[Answered] Assess the importance of Panchayat system in India as a part of local government. Apart from government grants, what sources the Panchayats can look out for financing developmental projects.

Local self-governance means a system of governance where the locals take decisions for their own governance and development through their representatives or direct participation. Panchayati Raj Institutions (PRIs) were constitutionalised under the 73rd Amendment Act of the Constitution of India in 1992. The 73rd and 74th constitutional amendments gave recognition and protection to local government. They are the statutory bodies which are elected at village, block and district level.

Importance of Panchayat system in India as a part of local government:

1. The PRIs are the local self-governing bodies that ensure the opportunity for people’s participation and involvement in the formulation and implementation of rural development programmes.
2. The main objective of Panchayat System in India is to strengthen the base of democracy at the grass root level.
3. It was introduced as a real democratic political apparatus which would bring the masses into active political control from below, from the vast majority of the weaker, poor sections of rural India.
4. They play the role of a catalytic agent in integrating development of tribal masses in rural areas.
5. Plan documents of both the central and state governments and various committees have emphasised the importance of these bodies in the polity. Five-year plans have also laid special emphasis on the role of Panchayats in rural developments.
6. Rural Development includes measures to strengthen the democratic structure of society through the PRIs. PRIs have been used to improve the rural infrastructure, income of rural households and delivery systems pertaining to education, health and safety mechanisms. These institutions are to be galvanised to become effective instruments of social and economic change at the local level.

Sources of finance of PRIs other than government grants:

1. The taxes imposed by the Village Panchayats are important source of income of Gram Panchayats, such as:
   • taxes on land and houses
   • the custom duty
   • toll tax
   • license fees
2. Money comes also as grants-in-aid from the Central or the State government or from the ZillaParishad or PanchayatSamiti.
3. Another source of earning of the Panchayat is the loan collected from the Central government, the State government or other financial agencies. Money collected from gifts through Government schemes such as MPLADS also becomes a source of earning for the Panchayat.

However, the decisions as to which taxes, duties, tolls and fees should be assigned to local governments and which should be shared by the State with them, continue to be with the state legislatures. Therefore, more devolution of financial powers to the PRIs is the need of the hour to make them as viable institutions to effect change in the socio-economic development of the rural India.