Germany’s Support to India to Fight COVID-19

On behalf of the Federal Ministry for Economic Cooperation and Development (BMZ), KfW signed a loan agreement on 21 August 2020 with the Indian Ministry of Finance amounting to EUR 250 Million for the COVID-19 Social Protection Crisis Response Programme. The loan is the first tranche of an overall package amounting to EUR 460 Million, with the second tranche to be made available by the end of the year.

The Financial Corporation assistance is tailored towards supporting both immediate assistance for poor and vulnerable households that have been among the worst hit by the Covid-19 pandemic, while at the same time promoting institutional reforms to widen and deepen the coverage of social protection schemes. The first phase of the operation is being rolled out through the Pradhan Mantri Garib Kalyan Yojana (PMGKY), the Government of India’s emergency social assistance program which is providing vulnerable groups and migrant workers with a mix of direct cash transfers, food security, and medical insurance cover through established national platforms and programs. The total outlay under PMGKY has been estimated at INR 1,70,000 crore or approximately USD23 billion.

India has been heavily affected by the global COVID-19 pandemic rising fears that the devastating socio-economic impacts could cause large segments of the population to slip back into extreme poverty. In a country where over 90% of the workforce is employed in the informal sector with virtually no recourse to workplace-based social protection benefits, the role of national social assistance programs becomes even more critical.

The FC program will provide further support for the social security system through long-term institutional reforms. The objective is to integrate the abundance of different social security programs at both national and state levels into a flexible and adaptable system that provides portable benefits to India’s vast migrant worker population. Moreover, the primarily rural focus of existing social assistance programs will be expanded to include those in need in urban regions.

The COVID-19 Social Protection Crisis Response Programme is parallel financing with the World Bank and includes the participation of other bilateral and multilateral donors. The World Bank is the lead agency.