Issues with Panchayati Raj Institutions (PRIs)

General Studies Paper -2

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

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.

Why are Panchayati Raj Institutions important?

1. Governance and Rural Development: Critical to providing local governance and helping in rural developmen 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.

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.