UNIT III

Rural Development: Administration and Planning

ADMINISTRATION AS BUREAUCRACY

Max Weber, a German sociologist believed bureaucracy as the most efficient way to set up an
organisation, administration and organizations.

Definitions

 “A system of administration characterized by expertness, impartiality and absence of

humanity”. -Max Weber

 “A systematic organization of tasks and individuals into a pattern which can most effectively
achieve the ends of collective efforts”. -J.M.Pfiffner BUREAUCRACY BUREAUCRACY IS THE RULE
OF OFFICIALS IN THE SYSTEM OF GOVERNMENT

 A bureaucracy is a body of non-elective government officials and/or "an administrative

policy-making group ".

 Historically, bureaucracy was government administration managed by departments staffed

with nonelected officials.

 Today, bureaucracy is the administrative system governing any large institution.

Characteristics of bureaucracy

 Max Weber argued that the bureaucratic organizational form is characterized by six features:

1) Specialization and Division of Labor;

 2) Hierarchical Authority Structures

 3) Rules and Regulations

 4) Technical Competence Guidelines

 5) Impersonality and Personal Indifference;

 6) A Standard of Formal, Written Communication Forms of Bureaucracy

 Guardian Bureaucracy

 Class/Caste Bureaucracy
 Political Patronage Bureaucracy

 Merit Bureaucracy Forms of Bureaucracy Guardian Bureaucracy

 Dedicated to general welfare ---Acts as a champion of justice ---Custodian of community’s

welfare. Caste Bureaucracy

 Higher administrative positions given to individuals from a specific social background. For ex.
During Mauryan period, senior government positions were given mostly to brahmins. Political
Patronage Bureaucracy

 -Public appointments are made on the basis of personal favour or as political rewards. Merit
Bureaucracy Appointed on the basis of merit through competitive examination.

Most countries practice this type Educational Significance of Bureaucratic Approach of

Administration As applied to the educational system, the hierarchical method of organization is
observed perfectly.

Structure of Administration- Panchayati Raj

The ‘Gram Swaraj’ dream of Mahatma Gandhi and the ‘Power to the People’ dream of Rajiv
Gandhi are the essence of true democracy. Prime Minister in his address on January 16, 2009
has observed that “We are a large, young and restless nation.

On the move. There is no other way to include the aspirations of all our people to guide our
collective destiny other than to develop a strong local government system. Inclusive growth,
which is the motto of the 11th five year plan, can be achieved only through inclusive
governance. And the key to this is an effective, well functioning system of Panchayats.

What is Panchayati Raj in India? Panchayati Raj Institution (PRI) is the third tier of our three-tier
governance model. This system is a rural local self-governing body where the local people elect
the leaders. These local bodies were formed to get governance to the roots of the country.

The 73rd Constitutional Amendment of India 1992 constitutionalized Panchayati Raj institutions
which the idea of propagating democracy to the grassroots level of the country.

The amendment has since completed nearly three decades of existence; however, the lofty
goal of decentralization of powers is yet to be achieved.

The difference between the rural and urban ways of life cannot be more prominent and
staggering, which is why the central or state government may be grossly insufficient in
understanding the needs of the people living in a rural setting. Hence, the need for Gram
Panchayats and Sabhas become very evident.
Evolution of Local Self-Government Though introduced quite late in post-independent India,
Panchayati Raj is not a recently conceptualized idea but an ancient one that traces its roots
back to even the first civilizations to exist.

• Before the Mughals and the British intervention, Gram Panchayats held an incredible sway
over the population as the primary judicial authority that extended executive powers as well.

Committees Appointed for Panchayati Raj To gauge the level of efficiency of the local village
governance bodies, the government has set up multiple commissions to evaluate this more
closely. The committees that were appointed are as follows:

• Balwant Rai Mehta Committee

• Ashok Mehta Committee

• G.V.K Rao Committee

• L M Singhvi Committee

Balwant Rai Mehta Committee & Panchayati Raj

The committee was appointed in 1957, to examine and suggest measures for better working of
the Community Development Programme and the National Extension Service. The committee
suggested the establishment of a democratic decentralised local government which came to be
known as the Panchayati Raj.
Recommendations by the Committee:

 Three-tier Panchayati Raj system: Gram Panchayat, Panchayat Samiti and Zila Parishad.
 Directly elected representatives to constitute the gram panchayat and indirectly elected
representatives to constitute the Panchayat Samiti and Zila Parishad.
 Planning and development are the primary objectives of the Panchayati Raj system.
 Panchayat Samiti should be the executive body and Zila Parishad will act as the a dvisory
and supervisory body.
 District Collector to be made the chairman of the Zila Parishad.
 It also requested for provisioning resources so as to help them discharge their duties
and responsibilities.
The Balwant Rai Mehta Committee further revitalised the development of panchayats in the
country, the report recommended that the Panchayati Raj institutions can play a substantial
role in community development programmes throughout the country. The objective of the
Panchayats thus was the democratic decentralisation through the effective participation of
locals with the help of well-planned programmes. Even the then Prime Minister of India, Pandit
Jawaharlal Nehru, defended the panchayat system by saying, “. . . authority and power must be
given to the people in the villages …. Let us give power to the panchayats.”

Ashok Mehta Committee & Panchayati Raj

The committee was appointed in 1977 to suggest measures to revive and strengthen the
declining Panchayati Raj system in India.
The key recommendations are:

 The three-tier system should be replaced with a two-tier system: Zila Parishad (district
level) and the Mandal Panchayat (a group of villages).
 District level as the first level of supervision after the state level.
 Zila Parishad should be the executive body and responsible for planning at the district
level.
 The institutions (Zila Parishad and the Mandal Panchayat) to have compulsory taxation
powers to mobilise their own financial resources.

G V K Rao Committee & Panchayati Raj

The committee was appointed by the planning commission in 1985. It recognised that
development was not seen at the grassroot level due to bureaucratisation resulting in
Panchayat Raj institutions being addressed as ‘grass without roots’. Hence, it made some key
recommendations which are as follows:

 Zila Parishad to be the most important body in the scheme of democratic

decentralisation. Zila Parishad to be the principal body to manage the developmental
programmes at the district level.
 The district and the lower levels of the Panchayati Raj system to be assigned with
specific planning, implementation and monitoring of the rural developmental
programmes.
 Post of District Development Commissioner to be created. He will be the chief executive
officer of the Zila Parishad.
 Elections to the levels of Panchayati Raj systems should be held regularly.

L M Singhvi Committee & Panchayati Raj

The committee was appointed by the Government of India in 1986 with the main objective to
recommend steps to revitalise the Panchayati Raj systems for democracy and development.
The following recommendations were made by the committee:

 The committee recommended that the Panchayati Raj systems should be

constitutionally recognised. It also recommended constitutional provisions to recognise
free and fair elections for the Panchayati Raj systems.
  The committee recommended reorganisation of villages to make the gram panchayat
more viable.
 It recommended that village panchayats should have more finances for their activities.
 Judicial tribunals to be set up in each state to adjudicate matters relating to the
elections to the Panchayati Raj institutions and other matters relating to their
functioning.
All these things further the argument that panchayats can be very effective in identifying and
solving local problems, involve the people in the villages in the developmental activities,
improve the communication between different levels at which politics operates, develop
leadership skills and in short help the basic development in the states without making too many
structural changes.
Rajasthan and Andhra Pradesh were the first to adopt Panchayati raj in 1959, other states
followed them later.
Though there are variations among states, there are some features that are common. In most
of the states, for example, a three-tier structure including panchayats at the village level,
panchayat samitis at the block level and the zila parishads at the district level-has been
institutionalized. Due to the sustained effort of the civil society organisations, intellectuals and
progressive political leaders, the Parliament passed two amendments to the Constitution – the
73rd Constitution Amendment for rural local bodies (panchayats) and the 74 th Constitution
Amendment for urban local bodies (municipalities) making them ‘institutions of self-
government’. Within a year all the states passed their own acts in conformity to the amended
constitutional provisions.

73rd Constitutional Amendment Act of 1992-

Significance of the Act

 The Act added Part IX to the Constitution, “The Panchayats” and also added the
Eleventh Schedule which consists of the 29 functional items of the panchayats.
 Part IX of the Constitution contains Article 243 to Article 243 O.
 The Amendment Act provides shape to Article 40 of the Constitution, (directive
principles of state policy), which directs the state to organise the village panchayats and
provide them powers and authority so that they can function as self-government.
 With the Act, Panchayati Raj systems come under the purview of the justiciable part of
the Constitution and mandates states to adopt the system. Further, the election process
in the Panchayati Raj institutions will be held independent of the state government’s
will.
 The Act has two parts: compulsory and voluntary. Compulsory provisions must be added
to state laws, which includes the creation of the new Panchayati Raj systems. Voluntary
provisions, on the other hand, is the discretion of the state government.
  The Act is a very significant step in creating democratic institutions at the grassroots
level in the country. The Act has transformed the representative democracy into
participatory democracy.
Salient Features of the Act

1. Gram Sabha: Gram Sabha is the primary body of the Panchayati Raj system. It is a village
assembly consisting of all the registered voters within the area of the panchayat. It will
exercise powers and perform such functions as determined by the state legislature.
Candidates can refer to the functions of gram panchayat and gram panchayat work, on
the government official website – https://grammanchitra.gov.in/.
2. Three-tier system: The Act provides for the establishment of the three-tier system of
Panchayati Raj in the states (village, intermediate and district level). States with a
population of less than 20 lakhs may not constitute the intermediate level.
3. Election of members and chairperson: The members to all the levels of the Panchayati
Raj are elected directly and the chairpersons to the intermediate and the district level
are elected indirectly from the elected members and at the village level the Chairperson
is elected as determined by the state government.
4. The Chairperson of a Panchayat and other members of a Panchayat, whether or not
elected directly from territorial constituencies in the Panchayat area, have the right to
vote in Panchayat meetings.
5. Reservation of seats:
 For SC and ST: Reservation to be provided at all the three tiers in accordance
with their population percentage.
 For women: Not less than one-third of the total number of seats to be reserved
for women, further not less than one-third of the total number of offices for
chairperson at all levels of the panchayat to be reserved for women.
 The state legislatures are also given the provision to decide on the reservation of
seats in any level of panchayat or office of chairperson in favour of backward
classes.
6. Duration of Panchayat: The Act provides for a five-year term of office to all the levels of
the panchayat. However, the panchayat can be dissolved before the completion of its
term. But fresh elections to constitute the new panchayat shall be completed –
 before the expiry of its five-year duration.
 in case of dissolution, before the expiry of a period of six months from the date
of its dissolution.
7. Disqualification: A person shall be disqualified for being chosen as or for being a
member of panchayat if he is so disqualified –
 Under any law for the time being in force for the purpose of elections to the
legislature of the state concerned.
 Under any law made by the state legislature. However, no person shall be
disqualified on the ground that he is less than 25 years of age if he has attained
the age of 21 years.
  Further, all questions relating to disqualification shall be referred to an authority
determined by the state legislatures.
8. State election commission:
 The commission is responsible for superintendence, direction and control of the
preparation of electoral rolls and conducting elections for the panchayat.
 The state legislature may make provisions with respect to all matters relating to
elections to the panchayats.

Powers and Functions: The state legislature may endow the Panchayats with such
powers and authority as may be necessary to enable them to function as institutions of
self-government. Such a scheme may contain provisions related to Gram Panchayat
work with respect to:

 the preparation of plans for economic development and social justice.

 the implementation of schemes for economic development and social justice as
may be entrusted to them, including those in relation to the 29 matters listed in
the Eleventh Schedule.
9. Finances: The state legislature may –
 Authorize a panchayat to levy, collect and appropriate taxes, duties, tolls and
fees.
 Assign to a panchayat taxes, duties, tolls and fees levied and collected by the
state government.
 Provide for making grants-in-aid to the panchayats from the consolidated fund of
the state.
 Provide for the constitution of funds for crediting all money of the panchayats.

10. Finance Commission: The state finance commission reviews the financial position of the
panchayats and provides recommendations for the necessary steps to be taken to
supplement resources to the panchayat.
11. Audit of Accounts: State legislature may make provisions for the maintenance and audit
of panchayat accounts.
12. Application to Union Territories: The President may direct the provisions of the Act to be
applied on any union territory subject to exceptions and modifications he specifies.

• In Ancient India, the selection for the leaders of the Panchayat was more or less similar to the
modern one we follow under democracy. While India has seen a lot of foreign intervention over
its rich history, only the British rule truly weakened the effectiveness and held the Panchayats
had over its people.
• The Crown undermined their significance over time. However, it is important to note that
social systems like Panchayats were often the propagators of social evils like casteism as the
upper caste men always dominated them. This furthered the divide between the oppressors
and the subjugated. The system of the Panchayati Raj got revamped after India attained its
independence in 1947. Article 40 of the Indian constitution guides that the state must aid in
organizing the village panchayats and bestow onto them powers that let them function as units
of self-government.

73rd Constitutional Amendment Act 1992 –

Panchayati Raj The 73rd Constitutional Amendment Act 1992 brought important changes to the
country's political system. Its salient features have been listed below;

1. Three-tier system The Act requires the organization of the system's third tier in the form of
Panchayati Raj. The Panchayati system, too, shall have a three-tier organizational structure with
village, intermediate, and district levels. However, the states with a population on the lower
side of 20 lakhs shall not constitute the intermediate tier.

2. Gram Sabha Gram Sabha shall be the primary body of the Panchayati Raj. The village panel
will consist of all registered voters in the demarcated area of the panchayat. Its powers and
authority shall be at the discretion of the State Legislature.

3. Elections Panchayati Raj has direct and fair elections at all levels for its members, while the
elections for the chairperson at the intermediate and district levels are chosen through indirect
elections. The State Legislation selects the candidates for the chairperson position.

4. Reservation in the Assembly There is a reservation of seats for the marginalized

communities. They are as follows

SC and ST: Reservation is there at all three levels. The percentage is divided by the population
of the particular constituency.

• Women: The reservation percentage for women candidates is set at one-third of the total
seats at all levels (including the chairperson position)

• The State governments can also call over the reservation of seats for the backward classes at
any level of the Panchayati Raj system.

5. Tenure

• The tenure is five years long, as decided by the Act. This is applicable at all levels of the
system.
 • The panchayat can also be dissolved before the completion of its tenure. Elections for the
fresh panel are to be completed-

• Before the completion of the five-year tenure of the panel before.

• If the panchayat assembly is dissolved before its tenure, the new elections should take place 6
months before the dissolution.

6. State Election Commission The electoral rolls and conduction of elections are helmed entirely
by the State Election Commission- from the supervision and direction to the control and
preparation. The State government can make provisions concerning the elections.

7. Powers and Functions The state governments can bestow onto the panchayats the power
required for its smooth and fruitful functioning as a self-governing body. These powers can be
dependent on the Panchayat’s duties regarding the planning for economic growth and social
development and/or its implementation of schemes that promote growth (including the 29
articles listed in the 11th Schedule) 8. Financial Situation The state government can make
provisions for the panchayats and authorize them to undertake several steps, like;

• Authorization to levy taxes and/or fees that are appropriate.

• Assign an amount of taxes to the panchayat collected by the state.

• Provision for grants-in-aid help for panchayats from the state funds.

9. Finance Commission The state’s finance commission is charged with the review of the
financial stance of the panchayats. It is subsequently also in charge of providing the required
recommendations that will add to the resources of the panchayat.

Evolution of Panchayati Raj System in India

The history of Panchayat Raj in India can be divided into the following periods from the
analytical point of view:

 Vedic Era: In the old Sanskrit scriptures, word ‘Panchayatan’ has been mentioned which
means a group of five persons, including a spiritual man.
 Gradually the concept of the inclusion of a spiritual man in such groups vanished.
 In the Rigveda, there is a mention of Sabha, Samiti and Vidatha as local self-units.

o These were the democratic bodies at the local level. The king used to get the
approval of these bodies regarding certain functions and decisions.
 Epic Era indicates the two great epic periods of India, that is, the Ramayana and the
Mahabharata.
 The study of Ramayana indicates that the administration was divided into two parts - Pur
and Janpad or city and village
o In the whole of the state, there was also a Caste Panchayat and one person elected
by the Caste Panchayat was a member of the king's Council of Ministers.
 Self-government of a village finds ample expression in the ‘Shanti Parva’ of the
Mahabharata; in the Manu Smriti as well as in Kautilya’s Arthashastra.
 As per the Mahabharata, over and above the village, there were units of 10, 20, 100, and
1,000 village groups.
o ‘Gramik’ was the chief official of the village, ‘Dashap’ was the chief of ten
villages, Vinshya Adhipati, Shat Gram Adhyaksha and Shat Gram Pati were the chiefs
of 20, 100, and 1,000 villages, respectively.
o They collected the local taxes and were responsible for the defense of their villages.
 Ancient Period: There is a mention of village panchayats in Kautilya’sArthashastra.

o The town was referred to as Pur and its chief was the Nagarik.
o Local bodies were free from any royal interference.
o During the Mauryan and Post-Mauryan periods too, the headman, assisted by a
council of elders, continued to play a prominent role in the village life.
o The system continued through the Gupta period, though there were certain changes
in the nomenclature, as the district official was known as the vishya pati and
the village headman was referred to as the grampati.
o Thus, in ancient India, there existed a well established system of local government
which was run on a set pattern of traditions and customs.
o However, it is significant to note that there is no reference of women heading the
panchayat or even participating as a member in the panchayat.
 Medieval Period: During the Sultanate period, the Sultans of Delhi divided their kingdom
into provinces called Vilayat.
o For the governance of a village, there were three important officials - Mukkaddam
for administration, Patwari for collection of revenues, and Choudhrie for settling
disputes with the help of the Panch.
o The villages had sufficient powers as regards self-governance in their territory.
o Casteism and feudalistic system of governance under the Mughal rule in the
medieval period slowly eroded the self-government in villages.
 o It is again noteworthy to note that even in the medieval period there is no mention
of women participation in the local village administration.
 British Period: Under the British regime, village panchayats lost their autonomy and
became weak.
 It is only from the year 1870 that India saw the dawn of representative local institutions.
 The famous Mayo’s resolution of 1870 gave impetus to the development of local
institutions by enlarging their powers and responsibilities.
 The year 1870, introduced the concept of elected representatives, in urban municipalities.
 The revolt of 1857 had put the imperial finances under considerable strain and it was
found necessary to finance local service out of local taxation. Therefore it was out of fiscal
compulsion that Lord Mayo’s resolution on decentralization came to be adopted.
 Following the footsteps of Mayo, Lord Rippon in 1882 provided the much needed
democratic framework to these institutions.
o All boards (then existing) were mandated to have a two-thirds majority of non-
officials who had to be elected and the chairman of these bodies had to be from
among the elected non-officials.
o This is considered to be the Magna Carta of local democracy in India.
 Local self-government institutions received a boost with the appointment of the Royal
Commission on centralisation in 1907 under the Chairmanship of C.E.H. Hobhouse.

o The commission recognized the importance of panchayats at the village level.

 It is in this backdrop that the Montagu Chelmsford reforms of 1919 transferred the
subject of local government to the domain of the provinces.

o The reform also recommended that as far as possible there should be a complete
control in local bodies and complete possible independence for them from external
control.
o These panchayats covered only a limited number of villages with limited functions
and due to organisational and fiscal constraints they did not become democratic and
vibrant institutions of local self government at the village level.
 However, by 1925, eight provinces had passed the Panchayat Acts and by 1926, six native
States had also passed panchayat laws. Local bodies were given more powers and
functions to impose taxes were reduced. But, the position of the local self-government
institutions remained unaffected.
 Post–Independence Period: After the Constitution came into force, Article 40 made a
mention of panchayats and Article 246 empowers the state legislature to legislate with
respect to any subject relating to local self-government.
 However, this inclusion of panchayats into the Constitution was not unanimously agreed
upon by the then decision-makers, with the major opposition having come from the
framer of the Constitution himself i.e. B.R.Ambedkar.

o It was after much discussion among the supporters and opponents of the village
panchayat that the panchayats finally got a place for themselves in the Constitution
as Article 40 of the Directive Principles of State Policy.
 Since the Directive Principles are not binding principles, the result was the absence of a
uniform structure of these bodies throughout the country.
 After independence, as a development initiative, India had implemented the Community
Development Programmes (CDP) on the eve of Gandhi Jayanti, the 2nd October, 1952
under the major influence of the Etawah Project undertaken by the American expert
Albert.

o It encompassed almost all activities of rural development which were to be

implemented with the help of village panchayats along with the participation of
people.
o In 1953, the National Extension Service was also introduced as a prologue to CDP.
But the programme did not yield much result.
 There were various reasons for the failure of CDP like bureaucracy and excessive politics,
lack of people participation, lack of trained and qualified staff, and lack of local bodies
interest in implementing the CDP especially the village panchayats.
 In 1957, the National Development Council constituted a committee headed by Balwant
Rai Mehtato look into the working of community development programme.

o The team observed that the major reason for the failure of the CDP was the lack of
people’s participation.
o The committee suggested a three-tier PRIs, namely, Grama Panchayats (GPs) at the
village level, Panchayat Samiti (PSs) at the block level, and Zilla Parishad (ZPs) at the
district level.
 As a result of this scheme of democratic decentralization was launched in Rajasthan on
October 2, 1959.
 In Andhra Pradesh, the scheme was introduced on 1st November, 1959. The necessary
legislation had also been passed and implemented in Assam, Gujarat, Karnataka, Madhya
Pradesh, Maharashtra, Orissa, and Punjab etc.
 The appointment of the Ashok Mehta Committee in 1977 did bring new thinking in the
concepts and practice of the Panchayat Raj.
o The committee recommended a two-tier Panchayat Raj institutional structure
consisting of Zilla Parishad and Mandal Panchayat.
 In order to use planning expertise and to secure administrative support, the district was
suggested as the first point of decentralization below the state level.
 Based on its recommendation, some of the states like Karnataka incorporated them
effectively.
 In subsequent years in order to revive and give a new lease of life to the panchayats, the
Government of India had appointed various committees.
 The most important among them are the Hanumantha Rao Committee (1983), G.V.K. Rao
Committee (1985), L.M.Singhvi Committee (1986) and the Sarkaria Commission on Centre-
State relations (1988), P.K. Thungan Committee (1989) and Harlal Singh Kharra Committee
(1990).
 The G.V.K. Rao Committee (1985) recommended making the “district” as the basic unit of
planning and also holding regular elections while the L.M.Singhvi
committee recommended providing more financial resources and constitutional status to
the panchayats to strengthen them.
 The Amendment phase began with the 64th Amendment Bill (1989) which was introduced
by Rajiv Gandhi seeking to strengthen the PRIs but the Bill was not passed in the Rajya
Sabha.
 The Constitution (74th Amendment) Bill (a combined bill for the PRIs and municipalities)
was introduced in 1990, but was never taken up for discussion.
 It was during the Prime Ministership of P.V.Narasimha Rao that a comprehensive
amendment was introduced in the form of the Constitution 72nd Amendment Bill in
September 1991.
 73rd and 74th Constitutional Amendments were passed by Parliament in December, 1992.
Through these amendments local self-governance was introduced in rural and urban India.
 The Acts came into force as the Constitution (73 rd Amendment) Act, 1992 on April 24,
1993 and the Constitution (74 th Amendment) Act, 1992 on June 1, 1993.
 The following areas have been exempted from the operation of the Act because of the
socio-cultural and administrative considerations-
o Scheduled areas listed under the V Schedule in the states of Andhra Pradesh, Bihar,
Gujarat, Himachal Pradesh, Madhya Pradesh, Maharashtra, Orissa and Rajasthan.
o The states of Nagaland, Meghalaya and Mizoram.
 o The hill areas of district of Darjeeling in the state of West Bengal for which Darjeeling
Gorkha Hill Council exists.
 In conformity with provisions in the Constitution Amendment Act, an Act called
the Provisions of Panchayats (Extension to the Scheduled Areas) Act, 1996 passed by the
Government of India.
How have the Panchayati Raj Institutions Reformed since their Inception?

 PRIs has witnessed simultaneously a remarkable success and a staggering failure in the
journey of 26 years depending on the goalposts against which they are evaluated.
 While the PRI has succeeded in creating another layer of government and political
representationat the grass-roots level, it has failed to provide better governance.
 There are about 250,000 PRIs and urban local bodies, and over three million elected local
government representatives.
 The 73rd and 74th Amendments required that no less than one-third of the total seats in
local bodies should be reserved for women. At 1.4 million, India has the most women in
elected positions. Seats and sarpanch/pradhan positions were also reserved for SC/ST
candidates.
 Research using PRIs has shown that having female political representation in local
governmentsmakes women more likely to come forward and report crimes.

o In districts with female sarpanchs, significantly greater investments are made in

drinking water, public goods.
 Moreover, the states have also provided the statutory safeguards for many devolution
provisions, which have considerably empowered local governments.
 Successive (central) Finance Commissions have, so substantially, increased fund
allocations for local bodies and also the grants have been increased.
 15th Finance Commission is also considering to further increase the allocations for local
governments to match the international standards.
 India commemorated the 12 th National Panchayati Raj day on 24 th April 2022

o The Prime Minister launched the distribution of e-property cards under

the SWAMITVA (Survey of Villages and Mapping with Improvised Technology in
Village Areas) scheme on the Day.
What are the Challenges associated with the PRI System?

 Lack of Effective Devolution

 o Local government is a state subject in the Constitution, and consequently, the
devolution of power and authority to panchayats has been left to the discretion of
states.
o Some of the important subjects like fuel and fodder, non-conventional energy
sources, rural electrification including distribution of electricity, non-formal
education, small scale industries including food processing industries, technical
training, and vocational education have not been devolved in certain states.
 Insufficient Grants/Funds
o Despite the constitutional empowerment, the local bodies face problems
of inadequate financeto carry out various activities assigned to them.
o Transfers made through the State Finance Commissions are also meagre in most
States.
o In most of the states, most of the GPs are found reluctant to raise their own source
of revenue (OSR). Only a few GPs are able to generate OSR in the form of tax or non-
tax revenue by renting shops, house tax and clean water fee.
 Issue of Sarpanch Pati
o On the Panchayati Raj Day in 2015, the Prime Minister called for an end to ‘Sarpanch
Pati culture’. But it is still very much prevalent in the society, mainly due to gender
biases, women illiteracy and patriarchal society.
 Infrastructural Challenges
o Some of the GPs do not have their own building and they share space with schools,
anganwadi centre and other places. Some have their own building but without basic
facilities like toilets, drinking water, and electricity connection.
o While GPs have internet connections, they are not functional in many cases. For any
data entry purposes, panchayat officials have to visit Block Development offices
which delay the work.
 Lack of Support Staff
o The Standing Committee on Rural Development (Chair: Dr. P Venugopal) in July 2018
observed that there is severe lack of support staff and personnel in panchayats, such
as secretary, junior engineers, computer operators, and data entry operators. This
affects their functioning and delivery of services by them.
 Lack of Convergence of Various Government Programmes
o There is a clear lack of convergence of various development programmes of the
Centre and state governments.
 o For example, roads in two different patches are constructed utilising two different
sources of funding (e.g. Fourteenth Finance Commission and MPLAD), but it is
difficult to find one large activity with funding from multiple sources.
o Different guidelines by different departments are cited as a major constraint for lack
of convergence of activities.

Structure of Rural Financial Institutions-

Rural credit needs in India are met by an elaborate structure of rural financial institutions (RFIs).
The National Bank for Agriculture and Rural Development (NABARD) acts as the apex institution
and also as the principal refinancing agency for the RFIs.

The Reserve Bank of India, as the principal monetary authority of the country, has retained
some powers of regulating and directing agricultural credit, though most of its developmental
functions in this area have been ceded to NABARD.

Cooperative banks, scheduled commercial banks, and regional rural banks are the three
principal rural financial agencies. Numerous state-sponsored institutions and nongovernmental
organizations established for development of special sections of the population or particular
regions in the country also advance credit to the rural population.

Cooperative banks cater to the short-term as well as long-term requirements of credit in rural
and semi-urban areas. The short-term credit structure is a three-tier structure, with state-level
cooperative banks, or SCBs (numbering 30), at the apex, district-level credit cooperative banks,
or DCCBs (numbering 368) constituting the middle tier, and over 98,000 village-level primary
societies.

Each higher tier largely relies on the lower tier for credit dispersal and, to an extent, on deposit
mobilization. State- as well as district-level cooperative institutions also operate, to a limited
extent, through their branches. There are 847 branches of the SCBs and over 12,000 branches
of the DCCBs.

Long-term credit structure is also a tiered structure. There are 20 state-level cooperative
agricultural and rural development banks. Some of these banks, mainly in the smaller states,
operate directly through their branches. Others, especially those located in the larger states,
operate through an intermediary level called primary cooperative agricultural rural
development banks, the latter numbering nearly 800, with a branch network of nearly 1,100.

Ninety-eight scheduled commercial banks operate through more than 66,400 branches, of
which nearly 32,000 are located in rural areas. The rural and the semi-urban branches of the
commercial banks are controlled at the regional level by their regional offices, and the regional
offices are coordinated at the zonal level by zonal offices, with the headquarters of the banks
responsible for overall control and supervision. The commercial banks have also sponsored, in
collaboration with the central and state governments, local district level banks, known as
regional rural banks (RRBs). The RRBs number 196, and have a network of over 14,000
branches, which are located preponderantly in rural areas.

There are more than 157,000 credit outlets serving India's rural population of nearly 742 million
people. The flow of credit for agriculture and allied activities was estimated at 6204.5 billion
rupees, of which 4050.9 billion rupees were disbursed as production credit and 2153.6 billion
rupees as investment credit. A progressively larger share of ground-level credit in agriculture is
accounted for by commercial banks.

A remarkable feature of the RFIs is their comprehensive coverage of different segments of rural
society, including the small and marginal farmers. With the organization of self-help groups of
poor farmers and artisans, now numbering over 780,000, and their coordination with the
banking institutions, the RFIs now cover a large number of households among the
disadvantaged sections of rural society.

Evolution of State Policies

Three distinct phases can be identified in the evolution of the RFIs. The first phase began in
1954, when the recommendations of the Rural Credit Survey Report were largely accepted and
efforts made to encourage formal credit institutions, particularly cooperatives. The beginning of
the second phase coincided with bank nationalization in 1969, when credit was considered an
important instrument of eradicating poverty. The third phase began in 1991, when the RFIs
sought to be reformed in consonance with the overall policy of economic reforms.

Financial Organization in Panchayati Raj Institutions-

Panchayat Finance-
The Panchayati Raj Ministry in a meeting with the 15 th Finance Commission has pitched for
a fivefold increase in funding for rural local bodies. Know in detail about the 15th finance
Commission on the link provided here.
The Panchayati Raj Ministry has asked for Rs 10 lakh crore to be allocated for the 2020-21 to
2025-26 period, in comparison to the Rs 2 lakh crore allocated under the 14 th Finance
Commission

Self Help Groups (SHGs) in India – Functions, Advantages & Disadvantages