Anders Kjelsrud and Rohini Somanathan
CDE Working Paper No. 271, February 2017
Although a large fraction of India’s rural population lacks access to basic schooling and health care, a rising share of the government budget is allocated to programmes that are restricted to families classified as poor. We know relatively little about how per capita benefits from these targeted programmes compare with those from free or subsidized services at public institutions. This chapter is aimed at such a comparison. We impute the value of benefits to rural families using public schools and health facilities, and compare them to the gains from subsidized fuel and food from the Public Distribution System (PDS). Although our interest is in examining the extent of targeting implicit in these different forms of public spending, our methods can also be used as part of a new methodology for poverty estimation that includes these benefits in measures of household consumption. Poverty lines and estimates based only on private consumption expenditures understate regional disparities in real consumption and poverty because the richer states typically also provide better public services.