Issues with Panchayati Raj Institutions (PRIs)

Source: This post on the Issues with Panchayati Raj Institutions (PRIs) has been created based on the article “Panchayati Raj: It needs funding empowerment” published in “Live Mint” on 29^th January 2024.

UPSC Syllabus Topic: GS Paper 2 Indian Polity – Devolution of powers and finances up to local levels and challenges therein.

News: Issues with Panchayati Raj Institutions, The article discusses the importance and challenges faced by Panchayati Raj Institutions in India, especially with regards to funds.

A detailed article on Local Governance in India can be read here.

Background:

Recently, the RBI’s report on ‘Finances of Panchayati Raj Institutions’ was released. It helps in understanding the fiscal health of the third tier of government in India: local institutions of governance.

Importance of Panchayati Raj Institutions?

1. Governance and Rural Development: Critical to providing local governance and helping in rural development. This is important as almost 69% of our population resides in rural areas
2. Implementation of Policies: Significant role in translating the vision and developmental policies of both the Central and State governments into action.
3. Familiarity with Local Needs: Local governments have a more detailed information on the local needs of citizens than any higher level of government. This makes them best suited to provide basic public goods and services, such as health, education, sanitation, etc.

What are The Challenges with Panchayati Raj Institutions?

1. Funds: Inadequate independent financial resources and heavy reliance on grants from upper tiers of government.
2. Functionaries: Lack of trained manpower.
3. Functions: Lack of political will (to devolve more power and functions to local governments).
4. Weak infrastructure.
5. Regional Disparities: The devolution of powers and functions to panchayats (and their performance) varies greatly across states (India’s southern states have done better than others).

According to the author, the main challenge is inadequate resources.

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What are The Issues with PRI Finances?

1) Lack of Own Revenues: PRIs have done little to augment their own revenues—items like property tax, fees and fines.

2) Dependence on Transfers: PRIs have preferred the option of transfers from higher levels of government. This reliance on grants has meant they are not financially self-reliant, restricting their power to take spending decisions.

It is against the principle of subsidiarity, which means that higher levels of government should perform only those functions that cannot be effectively performed at the local level.

Question for practice:

Immediate attention is required to deal with the challenges faced by Panchayati Raj Institutions in India, especially with regards to funds. Discuss.