A reduction of food subsidies by means of targeting a select group is an important way of lowering government spending within the framework of an orthodox structural adjustment programme. Targeted food subsidy schemes, however, have costs, which are ignored or not fully accounted for by policy-makers. This article focuses on costs arising out of the two types of targeting errors - errors of exclusion and errors of inclusion - in the system of public distribution of food in India or the PDS. Using primary data from a village in Maharashtra, at two subsequent surveys, the authors show that errors of wrong inclusion decreased while errors of wrong exclusion increased with a shift from universal to targeted coverage. The article also demonstrates the pitfalls of identifying a target-group based on an income indicator.
