73rd and 74th CAA are the embodiment of grass-root democracy and democratic decentralization in India. They are inspired by Gandhiji’s concept of “Oceanic Circles of Power” and “Swaraj”.
Importance of PRIs
Rajni Kothari – Described local bodies as “schools of democracy” where political awareness and participation are cultivated at the grassroots level.
Democratic Decentralization – Eg- Kerala’s People’s Plan Campaign grants local bodies control over 40% of the state’s plan budget.
Capacity Building– Training programs for PRI members. Eg- e-Panchayat initiative
Efficient Local Service Delivery- Addresses local needs in sanitation, drinking water, roads, housing, and education. Eg- Hiware Bazar Model of watershed development.
Transparency– Direct accountability to local constituents. Eg- Rajasthan’s Social Audit Mechanism
Implementation of Schemes, ensuring that benefits reach the grassroots. Eg- MGNREGA.
Financial Autonomy– PRIs have the power to levy taxes and mobilize resources, which helps them fund and manage local development projects.
Conflict Resolution- Reports indicate a 30% reduction in petty disputes reaching district courts due to effective Panchayat mediation.
Inclusivity– Reserving seats for women, Scheduled Castes, and Scheduled Tribes. Eg- Women’s Representation at 46.44%
Challenges
“PRIs exist as over-structured but underpowered organisations.” (2nd ARC)
No decentralisation of power, rather decentralisation of corruption – Mani Shankar Iyer Committee
Dependence on higher tiers- Around 95% of Panchayat funds come from Central/State transfers, limiting fiscal autonomy.
Limited own-source revenue- Poor tax collection efficiency (>1% own tax).
Barriers to Local Taxation- Freebie culture and fear of losing popularity discourage local taxation.
Incomplete devolution- less than 20% of States have transferred all 29 subjects under 11th Schedule (MoPR, 2022). (overall Panchayat Devolution Index is only 43.89% (2021-22))
Centralised Welfare via Cash Transfers – The welfare state now relies on DBT through JAM, bypassing panchayats and reducing local accountability and participatory governance
Shortage of staff- Average 0.67 Panchayat Secretaries per Gram Panchayat, as low as 0.33 in Uttar Pradesh.
Weak Gram Sabhas- Low participation, elite domination, and token meetings.
Gender and social barriers leading to proxy control. (Sarpanch Pati)
Alternate Sources of Panchayat Financing (Beyond Government Grants)
Own Tax Revenues- Property/House tax, Profession tax, Market fees, and Entertainment tax.
Non-Tax Revenues- Rent from panchayat buildings, water usage fees, license fees, and user charges for services.
Public-Private Partnerships (PPPs) for solid waste management, renewable energy, or tourism projects. Eg- waste-to-energy projects.
Community Contributions- Voluntary labor (Shramdaan), local donations, and community funds for infrastructure.
Borrowings and Bonds- Soft loans from NABARD and Rural Infrastructure Development Fund (RIDF) for rural projects.
Corporate Social Responsibility (CSR)- Eg- Tata Steel CSR projects in Jharkhand villages for drinking water and sanitation.
Using funds from MGNREGA, 15th FC grants for rural infrastructure development.
Way Forward
Strengthen State Finance Commissions (SFCs) with mandatory action on their recommendations.
Manishankar Aiyar Committee recommendations – Adopt activity mapping for clear delineation of 3Fs – Funds, Functions, Functionaries.
Flexible Funding Norms under CSS
To realise the vision of “Gram Uday se Bharat Uday”, India needs second-generation Panchayati Raj reforms