Our Panchayati Raj system is in need of funding empowerment
The Reserve Bank of India’s (RBI) maiden report on ‘Finances of Panchayati Raj Institutions,’ released on 24 January 2024, fills a long-felt gap in our understanding of the fiscal health of the third tier of government in India: local institutions of governance. Though it is now more than 30 years since the 73rd amendment to the Constitution institutionalized Panchayati Raj Institutions (PRIs) at three levels in rural India—gram panchayats at the village level, mandal panchayats at the block level and zila parishad at the district level—empowerment of the kind envisaged in 1992 is yet to realized.
And sadly so. According to the 2011 Census, almost 69% of our population resides in rural areas.
By any reckoning, it is no exaggeration that panchayats are critical to providing local governance and stepping up rural development. As the report says, local governments at the panchayat level (about 262,000 such) have a “significant role in translating the vision and developmental policies of both the Central and State governments into action." Local governments invariably have more detailed information on the preferences and local needs of citizens than any higher level of government.
This makes them best suited to provide many basic public goods and services, such as health, education, sanitation, etc. Yet, despite their pivotal role, challenges abound.
Starting with inadequate independent financial resources and heavy reliance on grants from upper tiers of government and an inability to deliver due to lack of trained manpower to weak infrastructure and lack of political will, PRIs have fallen far short of their potential. As the report points out, their efficacy is “contingent upon factors such as the availability of adequate
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