RBI Report-Finance of Panchayat Raj Institutions

Source- This post on RBI Report-Finance of Panchayat Raj Institutions has been created based on the article “Higher autonomy of panchayats leads to better health outcomes” published in “The Hindu” on 5 February 2024.

Why in the news?

RBI has recently released “Finance of Panchayat Raj Institutions” report highlighting the significance of financial autonomy of Panchayats.

Key findings of the report

1) RBI study noted that panchayats earn only 1% of their income through taxes, with the rest being sourced from Central and State grants.

2) The report noted that Panchayats having more functional and financial autonomy perform well on health, nutrition and sanitation.

Chart 1 shows this relationship, that is, the higher the score on health, nutrition, and sanitation parameters, the lower the IMR.(Infant mortality rate). For example-Kerala has a high score and low IMR.

3) RBI uses devolution index prepared by MoPRs (ministry of Panchayat Raj) to checks whether these better-performing States also have greater autonomy at the panchayat level.(Chart-2). For example-Tamil Nadu has high devolution score and low IMR.

4) Chart 1 and 2 when read together shows that panchayats having higher devolution of power fare well in health outcomes in rural areas.

NOTE – The devolution index rates a State based on three parameters:-

1) The transfer of subjects such as drinking water, rural housing, family welfare, and women and child development under the control of panchayats.

2) The transfer of functionaries, that is, how many positions were filled by panchayats on their own.

3) The transfer of finances, that is, power of panchayats to raise its own funds and autonomy in decision-making.

UPSC Syllabus- Reports and Indices