Why in news?
The Centre is taking another $1 billion loan from the World Bank to support its COVID-19 relief measures and financial assistance for the poorest and most vulnerable communities.
The loan was approved by the World Bank’s Board of Executive Directors on 14th May 2020, according to an official statement.
The money will also be used for reforms in India’s social security net, making it more integrated, portable and focussed on the urban poor.
The bank had already approved a $1 billion loan to support India’s health sector in April, taking its total commitment to India’s COVID-19 response to $2 billion.
How will the support be extended?
- The new support will be funded in two phases. An allocation of $750 million —more than ₹5,600 crore — will be made immediately to help fund the Pradhan Mantri Garib Kalyan Yojana, which the Centre announced in March to scale up cash transfers and free foodgrain distribution to vulnerable communities, pensioners and poor workers, and provide insurance support to health workers.
- The second phase will provide $250 million — almost ₹1,900 crore — post July 2020, which will fund additional cash and in-kind benefits based on local needs through state governments and portable social protection delivery systems.
- This program will support the Government of India’s efforts towards a more consolidated delivery platform – accessible to both rural and urban populations across state boundaries
- The World Bank (WB) is an international organization which provides facilities related to “finance, advice and research to developing nations” in order to bolster their economic development.
- It provides loans and grants to the governments of poorer countries for the purpose of pursuing capital projects.
- It comprises two institutions: The International Bank for Reconstruction and Development (IBRD), and the International Development Association (IDA).
- The World Bank is a component of the World Bank Group.
World Bank Group
The World Bank Group is an extended family of five international organizations, and the parent organization of the World Bank, the collective name given to the first two listed organizations, the IBRD and the IDA:
- International Bank for Reconstruction and Development (IBRD)
- International Development Association (IDA)
- International Finance Corporation (IFC)
- Multilateral Investment Guarantee Agency (MIGA)
- International Centre for Settlement of Investment Disputes (ICSID)
- With 189 member countries, the World Bank Group is a unique global partnership: five institutions working for sustainable solutions that reduce poverty and build shared prosperity in developing countries.
- The Bank Group works with country governments, the private sector, civil society organizations, regional development banks, think tanks, and other international institutions on issues ranging from climate change, conflict, and food security to education, agriculture, finance, and trade.
Introduction to the 5 organizations of World Bank Group
I – The International Bank for Reconstruction and Development
The International Bank for Reconstruction and Development (IBRD) lends to governments of middle-income and creditworthy low-income countries.
II – The International Development Association
The International Development Association (IDA) provides interest-free loans — called credits — and grants to governments of the poorest countries. It is called the soft loan window of the World Bank. Together, IBRD and IDA make up the World Bank.
III – The International Finance Corporation
The International Finance Corporation (IFC) is the largest global development institution focused exclusively on the private sector. It helps developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments.
IV – The Multilateral Investment Guarantee Agency
The Multilateral Investment Guarantee Agency (MIGA) was created in 1988 to promote foreign direct investment into developing countries to support economic growth, reduce poverty, and improve people’s lives. MIGA fulfils this mandate by offering political risk insurance (guarantees) to investors and lenders.
V – The International Centre for Settlement of Investment Disputes
The International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and arbitration of investment disputes.
-Source: The Hindu