Challenges Facing Panchayati Raj Institutions and Urban Local Bodies

Decentralisation was meant to be India’s great democratic leap downwards – a shift of power from distant capitals to the village square and the ward office. Three decades after the 73rd and 74th Constitutional Amendments, that promise has been partly kept and partly broken. Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs) exist in every state, elections are held, and reservations have brought women, Dalits, and tribal citizens into public office in unprecedented numbers. Yet these institutions continue to struggle with chronic illnesses – weak finances, missing staff, elite domination, and tangled lines of authority – that keep them from becoming genuine governments. This post unpacks the maladies that still plague India’s local bodies, and why fixing them matters for every village and city.

The unfinished business of devolution 🔗

At the heart of the problem lies a simple, stubborn fact: giving local bodies a constitutional identity is not the same as giving them real power. The 73rd Amendment listed 29 subjects in the Eleventh Schedule that states were expected to transfer to panchayats, and the 74th Amendment similarly listed 18 functions in the Twelfth Schedule for municipalities. But the actual transfer of powers has been patchy, reluctant, and in many places merely formal.

A Parliamentary Standing Committee report presented in July 2025 captured this bluntly. It observed that despite the constitutional mandate, devolution of functions, funds, and functionaries to PRIs remains incomplete, with many panchayats operating with limited administrative authority, inadequate financial resources, and without effective planning control. The Ministry of Panchayati Raj’s own Panchayat Devolution Index 2024 confirms the patchwork: overall devolution to rural local bodies rose only from 39.9% in 2013-14 to 43.9% in 2021-22, a sluggish improvement over nearly a decade.

Why states hold back 🔗

State governments are the gatekeepers of devolution, and many are unwilling to let go. Transferring a subject like primary education or minor irrigation means transferring the budget, the staff, and the political credit that comes with them. Many chief ministers and line departments prefer to keep that influence in the state capital, treating panchayats and municipalities as implementation arms rather than as governments in their own right. The result is a vast gap between top performers like Karnataka and Kerala and laggards where devolution exists only on paper.

The fiscal squeeze: funds without autonomy 🔗

The second malady is financial. Local bodies cannot govern if they cannot spend, and they cannot spend freely if they have no money of their own. The Reserve Bank of India’s study of panchayat finances revealed a striking dependency: panchayats earn only 1% of their revenue through taxes, with around 80% coming from Central government grants and 15% from State government grants. In effect, gram panchayats act as post offices that receive and disburse money tied to specific schemes, rather than as self-governing units planning their own development.

To make matters worse, the share of flexible money has actually shrunk. Untied grants, which panchayats can use freely, fell from 85% under the 13th Finance Commission to 60% under the 15th Finance Commission. Tied grants sound responsible, but they create absurd outcomes. The Standing Committee noted that tied grants can only be used for sanitation and the supply of drinking water, and if saturation has already been achieved in these categories through other schemes, the funds are not released to panchayats because they cannot be reallocated. A panchayat may desperately need a community hall or a drainage line, yet watch money meant for it evaporate because it does not fit the assigned box.

Urban bodies face the same trap 🔗

Municipalities are no better off. Property tax, which should be the bedrock of urban finance, is poorly administered, under-valued, and weakly enforced in most Indian cities. As a result, many municipalities continue to face financial constraints despite the State Finance Commission mechanism, with inefficient property tax collection and heavy dependence on state government transfers limiting their autonomy. Big-city corporations for Mumbai or Bengaluru may look powerful, but smaller municipal councils and nagar panchayats often cannot pay salaries on time, let alone invest in storm water drains, waste processing, or affordable housing.

The missing functionaries 🔗

The third ‘F’ – functionaries – is the quietest but most damaging weakness. A panchayat with funds and functions but without trained staff is like a hospital without doctors. The Devolution Index shows modest improvement; government efforts have strengthened PRIs through infrastructure, staffing, and digitalisation, raising the functionaries index from 39.6% to 50.9%. But half-empty is still half-empty. A Parliamentary committee on panchayat functioning found a severe lack of support staff and personnel such as secretaries, junior engineers, computer operators, and data entry operators.

Urban bodies suffer the same shortage. Many ULBs lack the technical expertise needed to handle urban planning, environmental regulation, GIS mapping, or project management. Elected representatives – sarpanches, councillors, mayors – often come to office with strong social roots but limited administrative training, and there is no dependable system of induction or capacity building that runs across their tenure.

Illiteracy and informal power 🔗

In many villages, the elected head is a first-generation literate or semi-literate citizen. As one analysis notes, illiterate or semi-literate sarpanches struggle to represent their panchayats effectively. The gap is filled, inevitably, by the panchayat secretary, the block development officer, or a local power-broker – shifting real authority away from the elected leader to the unelected or informal.

Elite capture and the problem of who benefits 🔗

Perhaps the most troubling malady is elite capture – the quiet takeover of local institutions by dominant castes, landowners, contractors, or political brokers. The idea of decentralisation is that decisions taken closer to the people will be more responsive to the poor. In practice, local politics can be more unequal than national politics, because social hierarchies are sharper at the village level and the poor have fewer resources to resist.

Evidence from across India shows how this plays out. Studies of rural decentralisation find that decentralisation contributes to elite capture and the continuing power of political brokers, with weakened corrective action from state agencies. On the ground, dominant groups often sponsor candidates from reserved categories who depend on them economically and then control their actions remotely – an agricultural labourer elected as sarpanch may remain dependent on the same landowner who employs her for daily wages. The reservation is filled, but the voice is borrowed.

Who gets the public good? 🔗

Research on gram panchayats has shown how resources skew toward those who already have power. A well-known study of Indian local governments finds that the Pradhan has the power to shape resource allocation and often does so to benefit his own village within the panchayat. When meetings of the gram sabha – the constitutional forum for citizen participation – are thinly attended, elite capture becomes almost effortless. One analysis of Karnataka notes that when roughly 65 percent of villagers in studied areas attended no Gram Sabha meetings in the previous year, it created spaces for unchecked elite influence over local governance decisions.

The result is predictable: roads get built to the landlord’s fields, houses under housing schemes go to the politically connected, and public goods that benefit the poor – primary health centres, pucca housing for the homeless, clean drinking water in Dalit hamlets – remain under-supplied.

Overlapping roles and the coordination muddle 🔗

Even where panchayats and municipalities have some powers and resources, they must function alongside a thicket of parallel bodies – state line departments, district administration, parastatals, and centrally sponsored scheme machinery. Instead of convergence, the system often produces confusion.

Urban governance illustrates the mess most clearly. Water supply may rest with a state water board, housing with a development authority, transport with a separate parastatal, slum improvement with yet another agency – while the elected municipality is left with garbage and street lights. As one study notes, the division of power between elected representatives and state-appointed officials creates friction, with the Commissioner accountable to the state government sometimes acting independently of local elected representatives, and this dual-control system frequently leads to governance stalemates. In rural areas, multiple rural development schemes run through blocks and districts, each with its own staff and hierarchy, bypassing the panchayat even as it is held responsible for outcomes.

Planning committees that don’t plan 🔗

The Constitution tried to solve coordination through District Planning Committees (DPCs), which were meant to consolidate rural and urban plans into a single district plan. But the promise has not been kept. An analysis of the Devolution Index found that although DPCs have been constituted in almost all states, such detailed grassroots planning is undertaken in very few places, with Kerala and Rajasthan scoring highest on establishment and functioning of DPCs. Without working DPCs, convergence is left to bureaucratic improvisation, and the voice of local bodies gets drowned out.

Interference, reservations, and shaky autonomy 🔗

Local autonomy is further undermined by the unchecked interference of higher-level politicians and officials. As the Panchayat Devolution Index 2024 analysis pointed out, interference by MPs and MLAs is seen to have undermined the autonomy and decision-making capacity of panchayats. A popular sarpanch or mayor can be easily overshadowed by a sitting legislator who controls scheme allocations and bureaucratic postings.

Reservations, which have been transformative, also face their own structural hurdle. The rotation of reserved seats for SCs, STs, and women affects leadership continuity, as new leaders may not prioritise the same goals or approaches as their predecessors. Genuine empowerment needs continuity of vision and not just continuity of rotation.

Uneven implementation across states 🔗

Perhaps the most underappreciated issue is how wildly decentralisation varies across India. The same Constitution applies everywhere, but the practice of local government looks entirely different from Thiruvananthapuram to Patna. The Panchayat Devolution Index ranks states along this spectrum. Karnataka, Kerala, Maharashtra, Tamil Nadu, and Uttar Pradesh, with scores above 60, fall in the ‘very high’ category, while states such as Assam, Bihar, Sikkim, and Uttarakhand rank as low performers, with several union territories and north-eastern states lagging even further.

This unevenness means that a citizen in Kerala may experience a functional, fund-rich panchayat that plans its own road network, while a citizen in a neighbouring state may meet a gram panchayat that cannot even hold a regular gram sabha. Delivery of welfare schemes, quality of services, and responsiveness to local needs all swing with this geography of devolution.

Way forward: from framework to functionality 🔗

The maladies are diagnosable, and so are the cures. States need time-bound roadmaps for devolving all listed functions, not just selected ones; finance commissions must be empowered to ensure predictable, flexible transfers; untied grants must expand rather than shrink; and the Ministry of Panchayati Raj has been urged to publish an annual “State of Devolution Report” with central financial incentives linked to actual progress. Capacity building needs to move from one-off training to a continuous professional track for both elected representatives and support staff. Gram sabhas and ward committees need legal teeth, so that elite capture cannot operate in the shadows. Coordination requires DPCs and Metropolitan Planning Committees that genuinely integrate plans rather than rubber-stamp them.

Above all, decentralisation has to be taken seriously as a political project, not just a legal one. The 73rd and 74th Amendments gave India a framework. The task ahead is to give that framework functionality – real money, real staff, real authority, and real accountability to the people it is meant to serve.

What do you think? Is it enough to keep strengthening the constitutional framework of local self-government, or does meaningful decentralisation require a deeper social transformation that weakens caste, class, and political hierarchies at the village and ward level? And if funds, functions, and functionaries were fully devolved tomorrow, would your nearest gram panchayat or municipal ward office be ready to use that power wisely?

References

1. https://mahadma.maharashtra.gov.in/en/74th-constitutional-amendment-and-urban-local-bodies-in-india/
2. https://prsindia.org/policy/report-summaries/devolution-of-funds-under-panchayati-raj-system
3. https://www.drishtiias.com/daily-updates/daily-news-analysis/status-of-devolution-to-panchayats-in-states-2024-report
4. https://forumias.com/blog/panchayat-raj-institutionpri-in-india-significance-challenges-and-way-forward-explained-pointwise/
5. https://www.civilsdaily.com/story/panchayati-raj-institutions-issues-and-challenges/
6. https://polsci.institute/public-policy-administration-india/74th-amendment-urban-local-bodies-india/
7. https://prsindia.org/policy/report-summaries/improvement-in-the-functioning-of-panchayats
8. https://compass.rauias.com/current-affairs/panchayat-devolution-index-2024/
9. https://pmc.ncbi.nlm.nih.gov/articles/PMC9358637/
10. https://csr.education/local-self-governance-development/new-trends-grassroots-leadership-india/
11. https://gsdrc.org/document-library/the-politics-of-public-good-provision-evidence-from-indian-local-governments/
12. https://idronline.org/article/advocacy-government/the-state-of-indias-panchayati-raj-system/
13. https://decentralization.net/2025/02/the-status-of-devolution-to-panchayats-in-india/