-out groups. Inclusion is therefore at the heart of this program’s design. A few important areas are described below: 62. Gender Based Violence and Exclusion: The global data from the WHO on Gender-Based Violence (GBV) during the COVID-19 lockdown is worrying. News reports and studies from across the world, including many from India, indicate a disturbing trend of increasing abuse, harassment and violence (including sexual exploitation and violence) faced by women and children on account of COVID-19 induced (forced) self-isolation. The proposed program’s focus on directly transferring benefits to women is aimed at redressing the amplified gender-based vulnerabilities at this time. Of the 320 million beneficiaries of cash transfers under PMGKY, 204 million are women. Further, the fuel supply program provides benefits to the female heads of 80 million households. 60% of social pension (NSAP) recipients are women. Of the 234 million household receiving food rations through the PDS, 69 percent (163 million households) report women as the head of the household. PDS provides extra food supplies to female-headed families. A large body of evidence from South Asia highlights that providing cash/resources to women enhances their bargaining power, dignity and ability to exit violent households. Also, sociological evidence from India highlights that domestic violence against children/women perpetrated by men often has psycho-social roots in economic distress. The main triggers for violence are often the increased economic hardships faced by families and the outcome of the fear and anxieties that families and communities have about the future. Addressing the immediate triggers – i.e. lessening economic hardships – also has a positive effect as they lessen the risk of abuse and violence on women and children. Cash and in-kind transfers are therefore important, not only to improve women’s position, but also to reduce consumption/income stress in the household. Finally, the program will closely monitor data on (i) benefit receipt by gender (ii) violence through administrative data on GBV cases and parallel surveys. However, it should be noted that the ability of surveys to pick up GBV is limited due to reluctance to report by victims. By delivering majority share of benefits to women, prior actions planned under the DPO will have significant positive gender impacts. 63. Scheduled Tribes: Tribal groups have the highest poverty rate in India – irrespective of consumption poverty or multi-dimensional poverty indicators. The social protection programs being Page 35 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) leveraged for COVID-19 relief give extra weightage to tribal households (due to constitutional protections accorded to these groups) in targeting of benefits. Nearly 80% of tribal households have access to the PDS, 40% of employment days generated through MGNREGS are for SC/ST groups. This will be an important area of results monitoring and technical assistance at the state level, to ensure tribal communities have adequate access to benefits. Further, all actions supporting portable benefits for migrants will help tribal communities as they constitute a large section of inter-state migrants in India. 64. Portability and Migrant Communities: The program aims to make India’s social protection system more inclusive for migrant communities through reforms which make food, cash and social insurance programs portable. COVID-19 has been classified as a ‘disaster’ by the national government. This allows state governments to use funds in the State Disaster Response Funds (PA 7) to provide support to migrants. This reform has already allowed several states to leverage NGOs, self-help groups, police, educational institutes, front line workers and the PDS machinery to provide on-demand food/shelter/relief materials to migrants without seeking any proof of eligibility or registration. There is no singular national model for providing support to migrants as states have flexibility in how they manage the process. In DPO1, PMGKY provides portable shelter/food/lumpsum cash using State Disaster Response Funds. In DPO2, cash transfers will be further scaled up for migrants, near poor/vulnerable and urban poor through Trigger 1A and Trigger 7B. 65. This is a multi-pronged emergency relief DPO that requires multiple central and state government agencies to work in consonance for outcomes that have immediate positive poverty and social impacts and help prevent further social and economic distress. Increase in direct benefits to MGNREGS beneficiaries will enable them meet increased expenses on food and other essential items, the prices of which have increased on account of COVID-19. Given that the average usage of LPG cylinders in India is 6.7 cylinders per family per annum and that the price of LPG cylinders have risen in the past year, the provision of free LPG cylinders for three months to beneficiaries under PMUY will have multiple related positive social impacts – (a) increase in household savings that can be used to meet potential increase in household expenditures on food, healthcare and other essential expenses, (b) continued usage of clean cooking fuel will address potential increase in acute respiratory illnesses (a major factor increasing the chances of comorbidity for COVID-19) that may arise on account of PMUY households going back to using firewood for cooking. Similarly, additional allowances to widows, the elderly, and disabled persons through NSAP; direct transfers to women account holders under PMJDY; and advanced payments to farmers through PM-KSY, supported through targeted communication on COVID-19 prevention, will help target beneficiaries spend on measures to prevent possible COVID-19 infection in their communities while providing much needed liquidity to meet rising prices of essential commodities. Provision of free food rations for three months to more than 800 million beneficiaries under the PMGKAY, many of whom have suffered job losses on account of the lockdown forced upon the country by COVID-19, will help meet their and their families’ food security needs and prevent potential food riots across the country. 66. For registered workers (approximately 48 million) in the formal sector affected by the COVID-19 crisis, the provision of a non-refundable advance of 75% from their EPF accounts or three months of salary (whichever is lower) will help meet a portion of their committed monthly expenses and provide much needed financial and psychological security. Similarly, low wage-earning workers16 in small and medium enterprises affected by the COVID-19 crisis will benefit from the injection of 24% of their monthly wages 16 Defined as those earning less than INR 15,000 per month in units that have less than 100 workers Page 36 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) by the government in their respective PF accounts through PMGKY. 67. The Government’s special insurance scheme for health workers providing essential care and treatment to COVID-19 patients – namely: doctors, nurses, paramedical personnel, technicians, ward boys, safai karamcharis, ASHA workers – is not just a recognition of the high risks that the frontline workers in the country’s battle against COVID-19, but also provides financial security to the families of these workers, should they succumb whilst performing their duties. 68. One of the sectors that is more badly affected than most others on account of the COVID-19 induced lockdown is the real estate sector. Building and construction workers form a large part of the country’s unregistered workforce. The lockdown has had significant negative economic and social impacts on building and construction workers. If the financial impacts are not urgently addressed, there is a risk of social unrest spreading across the country; not to mention the larger risk of workers ignoring social distancing norms, leading to a rapid increase in the spread of COVID-19 infections. The provision of cash and relief materials to building and construction workers through the Building and Construction Workers Welfare Fund would therefore serve a two-fold purpose – (i) to address the immediate financial and food needs of the impacted workers; and (ii) a safeguard against behaviors and actions that could exacerbate the COVID-19 condition in the country. The measures proposed for provision of relief material and / or in- kind support to migrant workers through respective State Disaster Relief Funds (with flexibility provided to States to develop delivery modalities) will provide critical support to a section of the population that is arguably the worst affected by the COVID-19 crisis. Additional measures such as waiver of charges imposed by banks for withdrawal of cash from ATMs will not just help PMGKY beneficiaries financially (by increase in savings, albeit marginal), but, coupled with appropriate messaging, would help prevent panic cash withdrawals by large numbers of people at the same time thereby aiding the government’s imperative to maintain social distancing whilst fighting the COVID-19 crisis. 5.2. ENVIRONMENTAL, FORESTS, AND OTHER NATURAL RESOURCE ASPECTS 69. The program will not have any negative impact on the environment, forests and natural resources. Provision of LPG will improve community and environmental health through access to a clean fuel. It will reduce the use of firewood, and its associated indoor pollution and deforestation. As climate projections indicate the worsening of climatic conditions and resulting natural disasters, the program helps activate an adaptive social protection system by enabling use of state disaster response funds to provide fast and flexible cash support to workers and households to address the impacts of disasters triggered by climate change, thereby helping the climate adaptation agenda. 5.3. PFM, DISBURSEMENT AND AUDITING ASPECTS 70. A Public Expenditure and Financial Assessment (PEFA), 2010 was conducted in India by National Institute of Public Finance and Policy (NIPFP) with support from World Bank, which concluded that PFM systems are working adequately and the Country fiduciary risk is moderate. 71. Subsequent assessments and technical work have been undertaken by the Bank at Union level in several areas such as Planning, Budgeting (program), Financial reporting (IFMIS), Public Investment Page 37 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Management, Chart of Accounts, Government Finance Statistics (GFS) and Financial/Performance Auditing. 72. Following are the main strengths and weaknesses of the system: • India has achieved a reasonably high level of fiscal transparency and the comprehensiveness of the fiscal information publicly available has improved over the years. • Adoption of the Fiscal Responsibility and Budget Management Act (FRBM) has led to presentation of fiscal policy strategy documents and projected major fiscal indicators in the medium term. • The budget documents contain relevant information on macroeconomic forecasts, fiscal deficit indicators, deficit financing sources, government borrowings and debt stock. However overall budget credibility is impacted by the absence of a hard budget constraint, thereby allowing substantial adjustments in the budget during the year through supplementary grants. • There is scope for further strengthening budgetary preparation and approval procedures (e.g. the Budget Manual) and in the manner it is controlled. • There is scope for unifying and improving public financial management (PFM) systems in India which are currently dis-jointed17. Public expenditures may be made at the national—or, union— level, through 28 states, or 715 districts. The expenditure commitment controls are not effective and cash management is not integrated with control over commitments. • There is a scope for further streamlining and enhancing financial rules for effective internal expenditure control. Internal audit has continued to remain a weak link in the financial management system. • The Constitution provides for Comptroller and Auditor General of India (CAG) to act independently as a statutory auditor of Union and States. CAG provides a range of audits such as regularity (financial) audit, regularity (compliance) audit, IT audit and performance audit. The audit reports are usually made available to the public within a year from the end of the FY and is submitted to the legislature. The independence of the CAG and auditing standards are acceptable to the World Bank. 73. Public procurement is decentralized to Ministries, States and Public Sector undertakings. Public procurement is government by General Financial Rules 2017 at Federal Level and Public Financial Rules at State Levels. Some States have promulgated Public Procurement Acts. As part of COVID -19 response, Federal Government has issued orders and instructions to streamline public procurement processes. These instructions have included designating agencies for procurement of goods for COVID response, greater use of Government e-market Portal, removal of import duties for a period to key products and ingredients and simplified tender processes. 74. Bank is carrying out country procurement assessment using the Methodology for Assessing Public Procurement Systems (MAPS) and final report is expected in September 2020. Preliminary findings show that India has a moderately well-functioning public procurement system with islands of excellence. Over 80% of procurement is carried out through open competition procedures and use of e-procurement is mandatory and used by procuring entities throughout the country. However, the system has some weaknesses that relate to weak bidder complaint systems, long procurement cycle time from initiation to 17An Integrated Financial Management Information System (IFMIS) incorporating systems for management of personnel database and payroll records at central government level in India does not exist. Page 38 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) contract award, delays on contract execution and absence of strategic use of data for development and monitoring of the system. 75. Foreign Exchange Controls: The World Bank has reasonable assurance that the control environment for foreign exchange in the Reserve bank of India (RBI), which is the Central Bank of India, is satisfactory for the purposes of this DPO. This assessment is based on the RBI audit report and the satisfactory outcomes of other operations, which have been disbursed and managed through the RBI. The International Monetary Fund (IMF) has not carried out a Safeguard Assessment of the Central Bank (RBI) so far. As part of the preparation for this operation, the RBI’s audit report and published annual financial statements for the three financial years (FY16-17, FY17-18 and FY18-19), were reviewed by the World Bank. The audit reports have a clean, unqualified opinion and was conducted by private firms of chartered accountants. 76. Disbursement: The proposed loan will follow the Bank’s disbursement procedures for Development Policy Financing. Upon effectiveness of the loan, the borrower, that is, the GoI will submit, to the World Bank, a withdrawal application for the loan. The World Bank will disburse the U.S. dollar proceeds of the loan to the GoI’s account with the RBI. This account is controlled by the Office of the Controller of Aid, Accounts, and Audit of the Department of Economic Affairs, GoI and is part of the GoI’s general foreign exchange reserves. Once the amount is credited it will be added to the consolidated fund of GOI and will be available as part of the general budget proceeds. The GoI will confirm to the World Bank within 30 days, the receipt of the tranche and its credit into the consolidated fund of the India. The loan proceeds for this operation do not finance specifically agreed activities. The proceeds may be used for any general purpose, in support of the program, other than for financing excluded expenditures (as defined in the loan agreement for the operation). If any amount of the loan proceeds is used to finance excluded expenditures, the legal agreements will authorize the World Bank to require India to refund the amount. The amounts so refunded shall be cancelled from the loan. 77. Overall, the fiduciary risk of the proposed operation is rated moderate. This rating is based on the current status of PFM systems, procurement systems and Forex control environment in the country. 78. GOI makes funds available to several Central Sponsored/Sector Schemes through departmental budgets, where in resources are transferred as ‘Grant in Aid’ to central level autonomous, semi- autonomous institutions under the administrative control of ministries. This ‘Grant in Aid’ is released by line ministries in two to three instalments. Agencies submit Utilization Certificates, confirming end use of funds and seek replenishment. The treasury uses the newly developed Project Financial Management System (PFMS) platform to electronically transfer and account for payments to vendors, suppliers and staff. Considerable progress in cash management has been made in recent years with the use of PFMS for Direct Benefit Transfers to the bank accounts of program beneficiaries – covering large programs such as MNREGA, NSAP, PMAY, PAHAL – thereby improving transparency, accountability and governance in the DBT administration. 79. There exists a substantive opportunity at Union level to leverage earlier PFM reforms and further augment revenue collection, enhance expenditure efficiency and create more headroom for undertaking Page 39 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) larger productive investments18. Till now India has not undertaken a comprehensive, coordinated PFM reform: instead, reforms have occurred as standalone reform initiatives of individual Union or state government departments. The most significant financial management reform in recent years is the expansion in the use of Direct Benefit Transfers (DBT), which has been driven from the Prime Minister’s Office and supported by dedicated institution, the DBT Mission. Most states have launched PFM reforms, often in parallel, rarely in coordination with each other or with the Union. State initiatives have included measures to strengthen cash management, introduce commitment controls and most have featured investments in new Financial Management Information Systems. However, the scope for state-led reforms is also constrained by their dependence on Government of India (GoI) and Comptroller and Account General (CAG) in setting the presentation of financial statements, accounting and reporting standards, reforms in budget orientation and benchmarks for financial and fiscal transparency. World Bank is actively engaged with Fifteenth Finance Commission, Department of Expenditure and Department of Economic Affairs in helping developing the next steps in this regard. 5.4. MONITORING, EVALUATION AND ACCOUNTABILITY 80. The program will leverage knowledge partnerships to track impacts and results. has already been collaborating with knowledge partners such as JPAL, EPoD, IDFC and CPR on taking stock of India’s social protection programs through ongoing Advisory Services and Analytics. These partnerships shall be critical to track impacts and implementation challenges as we move forward. As mentioned in paragraph 72 under the M&E section in the Program Document, the Bank will rely on four datasets for results : (i) Panel survey data for Results Indicators 1,2,7 and 8. The Bank has included PMGKY relevant questions into the dataset in partnership with the Poverty GP (ii) Administrative data on program releases and bank account transactions maintained by EPFO and DBT Mission for Results Indicators 3 and 4. (iii) Administrative data on coverage under the Special Health Insurance Scheme from Ministry of Health and Family Welfare for Results Indicator 5 (iv) Administrative data from Ministry of Labour and Employment on share of registered workers receiving cash for Results Indicator 6. All data will be disaggregated by gender, urban-rural location and tribal status. 81. The proposed program will use national representative sample survey data and MIS platforms maintained by the national government to record and report results. The PMGKY program scales up in kind and cash assistance provided by five national cash transfer programs and the Public Distribution System. Each of these programs falls under the monitoring purview of the Development Monitoring and Evaluation Office of the NITI Aayog. These programs also maintain their own Management Information System (MIS) portals which report on transactions and benefit delivery. These administrative data from the Ministry of Rural Development, Department of Food and Public Distribution, Ministry of Petroleum & Natural Gas and Ministry of Agriculture will be leveraged to monitor progress on implementation of different Prior Actions. The M&E function will be further augmented through Bank Financed TA. As a method of triangulation, the national Direct Benefits Transfer mission is responsible for coordinating and developing standard operating procedures to ensure that beneficiaries are receiving their benefits in a timely manner. Currently, the DBT mission is monitoring disbursements of benefits in 434 centrally sponsored schemes across 56 departments of Government of India, including all six programs enlisted in 18 See WB report to Fifteenth Finance Commission - “Strengthening Public Financial Management in India – Improving Outcomes from Public Spending” Page 40 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) the PMGKY. 82. Information dissemination and effective grievance redressal is key to deal with the COVID- 19crisis. The rapidly evolving COVID-19 crisis in the country is resulting in a lot of fear, anxiety and other psychological impacts among citizens of the country. In this context, providing timely and accurate information is critical. In keeping with this, the Government of India has created a national dashboard (https://mygov.in/covid-19) to provide live status of disease across the country and live support. In addition, information seekers can also access most updated information on COVID-19 through social media (dedicated Whatsapp number - +919013353535; dedicated Facebook Page - https://www.facebook.com/MyGovIndia/ or customized information that can be sought and received through https://www.messenger.com/t/MyGovIndia), e-mail (ncov2019@gov.in) and phone number - +91 11 2397 8046 and Toll Free number - 1075). All State governments and Union Territories in the country have also set up their respective information dissemination channels, primarily phone numbers and e- mail addresses, that residents can access for information on COVID-19. A massive multimedia campaign involving television and radio channels, YouTube and Social Media is also being effectively implemented across the country. 83. Given the multiple government departments and agencies involved in the implementation of various social protection initiatives under PMGKY at the Central and State / UT Government levels, and the millions of Indians who will be impacted by the scheme(s), a large volume of grievances from various stakeholders is quite likely. Anticipating a surge in the numbers of COVID-19 related complaints, the Government of India, through its centralized grievance redressal mechanism – the Centralized Public Grievance Redress and Monitoring System (CPGRAMS; https://pgportal.gov.in/) has issued guidelines to all Ministries and Departments of the Government of India as well as State and UT Governments (on March 30 202019 and March 31 202020 respectively; available on https://pgportal.gov.in/). The guidelines require the concerned entities to – (a) designate a Nodal Officer to handle COVID-19 related public grievances, (b) Publish the name, phone number and email ID of the designated Nodal Officer on the ministry’s / department’s website, (c) Ensure that the concerned entity’s website has a separate field in CPGRAMS to cater to COVID-19 grievances for more focused tracking, monitoring, and disposal of public grievances, (d) Considering the urgency and importance of redressal of COVID-19 grievances, the concerned entity is to prioritize for expeditious quality addressal of COVID-19 related grievances at the earliest preferably within a timeline of 3 days, (e) Accord the highest priority to COVID 19 related grievances, closely monitor redressal of COVID-19 related grievances and ensure that the most up to date status of grievance redressal is provided on their respective dashboards. 84. Empowered Committee for Public Grievances and Suggestions under the National Disaster Management Act, 2005. The Ministry of Home Affairs (MHA) through Order No. 40-3/2020 -DM-I(A), dated March 29, 202021 has set up various empowered committees under the National Disaster Management Act, 2005 to expeditiously address issues that will arise on account of the COVID-19 crisis. One such empowered committee, Empowered Committee – 10, has been constituted to deal with public 19 File No.S-15/4/2020-DARPG (C.No.6594), Dated March 30, 2020 20 File No: S-15/4/2020-DARPG (C.No.6594), Dated March 31, 2020 21 https://dst.gov.in/sites/default/files/MHA%20Order%20Dt.%2029.3.2020%20on%20%20Disaster%20Ma nagement%20Act%202005.pdf Page 41 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) grievances and suggestions concerning COVID-19. The empowered committees are multisectoral and comprise senior officials from different ministries of the Government of India as well as experts from specific domains. Decisions concerning COVID-19 related public grievance redressal and apex level monitoring of grievance redressal are amongst the key functions of Empowered Committee – 10. 85. World Bank’s Grievance Redress Mechanism. Communities and individuals who believe that they are adversely affected by specific country policies supported as prior actions or tranche release conditions under a World Bank Development Policy Operation may submit complaints to the responsible country authorities, appropriate local/national grievance redress mechanisms, or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address pertinent concerns. Affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate GRS, please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org 6. SUMMARY OF RISKS AND MITIGATION Table 5: Summary Risk Ratings Risk Categories Rating 1. Political and Governance ⚫ Moderate 2. Macroeconomic ⚫ Substantial 3. Sector Strategies and Policies ⚫ Moderate 4. Technical Design of Project or Program ⚫ Moderate 5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial 6. Fiduciary ⚫ Moderate 7. Environment and Social ⚫ Low 8. Stakeholders ⚫ Moderate 9. Other ⚫ Low Overall ⚫ Substantial Page 42 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) 86. The overall risk rating of the proposed operation is “substantial” on account of substantial macroeconomic and institutional capacity for implementation and sustainability. In addition, there is uncertainty regarding the extent of the impacts of the COVID-19 pandemic, and in a pessimistic scenario, the pandemic could destabilize the economy further and lead to increased mortality and morbidity. Nevertheless, despite the risk related to COVID-19, the proposed operation would likely achieve its objectives as it is designed to provide an economic lifeline to the vulnerable. 87. The macroeconomic risk is substantial. Economic growth had slowed in recent years, from 8.3 percent in FY17 to 5.0 percent (estimated) in FY20. The outbreak of the COVID-19 epidemic and the social distancing measures adopted by the GoI will further depress growth in FY21. Meanwhile, depressed revenues and higher expenditure needs are likely to translate into a significant fiscal expansion and increase in public debt (at both central and subnational levels). At the same time, India’s macroeconomic fundamentals remain robust. India’s public debt remains sustainable even under updated post-COVID scenarios and the sharp decline in oil prices has translated into a significant decline in the current account deficit (offsetting to a large extent capital outflows) and limiting the external financing gap. Moreover, risks are mitigated by the fact that the proposed operation is precisely designed to support the government’s integrated COVID response, which should help the economy sustain the immediate shock better and rebound faster in coming months. Indeed, this operation will allow the population to weather the consequences of near total economic shutdown before growth is restored, and it constitutes the second component of a three pronged approach by the World Bank to respond to the COVID 19 crisis (first addressing health priorities and the root cause of the crisis, then boosting social protections to sustain the population during the necessary social distancing phase, and finally growth enhancing measures such as supporting programs targeted at MSMEs and financial sector stabilization). 88. The institutional capacity for implementation and sustainability risk is substantial. The COVID crisis brought home some of the strengths and weaknesses of India’s social protection. Strengths are almost universal coverage of food needs due to the National Food Security Act 2013 as well employment under the employment guarantee program (MNREGA). Weaknesses are that benefits not easily transferable geographically which became clear when migrant workers got stuck away from their homes. The government has responded with feeding schemes which depend on the capacity of the state and locality where they are stranded. The government has agreed to reform to make changes to introduce portability and to enhance state governments ability to respond which will be supported by the second DPO in the series. 89. This risk is additionally hampered by fragmentation. There are over 465 Direct Benefit Transfer schemes which provide either cash or in-kind benefits. Government of India has announced Pradhan Mantri Garib Kalyan Yojna (PMGKY), wherein it proposes to leverage multiple centrally sponsored schemes which covers large population. While the policies and guidelines of centrally sponsored schemes is developed by the Union government, actual implementation (targeting, identification, etc.) is the responsibility of the State governments and Union Territories. There is adequate capacity at the Union government to guide and oversee Program implementation. The Public Financial Management System (PFMS) developed by the GOI is a fund tracking and expenditure filing system that can provide real time status of fund utilization and available funds. However, at the State level, the capacity to implement effectively varies, as there are capacity constraints which includes limitations of banking and financial Page 43 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) service providers. Further, the nature of reforms will require a shift in organizational culture - notably in terms of increased use of analytics and delegation of decision-making – and coordination across Central Ministries, State Governments, Reserve Bank of India and Banking & Financial service providers. The Program will address these risks through Technical Assistance which will provide support to the design, implementation, and monitoring and evaluation to the Union and State governments. Page 44 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) ANNEX 1: POLICY AND RESULTS MATRIX Prior Actions under DPF 1 Triggers for DPF 2 Indicator Name Baseline Target Pillar 1 – Leveraging Pre-existing Social Protection Measures for COVID-19 Relief Prior Action 1: The Borrower through Ministry of Indicative Trigger 1A: The Borrower Adequacy of benefits provided 0 (2020)22 40% (2021) Finance, Government of India has approved the through Ministry of Home Affairs, through the COVID-19 Social Pradhan Mantri Garib Kalyan Yojana, an integrated Government of India expands the ability of Protection Support Program measured COVID-19 social protection relief cash-transfer state governments to provide social by Pradhan Mantri Garib Kalyan package which: (a) increases benefit levels for protection during disasters through Yojana (PMGKY) transfers as a percent MGNREG; (b) allocates LPG and gas cylinders for executive orders that enable use of below-poverty line households for three months National Disaster Response Funds/State share of total household consumption through UJJWALA; (c) provides additional allowance Disaster Response Funds for social expenditures for the poorest quintile for elderly, widows and disabled through the NSAP; protection requirements, with outlined in India. (d) triggers cash transfers to women bank account regulations/manuals/procedures for state holders under the PMJDY and (e) outlines benefit governments to access financing to provide levels, implementation guidelines, fund-flow context-specific, adequate and agile safety mechanism and governance rules for coordination nets for disaster relief (such as COVID-19 and monitoring across multiple state governments and future health/natural disasters) which and line ministries for roll-out of the PMGKY could include community-driven approaches package. *The current NDMA does not contain any provisions/manuals for providing social protection in times of disasters. The reform aims to re-orient the NDMA to include social security concerns in disaster management. Lessons from PMGKY implementation can feed into the protocols designed. 22Zero implies that prior to the announcement of the PMGKY package, the poor and vulnerable groups were not receiving any additional entitlements to cope with COVID-19 shocks. Page 45 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Prior Action 2: The Borrower through Ministry of Indicative Trigger 2A: The Borrower through Access to essential food supplies 023 (2020) 60% (2021) Consumer Affairs, Food and Public Distribution, Ministry of Consumer Affairs, Food and Public provided through the COVID-19 Government of India has approved the provision of Distribution Government of India expands Social Protection Program free food rations for a three-month period delivered the PMGKAY package and issues government measured by percentage share of under PMGKAY’s public distribution system, orders notifying release of three-month poor households receiving the outlining benefit levels and implementation additional grains to all AAY (chronic poor) additional food ration entitlement guidelines for delivery. households in hot-spot districts. for a three-month period as outlined by Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY). Prior Action 3: The Borrower through Ministry of Access to wage protection 0(2020) 25% (2021) Labour and Employment, Government of India has measures provided through the amended the Employees’ Provident Fund COVID-19 Social Protection Regulations to include pandemic as a reason to Program measured by percentage allow workers to withdraw from their Provident share of low-wage (as defined and Fund account a non-refundable advance of 75% of identified by Government program) the balance in the account or three months of the workers withdrawing funds from wages, whichever is lower. Employee Provident Fund Accounts citing the COVID-19 pandemic as a reason for withdrawal. Prior Action 4: Under its PMGKY, the Borrower Timeliness of wage-loss 0 (2020) 60% (2022) through Ministry of Labour and Employment, compensation measures Government of India contributes 24% of monthly guaranteed by COVID-19 Social wages for low-wage workers in small and medium Protection Program for low-wage enterprises24 for a three months period into their workers measured by percentage of Provident Fund account. low-wage workers in SME’s* receiving additional contribution announced within eight-weeks of the announcement. 23 The PMGKAY has doubled the food ration allotment to households under the PDS. Zero, as a results indicator, implies that while citizens were receiving the regular allotment of food rations through the PDS, prior to PMGKAY, no household was receiving additional food rations. 24 Wage-earners below Rs15,000 per month in businesses having less than 100 employees. Page 46 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Pillar 2 – Protecting Workers in Essential Service Supply Chains during COVID-19 Pandemic Prior Action 5: The Borrower through Ministry of Utility of health insurance 0 (2020) 30% (2021) Health and Family Welfare, Government of India measures provided through the has established a special health insurance scheme COVID-19 Social Protection for health workers providing essential care/medical Program measured by percentage services to COVID-19 patients. share of essential service workers infected with COVID-19 using the Special Health Insurance Scheme. (Included groups: Health professionals tackling COVID-19 cases, Safai karamcharis, ward-boys, nurses, ASHA workers, paramedics, technicians, doctors and specialists and other health workers would be covered) Pillar 3 – Improving Access and Delivery for Vulnerable Populations Prior Action 6: The Borrower through Ministry of Access to support provided 0 (2020) 50% (2021) Labour and Employment, Government of India has through the COVID-19 Social issued advisories to all States’ government on how Protection Program for informal to use the Building and Other Construction workers measured by percentage (Workers Welfare Fund) to provide relief materials share of construction workers and cash to registered construction workers. registered with Building and Other Construction Workers Fund receiving cash transfers. Prior Action 7: The Borrower through Ministry of Indicative Trigger 7A: The Borrower Migrant-neutrality of support 0 (2020) 33% (2022) Home Affairs, Government of India has enabled the through Ministry of Consumer Affairs, Food provided through the COVID-19 Social States’ government to use finances from the State and Public Distribution, Government of Protection Program measured by Disaster Response Funds to provide migrant India approves and adopts a framework for percentage of India’s population able workers relief materials and in-kind support, with pan-national portable PDS access, which to access to portable food benefits flexibility for States in the modality of delivery. clearly outlines fund-sharing and coordination mechanisms for states to through the Public Distribution System support food rations for all migrants across (PDS). state boundaries. Page 47 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Indicative Trigger 7B: The Borrower through Ministry of Finance, Department of Financial Services, Government of India approves the roll-out of a Jansuraksha Mission (with online and offline interface) to pursue and ensure universal coverage on mission-mode Migrant-neutrality of support 15% (2020) 45% (2021) for a basic package of three social insurance provided through the COVID-19 schemes (PMJJBY, PMSBY and APY), Social Protection Program leveraging the PDS, PMJDY, e-KYC and measured by percentage of India’s Aadhar infrastructure, with focus on vulnerable population in urban achieving full coverage of vulnerable and areas covered by portable life and female-headed households in urban areas, accident insurance through with clearly defined roll- Department of Financial Services out/information/incentive strategies. (DFS) *Vulnerable groups could be identified as all PDS BPL/Priority/AAY ration card holding households. The Jansuraksha Mission can create business processes and mechanism with banks/other agencies which ensures that all urban ration card holders are covered by the 3 DFS insurance schemes. The initiative could also aim to cover all PMJAY beneficiaries. Prior Action 8: The Borrower through Ministry of Indicative Trigger 8A: The Borrower through Timeliness of cash-transfers 0 (2020) 60% (2021) Finance, Government of India has issued guidance Department of Financial Services, Ministry of provided through the COVID-19 largely adopted by public sector banks to waive Finance, Government of India issues Social Protection Program ATM charges for all cash withdrawals to facilitate government orders notifying information measured by percentage of poor access to cash and PMGKY payments. campaign and methods of alerting PMGKY households who have received at beneficiaries of the status of their benefit least one PMGKY benefit within delivery. eight-week period of program announcement. Page 48 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) ANNEX 2: FUND RELATIONS ANNEX Page 49 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Page 50 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Page 51 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) ANNEX 3: LETTER OF DEVELOPMENT POLICY Page 52 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Page 53 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) ANNEX 4: ENVIRONMENT AND POVERTY/SOCIAL ANALYSIS TABLE Prior Actions/Triggers Significant positive or Significant poverty, social or negative environmental distributional effect positive or effects negative Pillar 1 – Leveraging Pre-existing Social Protection Measures for COVID-19 relief Prior Action 1: The Borrower through Positive. Positive. Ministry of Finance, Government of India has approved the Pradhan Allocation of free Increase in wages will allow Mantri Garib Kalyan Yojana, an cylinders to 80 million BPL approximately 110 million beneficiaries integrated COVID-19 social protection families will encourage to cope with the inflation. relief cash-transfer package which: (a) them not to use alternate increases benefit levels for MGNREG; source of energy, thereby Additional ex-gratia allowance to 30 (b) allocates LPG and gas cylinders for avoiding further negative million elderly, widows and disabled below-poverty line households for impact on their health. beneficiaries will provide much three months through UJJWALA; (c) This will also reduce of required monetary relief and liquidity provides additional allowance for firewood contributing to during the period of social and elderly, widows and disabled through protecting wood cover. economic distress. the NSAP; (d) triggers cash transfers to women bank account holders under Cash Transfers to women bank account the PMJDY; and (e) outlines benefit holders will provide a mechanism to levels, implementation guidelines, augment their bargaining power within fund-flow mechanism and governance households, stabilize income and will rules for coordination and monitoring also supplement the financial needs in across multiple state governments and the time of crisis. line ministries for roll-out of the PMGKY package. Prior Action 2: The Borrower through No significant Positive. Ministry of Consumer Affairs, Food environmental effect and Public Distribution, Government COVID-19 crisis has led to millions of of India has approved the provision of job losses, especially affecting people free food rations for a three-month employed in informal sector. period delivered under PMGKAY’s Provisioning of free ration for three public distribution system, outlining months will provide much desired benefit levels and implementation staple food to approximately 800 guidelines for delivery. million beneficiaries. Prior Action 3: The Borrower through No significant Positive. Ministry of Labour and Employment, environmental effect. Government of India has amended the Lockdown due to COVID-19 crisis has Employees’ Provident Fund affected large number of formal sector Regulations to include pandemic as a employees, as all operations stands reason to allow workers to withdraw suspended. Inclusion of pandemics as a from their Provident Fund account a reason to allow non-refundable non-refundable advance of 75% of the advance will provide financial support balance in the account or three which may be availed by approximately Page 54 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) months of the wages, whichever is 48 million registered employees. lower. Prior Action 4: Under its PMGKY, the No significant Positive. Borrower through Ministry of Labour environmental effect and Employment, Government of The pandemic has led to shut-down India contributes 24% of monthly and massive losses to businesses. The wages for low-wage workers in small smaller business entities have suffered and medium enterprises25 for a three the worst and the lower income groups months period into their Provident were particularly affected. Fund account. Contributions by Government of India (*Wage-earners below Rs 15,000 per on behalf of both Employer and month in businesses having less than Employee will lead to job protection 100 employees) and financial security in short-term. Trigger 1A: The Borrower through No significant Positive. Ministry of Home Affairs, environmental effect Government of India expands the The amendment to National Disaster ability of state governments to Management Act will provide greater provide adequate social protection flexibility to the State governments to during disasters through orders access finance and provide context- notifying the creation of a social specific adequate safety net measures protection window within the at the time of either localized or National Disaster Management Act, nationally declared disasters. which outlines regulations for state governments to access financing to provide context-specific, adequate and agile safety nets for disaster relief (such as COVID-19 and future health/natural disasters). *The current NDMA does not contain any provisions/manuals for providing social protection in times of disasters. The reform aims to re- orient the NDMA to include social security concerns in disaster management. Lessons from PMGKY implementation can feed into the protocols designed. Trigger 2A: The Borrower through No significant Positive. Union Ministry of Consumer Affairs, environmental effect Food and Public Distribution, COVID-19 crisis has led to millions of 25 Wage-earners below Rs15,000 per month in businesses having less than 100 employees. Page 55 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) Government of India amends and job losses, especially affecting people expands the PMGKAY package and employed in informal sector. issues government orders notifying Provisioning of free ration for three release of three-month additional months will provide much desired grains to all AAY (chronic poor) staple food to approximately 24 million households in hot-spot districts. families. Pillar 2 – Protecting Workers in Essential Service Supply Chains during COVID-19 Pandemic Prior Action 5: The Borrower No significant Positive. through Ministry of Health and environmental effect Family Welfare, Government of India Public healthcare providers including has established a special health community health workers, who may insurance scheme for health workers have to be in direct contact and care of providing essential care/medical COVID-19 patients and who may be at services to COVID-19 patients. risk of being impacted by this are covered under the Insurance scheme. (Included groups: Health professionals tackling COVID-19 cases, Safai karamcharis, ward-boys, nurses, ASHA workers, paramedics, technicians, doctors and specialists and other health workers would be covered) Pillar 3 – Improving Access and Delivery for Vulnerable Populations Prior Action 6: The Borrower No significant Positive. through Ministry of Labour and environmental effect Employment, Government of India All construction related activities has issued advisories to all States’ across pan-India stands suspended. government on how to use the This has led to job losses and loss of Building and Other Construction income for many of the construction (Workers Welfare Fund) to provide workers which includes migrant relief materials and cash to laborers. The implementation registered construction workers. guidelines will provide greater flexibility to boards to support construction workers either through cash or in-kind benefits. Prior Action 7: The Borrower No significant Positive. through Ministry of Home Affairs, environmental effect Government of India has enabled Increased relief to migrant workers. the States’ government to use Different State governments have finances from the State Disaster operationalized funds and currently Response Funds to provide migrant there are approximately 21,500 relief workers relief materials and in-kind camps catering to 600,000 persons and support, with flexibility for States in providing food to 2.5 million. Page 56 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) the modality of delivery. Prior Action 8: The Borrower No significant Positive. through Ministry of Finance, environmental effect Government of India has issued Increased savings to up to 80% of guidance largely adopted by public account holders. Also, support the sector banks to waive ATM charges notion of Social Distancing as for all cash withdrawals to facilitate individuals can withdraw monies from access to cash and PMGKY ATM instead of visiting a branch. payments. Trigger 7A: The Borrower through No significant Positive. Ministry of Consumer Affair, Food and environmental effects Public Distribution, Government of Increase use of PDS by migrant workers India approves and adopts a to avail subsidized ration. framework for pan-national portable PDS access, which clearly outlines fund-sharing and coordination mechanisms for states to support food rations for all migrants across state boundaries. Trigger 7B: The Borrower through No significant Positive. Ministry of Finance, Department of environmental effect Financial Services, Government of Increased coverage of informal India approves the roll-out of a workers to provide additional support Jansuraksha Mission (with online and at the time of crisis. offline interface) to pursue and ensure universal coverage on mission-mode As per the latest statistics provided by for a basic package of three social Department of Financial Services, there insurance schemes (PMJJBY, PMSBY are total of 220 million subscribers to and APY), leveraging the PDS, PMJDY, PMJJBY, PMSBY and APY schemes. e-KYC and Aadhar infrastructure, with focus on achieving full coverage of vulnerable and female-headed households in urban areas, with clearly defined roll- out/information/incentive strategies. *Vulnerable groups could be identified as all PDS BPL/Priority/AAY ration card holding households. The Jansuraksha initiative can create business processes and mechanism Page 57 The World Bank Accelerating India's COVID-19 Social Protection Response Program (P173943) with banks/other agencies which ensures that all urban ration card holders are covered by the 3 DFS insurance schemes. The initiative could also aim to cover all PMJAY beneficiaries. Trigger 8A: The Borrower through No significant Positive. Department of Financial Services, environmental effect Ministry of Finance, Government of While the PMGKY scheme has been India issues government orders announced, the current situation is notifying information campaign and very dynamic and there is new methods of alerting PMGKY information daily. Aggressive beneficiaries of the status of their information campaign will provide benefit delivery. much required information to all citizens, especially affected population. Page 58