National Rural Employment Guarantee Scheme and Targeted Public Distribution Scheme in Rajasthan and Madhya Pradesh: Complements or Substitutes?

The workfare scheme, the National Rural Employment Guarantee Scheme (NREGS), and the direct food subsidy programme, the Targeted Public Distribution Scheme (TPDS), represent two social safety nets instituted in India as anti-poverty measures. This paper examines whether from the point of view of individual households the two programmes are substitutes or complements, as this will shed light on the appropriateness of the design of the two programmes. Based on primary household data collected for the Indian states of Rajasthan and Madhya Pradesh (MP), we show that, in Rajasthan, a large percentage of households consider TPDS and NREGS programmes to be substitutes for each other, while in MP the households often perceive the two programmes as complements. Thus it appears that the two programmes are better designed in MP since an incentive for participation in one programme has desirable side effects on participation in the other. Correlates of participation in the two states are identified and the paper advances several policy conclusions.