Status of Devolution to Panchayats in States 2024 Report

• 17 Feb 2025

For Prelims: Panchayati Raj Institutions (PRIs), Article 243G, 11th Schedule, Rashtriya Gram Swaraj Abhiyan, State Finance Commissions (SFCs), GST, Gram Sabha, MGNREGA, NHM, PMAY, Finance Commissions.   

For Mains: Progress and challenges in functioning of Panchayati Raj Institutions (PRIs). 

Source: PIB 

Why in News? 

The Ministry of Panchayati Raj has released  a report titled “Status of Devolution to Panchayats in States – An Indicative Evidence Based Ranking” highlighting the progress in empowering Panchayati Raj Institutions (PRIs) across India. 

What are the Key Findings of the Devolution to Panchayats in States 2024 Report? 

• About Report: It is also referred to as the Panchayat Devolution Index 2024 which evaluates the autonomy and empowerment of Panchayati Raj Institutions (PRIs) by assessing the devolution of powers and resources across Indian states and Union Territories. 
  • It assesses Panchayats' autonomy in decision-making and implementation, reflecting Article 243G of the Constitution. 
• Dimensions: It assesses six critical dimensions i.e., Framework, Functions, Finances, Functionaries, Capacity Building, and Accountability of the Panchayats. 
• Key Findings:  
  • Overall Devolution: The overall devolution to rural local bodies increased from 39.9% in 2013-14 to 43.9% in 2021-22. 
  • State Rankings: Top 5 States are Karnataka (1st), Kerala (2nd), Tamil Nadu (3^rd), Maharashtra (4^th) and Uttar Pradesh (5^th) . 
    • Lowest-ranked states/UTs are Dadra & Nagar Haveli and Daman & Diu (13.62), Puducherry (16.16), and Ladakh (16.18). 
  • Improvements in Infrastructure: Government efforts have strengthened PRIs through infrastructure, staffing, and digitalization, raising the functionaries index from 39.6% to 50.9%. 
    • The Rashtriya Gram Swaraj Abhiyan (RGSA, 2018) boosted the capacity enhancement component of the Index from 44% to 54.6%. 
  • Performance Across 6 Dimensions: 

Dimension	State	Key Strength
Framework	Kerala	Robust legal and institutional framework for Panchayats
Functions	Tamil Nadu	Devolved functional responsibilities to Panchayats
Finances	Karnataka	Best financial management practices
Functionaries	Gujarat	Personnel management and capacity-building efforts
Capacity Enhancement	Telangana	Institutional strengthening efforts
Accountability	Karnataka	Transparency and financial accountability

• Challenges: 
  • Institutional Flaws: Rotation of reserved seats for SCs, STs, and women affects leadership continuity as new leaders may not prioritize the same goals or may have different approaches.  
    • District Planning Committee (DPCs) exist but lack proper implementation. 
  • Inconsistent Transfer of Functions: 29 subjects (11th Schedule) are inconsistently transferred as State governments fear losing control or influence at ground level, limiting Panchayats' decision-making power. 
  • Weak Financial Autonomy: Non-implementation of State Finance Commissions (SFCs) recommendations, centralized GST, and lack of fiscal autonomy restrict Panchayats' financial control. 
  • Poor Resource Capacity: Elected representatives lack proper training in governance, budgeting, and planning. 
  • Low Accountability: Low social audits and Gram Sabha participation reduce oversight; insufficient finance disclosure undermines transparency. 
• Recommendations:  
  • Fund Utilization: Stresses strict monitoring of funds to prevent misuse and corruption. 
  • Strengthening Panchayat Bhawans: Should act as hubs for public services and improve access to government schemes e.g., Ayushman Bharat. 
  • Empower Panchayats: Urges states to fully devolve powers and responsibilities to Panchayats. 
  • Strengthening SFCs: To ensure timely fund allocation. 
  • Autonomy in decision-making for Panchayats, especially in flagship schemes like MGNREGA, NHM, and PMAY. 
  • Digital Infrastructure: Enhance digital infrastructure in Panchayats for better governance and transparency. 

What is the Status of PRI Funding? 

• Revenue Composition: PRIs generate only 1% of revenue through taxes, indicating limited self-financing capacity. 
  • 80% of PRI revenue comes from Central government grants, and 15% from State government grants. 
• Revenue Per Panchayat: Each Panchayat earns Rs 21,000 from own taxes and Rs 73,000 from non-tax sources.  
  • Central grants average Rs 17 lakh, and State grants are around Rs 3.25 lakh per Panchayat, showing high reliance on external support. 
• Low Revenue Expenditure: The ratio of revenue expenditure of panchayats to nominal GSDP is less than 0.6% for all the states ranging from 0.001% in Bihar to 0.56% in Odisha. 
• Inter-State Disparities: Kerala and West Bengal have the highest average revenue (over Rs 60 lakh and Rs 57 lakh), while states like Andhra Pradesh and Punjab report much lower revenues (less than Rs 6 lakh). 

How Can PRI Funding be Improved? 

• Regular Transfer of Funds: The 14th and 15th Finance Commissions recommended substantial grants to Panchayats, but regular transfers, rather than ad-hoc grants, are needed for sustainability. 
  • Financial transparency and accountability should be ensured through regular audits, RTI disclosures, and strong procurement procedures to ensure efficient fund use. 
• Capacity Equalization: Fiscal transfers to PRIs should match states' capacity to finance Panchayats, ensuring balanced and sustained local governance growth. 
• Strengthening SFCs: SFC reports should be submitted regularly, with full implementation of recommendations to ensure consistent Panchayat funding. 
• Enhancing Own Revenue Generation: Panchayats should boost revenue through local taxes (e.g., land taxes), with states providing support and incentives for better tax collection and administration. 
• Creating Special Purpose Grants: Special-purpose grants should be made to incentivize performance and improve rural infrastructure and services like roads, water, and sanitation. 

Click Here to Read: What is a Panchayati Raj Institution? 

Conclusion 

The "Devolution to Panchayats" report highlights notable progress in empowering local bodies, with increased devolution and strengthened infrastructure. However, challenges such as weak financial autonomy, inconsistent devolution, and poor accountability persist. Addressing these gaps can further empower PRIs for sustainable local governance and development. 

Drishti Mains Question: 

Discuss the progress and challenges in the devolution of powers to Panchayats in India.

UPSC Civil Services Examination, Previous Year Questions (PYQs) 

Prelims 

Q. Local self-government can be best explained as an exercise in (2017)

(a) Federalism 

(b) Democratic decentralisation 

(c) Administrative delegation 

(d) Direct democracy 

Ans: (b)

Q. The fundamental object of the Panchayati Raj system is to ensure which among the following? (2015)

1. People’s participation in development
2. Political accountability
3. Democratic decentralization
4. Financial mobilization

Select the correct answer using the code given below 

(a) 1, 2 and 3 only  

(b) 2 and 4 only 

(c) 1 and 3 only  

(d) 1, 2, 3 and 4 

Ans: (c)

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Mains

Q1. To what extent, in your opinion, has the decentralisation of power in India changed the governance landscape at the grassroots? (2022) 

Q2. Assess the importance of the Panchayat system in India as a part of local government. Apart from government grants, what sources can the Panchayats look out for financing developmental projects? (2018)