World Bank Support to India’s Informal Working Class

• 01 Jul 2021

Why in News

The World Bank has approved a USD 500 million loan programme to support India’s informal working class to overcome the current pandemic distress.

• The loan will create greater flexibility for states to cope with the ongoing pandemic, future climate and disaster shocks.

Key Points

• World Bank’s Financial Support:
  
  • About:
    
    • Of the USD 500 million commitment, USD 112.50 million will be financed by its concessionary lending arm International Development Association (IDA) and the rest will be a loan from International Bank for Reconstruction and Development (IBRD).
    • The loan has a maturity period of 18.5 years including a grace period of five years.
  • Fundings Since Start of Pandemic:
    
    • In 2020, provided immediate emergency relief cash transfers to about 320 million individual bank accounts identified through pre-existing national social protection schemes.
    • Also an additional food rations for about 80 crore individuals.
• Significance:
  
  • States can now access flexible funding from disaster response funds to design and implement appropriate social protection responses.
  • The funds will be utilised in social protection programmes for urban informal workers, gig-workers, and migrants.
    
    • A gig worker is indulged in the gig economy which is a free market system in which temporary positions are common and organizations contract with independent workers for short-term engagements.
  • It is aimed at building the resilience of economies and livelihoods of communities.
  • Investments at the municipal level will promote National Digital Urban Mission that will create a shared digital infrastructure for people living in urban areas and will scale up urban safety nets and social insurance for informal workers.
    
    • It will also include gender-disaggregated information on women workers and female-headed households.
    • This will allow policymakers to address gender-based service delivery gaps and effectively reach the unreached, particularly widows, adolescent girls, and tribal women.
  • Street vendors are an integral part of India’s urban informal economy. The programme will give street vendors access to affordable working capital loans of up to Rs 10,000.
    
    • Some five million urban street vendors could benefit from the new credit programme,
• Informal Sector Worker:
  
  • The informal sector is the part of any economy that is neither taxed nor monitored by any form of government.
    
    • The workers who indulge in the informal sector are informal sector workers or informal workers.
  • The informal sector provides critical economic opportunities for the poor.
  • It is largely characterized by skills gained outside of a formal education, easy entry, a lack of stable employer-employee relationships, and a small scale of operations.
  • Unlike the formal economy, the informal sector’s components are not included in GDP computations.
• Need to Protect Informal Workforce:
  
  • India’s estimated 450 million informal workers comprise 90% of its total workforce, with 5-10 million workers added annually.
  • Further, according to Oxfam’s latest global report, out of the total 122 million who lost their jobs in 2020, 75% were lost in the informal sector.
  • Job loss and further increasing informalisation due to the Covid-19 pandemic and subsequent lockdown has resulted in lack of social protection to poors.
  • Moreover, in the financial year 2020-21, the economy contracted by 7.7%. So, there is an urgent need to revive the economy by generating employment and the informal sector is more labour intensive.
• Some Initiatives by the Government:
  
  • Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM)
  • Labour Reform
  • Pradhan Mantri Rojgar Protsahan Yojana (PMRPY)
  • PM SVANidhi: Micro Credit Scheme for Street Vendors
  • Atmanirbhar Bharat Abhiyan
  • Deendayal Antyodaya Yojana National Urban Livelihoods Mission

World Bank Group

• The World Bank Group is a unique global partnership which consists of five development institutions.
• International Bank for Reconstruction and Development (IBRD) provides loans, credits, and grants.
• International Development Association (IDA) provides low- or no-interest loans to low-income countries.
• The International Finance Corporation (IFC) provides investment, advice, and asset management to companies and governments.
• The Multilateral Guarantee Agency (MIGA) insures lenders and investors against political risk such as war.
• The International Centre for the Settlement of Investment Disputes (ICSID) settles investment-disputes between investors and countries.
  
  • India is not a member of ICSID.
• As of now, IBRD has 189 member countries, while IDA has 173.

Way Forward

• Strengthening MSME: Nearly 40% of the informal workforce is employed with Micro, Small and Medium Enterprises (MSMEs). Therefore, it is natural that the strengthening of MSME will lead to economic recovery, employment generation, and formalization of the economy.
• Skilling Under CSR Expenditure: The large corporate houses should also take the responsibility of skilling people in the unorganized sectors under Corporate Social Responsibility (CSR) Expenditure.
• Recognizing Invisible Labour: A national policy for domestic workers needs to be brought in at the earliest to recognize their rights and promote better working conditions.

Source: IE