Rural Development: Administration and Planning

KHU-801

Unit-3
Notes

Evolution of Panchayati Raj System

The foundation of the present local self-government in India was laid by the Panchayati Raj

System (1992). But the history of Panchayati Raj starts from the self-sufficient and self-

governing village communities. In the time of the Rig-Veda (1700 BC), evidence suggests that

self-governing village bodies called ‘sabhas’ existed. With the passage of time, these bodies

became panchayats (council of five persons). Panchayats were functional institutions of

grassroots governance in almost every village. They endured the rise and fall of empires in the

past, to the current highly structured system. The village panchayat, as a system of

administration, began in the British days, as their offer to satisfy the demands for local

autonomy. They opened up the governance of the lowest levels to the citizens. The Government

of India act, 1935 also authorizes the provinces to enact legislations. Even though such minor

forms of local governance was evident in India, the framers of the constitutions, unsatisfied

with the existing provisions, included Article 40 among the Directive Principles, whereby:

“The state shall take steps to organize village panchayats and endow them with such powers

and authority as may be necessary to enable them to function as units of self-government.”

Later, the conceptualisation of the system of local self-government in India took place through

the formation and effort of four important committees from the year 1957 to 1986.

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(a) Balwant Rai Mehta Committee (1957)

Originally appointed by the Government of India to examine the working of two of its earlier

programs, the committee submitted its report in November 1957, in which the term ‘democratic

decentralization’ first appears. The important recommendations are:

 Establishment of a three-tier Panchayati Raj system – gram panchayat at village level

(direct election), panchayat Samiti at the block level and Zila Parishad at the district

level (indirect election).

 District Collector to be the chairman of Zila Parishad.

 Transfer of resources and power to these bodies to be ensured.

The existent National Development Council accepted the recommendations. However, it did

not insist on a single, definite pattern to be followed in the establishment of these institutions.

Rather, it allowed the states to devise their own patterns, while the broad fundamentals were to

be the same throughout the country. Rajasthan (1959) adopted the system first, followed by

Andhra Pradesh in the same year. Some states even went ahead to create four-tier systems and

Nyaya panchayats, which served as judicial bodies.

(b) Ashok Mehta Committee (1977-1978)

The committee was constituted by the Janata government of the time to study Panchayati Raj

institutions. Out of a total of 132 recommendations made by it, the most important ones are:

 Three-tier system to be replaced by a two-tier system.

 Political parties should participate at all levels in the elections.

 Compulsory powers of taxation to be given to these institutions.

 Zila Parishad to be made responsible for planning at the state level.

 A minister for Panchayati Raj to be appointed by the state council of ministers.

 Constitutional recognition to be given to Panchayati Raj institutions.

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Unfortunately, the Janata government collapsed before action could be taken on these

recommendations.

(c) G V K Rao Committee (1985)

Appointed by the Planning Commission, the committee concluded that the developmental

procedures were gradually being taken away from the local self-government institutions,

resulting in a system comparable to ‘grass without roots’.

 Zila Parishad to be given prime importance and all developmental programs at that level

to be handed to it.

 Post of DDC (District Development Commissioner) to be created acting as the chief

executive officer of the Zila Parishad.

 Regular elections to be held

(d) L M Singhvi Commitee (1986)

Constituted by the Rajiv Gandhi government on ‘Revitalisation of Panchayati Raj institutions

for Democracy and Development’, its important recommendations are:

 Constitutional recognition for PRI institutions.

 Nyaya Panchayats to be established for clusters of villages

Though the 64th Constitutional Amendment bill was introduced in the Lok Sabha in 1989 itself,

Rajya Sabha opposed it. It was only during the Narasimha Rao government’s term that the idea

finally became a reality in the form of the 73rd and 74th Constitutional Amendment acts, 1992.

Panchayati Raj System under 73rd and 74th Constitutional Amendment acts, 1992

The acts of 1992 added two new parts IX and IX-A to the constitution. It also added two new

schedules–11 and 12 which contains the lists of functional items of Panchayats and

Municipalities. It provides for a three-tier system of Panchayati Raj in every state – at the

village, intermediate and district levels. Panchayat and Municipality are the generic terms for

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the governing body at the local level. Both exist as three tier systems – at the lower,

intermediate and upper levels.

The 73rd Constitutional Amendment act provides for a Gram Sabha as the foundation of the

Panchayati Raj system. It is essentially a village assembly consisting of all the registered voters

in the area of the panchayat. The state has the power to determine what kind of powers it can

exercise, and what functions it has to perform at the village level. The 74th Constitutional

Amendment act provides for three types of Municipalities:

 Nagar Panchayat for a transitional area between a rural and urban area.

 Municipal Council for a small urban area.

 Municipal Corporation for a large urban area.

Municipalities represent urban local self-government. Most of the provisions of the two acts

are parallel, differing only in the fact that they are being applied to either a Panchayat or a

Municipality respectively. Each Gram sabha is the meeting of a particular constituency called

ward. Each ward has a representative chosen from among the people themselves by direct

election. The chairperson of the Panchayat or Municipality at the intermediate and district level

are elected from among these representatives at the immediately lower level by indirect

election.

Three-tier structure of Panchayati Raj

(a) Gram Panchayat (village level)

Gram Panchayats are at the lowest level of Panchayat Raj institutions (PRIs), whose legal

authority is the 73rd Constitutional Amendment of 1992, which is concerned with rural local

governments. The Gram Panchayat is divided into wards and each ward is represented by a

Ward Member or Commissioner, also referred to as a Panch or Panchayat Member, who is

directly elected by the villagers. The Panchayat is chaired by the president of the village, known

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as a Sarpanch. The term of the elected representatives is five years. The Secretary of the

Panchayat is a non-elected representative, appointed by the state government, to oversee

Panchayat activities. A Gram panchyat's term of office is five years. Every five years elections

take place in the village. All people over the age of 18 who are residents of the territory of that

village's Gram panchayat can vote. For women's empowerment and to encourage participation

of women in the democratic process, the government of India has set some restrictions on Gram

panchayat elections, reserving one-third of the seats for women, as well as reserving seats for

scheduled castes and tribes.

Functions of Panchayat

All Panchayati Raj Institutions perform such functions as are specified in state laws relating to

panchayati raj. Some States distinguish between obligatory (compulsory) and optional

functions of Gram Panchayats while other States do not make this distinction.

 The civic functions relating to sanitation, cleaning of public roads, minor irrigation,

public toilets and lavatories, primary health care, vaccination, the supply of drinking

water, constructing public wells, rural electrification, social health and primary and

adult education, etc. are obligatory functions of village panchayats.

 The optional functions depend on the resources of the panchayats. They may or may

not perform such functions as tree plantation on roadsides, setting up of breeding

centers for cattle, organizing child and maternity welfare, promotion of agriculture, etc.

 After the 73rd Amendment, the scope of functions of Gram Panchayat was widened.

Such important functions like preparation of annual development plan of panchayat

area, annual budget, relief in natural calamities, removal of encroachment on public

lands and implementation and monitoring of poverty alleviation programmes are now

expected to be performed by panchayats.

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  Selection of beneficiaries through Gram Sabhas, public distribution system, non-

conventional energy source, improved Chullahs, biogas plants have also been given to

Gram Panchayats in some states.

(b) Mandal Parishad or Block Samiti or Panchayat Samiti (block level)

The second or middle tier of the Panchayati Raj is Panchayat Samiti, which provides a link

between Gram Panchayat and a Zila Parishad. The strength of a Panchayat Samiti also depends

on the population in a Samiti area. In Panchayat Samiti, some members are directly

elected.Sarpanchs of Gram Panchayats. Sarpanchs of Gram Panchayats are ex-officio members

of Panchayat Samitis. However, all the Sarpanchs of Gram Panchayats are not members of

Panchayat Samitis at the same time. The number varies from State to State and is rotated

annually. It means that only chairpersons of some Gram Panchayats in a Samiti area are

members of Panchayat Samiti at a time. In some panchayats, members of Legislative

Assemblies and Legislative Councils, as well as members of Parliament who belong to the

Samiti area, are co-opted as its members. Chairpersons of Panchayat Samitis are, elected

indirectly- by and from amongst the elected members thereof.

Functions of Panchayat Samiti

 Panchayat Samitis are at the hub of developmental activities.

 They are headed by Block Development Officers (B.D.Os).

 Some functions are entrusted to them like agriculture, land improvement, watershed

development, social and farm forestry, technical and vocational education, etc.

 The second type of functions relates to the implementation of some specific plans,

schemes or programmes to which funds are earmarked. It means that a Panchayat

Samiti has to spend money only on that specific project. The choice of location or

beneficiaries is, however, available to the Panchayat Samiti.

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(c) Zila Parishad (district level)

Zila Parishad or district Panchayat is the uppermost tier of the Panchayati Raj system. This

institution has some directly elected members whose number differs from State to State as it is

also based on population. Chairpersons of Panchayat Samitis are ex-officio members of Zila

Parishads. Members of Parliament, Legislative Assemblies and Councils belonging to the

districts are also nominated members of Zila Parishads. The chairperson of a Zila Parishad,

called Adhyaksha or President is elected indirectly-by and from amongst the elected members

thereof. The vice-chairperson is also elected similarly. Zila Parishad meetings are conducted

once a month. Special meetings can also be convened to discuss special matters. Subject

committees are also formed. Zila Parishad meetings are conducted once a month. Special

meetings can also be convened to discuss special matters. Subject committees are also formed.

Functions of Zila Parishad

 Zila Parishad links Panchayat Samitis within the district.

 It coordinates their activities and supervises their functioning.

 It prepares district plans and integrates Samiti plans into district plans for submission

to the State Government.

 Zila Parishad looks after development works in the entire district.

 It undertakes schemes to improve agricultural production, exploit ground water

resources, extend rural electrification and distribution and initiate employment

generating activities, construct roads and other public works.

 It also performs welfare functions like relief during natural calamities and scarcity, the

establishment of orphanages and poor homes, night shelters, the welfare of women and

children, etc.

 In addition, Zila Parishads perform functions entrusted to them under the Central and

State Government sponsored programmes. For example, Jawahar Rozgar Yojna is a big

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 centrally sponsored scheme for which money is directly given to the districts to

undertake employment-generating activities.

Structural transformation of rural finance in India

In 1947, with the help of survey, Reserve Bank of India (RBI) recorded that moneylenders and

other informal lenders met more than 90% of the rural credit needs. The share of banks was

only about 1 % of the total rural household debt. The increasing amount of institutionalization

of rural finance led to the structural transformation. The major emphasis was given during the

Fourth Five-Year Plan (1969–1974) following bank nationalization and by setting up of

NABARD (National Bank for Agriculture and Rural Development), the formation of Self-Help

Group (SHG)—bank linkage and the setting up of Micro Finance Institutions (MFIs).

The entire phase of rural credit provisioning in independent India can be classified into three

phases.

 First from the 1950s up to the mid-1960s when cooperatives were the main institutional

setups.

 Second, the 1970s and 1980s when commercial banks and RRBs (Regional Rural

Banks) played the dominating role in institutional credit disbursement.

 The final phase starting from the reform period in the early 1990s to the present which

observes the restructuring of the banking system, the emergence of SHGs, and a

growing number of MFIs.

The entire structural transformation process can be divided into four phases:

(a) Increasing dominance of cooperatives

 The introduction of cooperatives is the earliest attempt at institutionalization of rural

finance.

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  The cooperative credit movement in India started with the passing of the Cooperative

Societies Act in 1904. It came into force following the Fourth Five-year Plan (1969–

1974).

 The aim of cooperatives is to fulfil the short, medium and the long-term credit needs of

the rural households.

(b) Bank nationalization and dominance of commercial banks

 The share of scheduled commercial banks (SCBs) in total institutional credit has

gradually increased since the nationalization of banks in 1969.

 After bank nationalization, RBI made it mandatory for commercial banks to cover the

unbanked rural and semi urban areas. Each bank would have to open at least three

branches in unbanked rural or semi urban areas.

(c) Establishment of NABARD and Bank—Self-Help Groups (SHGs) Linkage

 With this establishment of NABARD (National Bank for Agriculture and Rural

Development) in July 1982 the government has widened its role in rural credit from

‘‘agricultural development’’ to ‘‘rural development.’’

 NABARD approves short, medium, and long-term credits and facilitate the

development of bank–SHGs linkage.

 NABARD provides refinance support to banks at very low interest rates for financing

SHGs. As most of the SHGs comprise women members so empowerment of rural

women was achieved.

 The government has introduced Rural Infrastructure Development Fund (RIDF) in

1995–1996 in NABARD. The fund is created to finance various rural infrastructure

projects such as irrigation, road, bridges, watershed, cold storage, fisheries, inland

waterways development, etc.

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(d) Introduction and commercialization of Micro Finance

 The most recent innovation toward institutionalization of the rural credit system is the

introduction of microfinance.

 MFIs in India have non-profit motivation on one hand and profit maximization for long-

term on the other hand.

 It has evolved as an attractive and cost-effective mechanism to reach financial services

to the rural poor.

 MFIs has eliminated the basic problems of incorrect client identification and mitigate

repayment risks to a great extent.

 MFIs are more aggressive and innovative to reach the rural poor than the formal

banking system. They not only provide loan for productive purposes but also for

consumption purposes.

Self-help groups

Self-Help Groups (SHGs) are the people who choose to come together to find ways to improve

their living conditions. It can be defined as self-governed group of people with similar socio-

economic background and having a desire to collectively perform common purpose. Villages

face numerous problems related to poverty, illiteracy, lack of skills, lack of formal credit etc.

These problems cannot be tackled at an individual level and need collective efforts. Thus SHG

can become a vehicle of change for the poor and marginalized. SHG rely on the idea of “Self

Help” to encourage self-employment and to reduce poverty.

Functions

 It looks to build the functional capacity of the poor and the marginalized in the field of

employment and in the income generating activities.

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  It resolves conflicts through collective leadership and mutual discussion.

 It provides collateral free loan with terms decided by the group at the market driven

rates. The poor collect their savings and save it in banks. In return they receive easy

access to loans with a small rate of interest to start their micro unit enterprise.

 Consequently, Self-Help Groups have emerged as the most effective mechanism for

delivery of microfinance services to the poor.

Need for SHGs

 One of the reasons for rural poverty in our country is low access to credit and financial

services.

 A Committee constituted under the chairmanship of Dr. C. Rangarajan to prepare a

comprehensive report on Financial Inclusion in the Country identified some major

reasons for lack of financial inclusion:

o Inability to provide collateral security

o Inadequate reach of the institutions

 The existence of sound community networks in villages is increasingly being

recognised as one of the most important elements of credit linkage in the rural areas.

 SHGs help in accessing credit to the poor and thus, play a critical role in poverty

reduction.

 SHGs help to build social capital among the poor, especially women. This empowers

women and gives them greater voice in the society.

Benefits of SHGs

(i) Social integrity: SHGs take action to stop practices like dowry, alcoholism etc.

(ii) Gender Equity: SHGs empowers women and develop leadership skill among them.

Empowered women participate more actively in gram sabha and elections. Self-Help Groups

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formation has a multiplier effect in improving women’s status in society as well as in the family

leading to improvement in their socio-economic condition and also enhances their self-esteem.

(iii) Voice to marginalized section: Most of the beneficiaries of government schemes have

been from weaker and marginalized communities and hence their participation through SHGs

ensures social justice.

(iv) Financial Inclusion: The SHG-Bank linkage programme pioneered by NABARD has

made access to credit easier and reduced the dependence on traditional money lenders and other

non-institutional sources.

(v) Improving efficiency of government schemes and reducing corruption through social

audits.

(vi) Alternate source of employment: It eases dependency on agriculture by providing

support in setting up micro-enterprises like tailoring, grocery, and tool repair shops.

(vii) Financial independence: Financial independence through self-employment has many

externalities such as improved literacy levels, better health care and even better family

planning.

(viii) Changes in consumption pattern: It has enabled the participating households to spend

more on education, food and health than non-client households.

(ix) Impact on housing & health: The financial inclusion attained through SHGs has led to

reduced child mortality, improved maternal health and the ability of the poor to take action to

prevent disease through better nutrition, housing and health–especially among women and

children.

Need for increased funding to Panchayats

The panchayats gained prominence as crucial nodal points during the COVID-19 as they ran

isolation centres, medical camps, and contact tracing. However, they faced a lot of challenges

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during the lockdown period as for most panchayats it was difficult to provide food at short

notice. Hence, the Panchayati Raj Ministry has proposed to set up community kitchens in each

panchayat that will be operated by the local self-help groups (SHGs).

 The utilisation rate for Finance Commission grants between 2015 and 2019 stands at

78% and the allocations had tripled between the 13th and 14th Commissions.

 The role of panchayats becomes more important post lockdown period because now the

newly returned migrant workers will also depend on them to generate employment

under the Garib Kalyan Rojgar Abhiyan.

 The 2.63 lakh panchayats across the country have 29 functions under their ambit,

according to the 11th Schedule of the Constitution. Road construction, its maintenance

and drinking water supply are the major projects carried out by panchayats using FC

grants.

Sources of funds for the various levels of Panchayati Raj System

(a) Gram Panchayat (village level)

The income of the gram panchayat comes from:

 Collection of taxes on houses, market places etc.

 Government scheme funds received through various departments of the government–

through the Janpad and Zila Panchayats.

 Donations for community works etc

(b) Mandal Parishad or Block Samiti or Panchayat Samiti (block level)

The income of the panchayat samiti comes from:

 Land and water use taxes, professional taxes, liquor taxes and others

 Income-generating programmes

 Grants-in-aid and loans from the state government and the local zila parishad

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  Voluntary contributions

(c) Zila Parishad (district level)

The income of the zila parishad comes from:

 Income from taxes levied by Zila Parishad, license fees and market fees

 A share is given to Zila Parishad from the collected land revenue

 Income from various properties of Zila Praishad

 Grants from the State and Central governments

 Funds allotted by the State for developmental activities.

Role of bureaucracy in India

Ans: Grass roots bureaucracy are the officials consisting at the district and its below level. The

officials in these institutions are directly responsible for implementing the welfare schemes for

the people. There are three pillars that form the basic structures of these institutions i.e state

government departments responsible for planning, collector responsible for coordinating and

act as a executive officer at the district level and at last is the democratically elected local

government. Even though the schemes are well planned, the implementation has the major

shortcomings. It is due to centralization of power, lack of coordination, lack of skilled field

officers, rigid mode of working etc. Scrutinizing the implementation failure is the need of the

hour which prevents the wastage of resources which is planned for effective implementation.

Problems

(a) Centralization of powers

Though, at the district level collector is the chief executive officer of various government

welfare schemes, state departments hold the district offices tightly. Collector has huge authority

over the police and revenue department but comparatively less over personnel in district level

offices which makes coordination more difficult at the district level. Offices at different

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geographical units and the non-acceptance of single authority as a coordinating body makes

the things even worse. Local Government who are well aware of the needs and problems of the

local people are helpless as they are disempowered to do so. Local government are responsible

for implementing the socio economic development schemes but they are disempowered by

state government as the financial autonomy is under voluntary provision despite of 73rd CAA.

Because of this disempowerment, local government got caught in between the public demands

and lack of actual authority.

(b) Lack of skilled officers

We have doctors, engineers and other professionals but we lack of nutritionists, health

administrators who are all needed to implement the schemes at grass root level. There is

shortage of personnel as number of people per official is too huge which is unavoidable in our

country. Because of this official carry huge workload and often they tend to concentrate on the

works where the superior pressure in intense.

(c) Mode of working

Officials define their terms based on the implementation programmes rather than the goals that

are set by implementation programmes. It is because of their that they are confined only to

implement the plan and not caring about the future results. These problems faced by officials

subsumes the great amount work involved every year for planning and also the government

initiatives.

Reforms

The reforms are the need of the hour as it severely affects the quality of the programmes

initiated by the government. The less effectiveness involves the wastage of resources in the

country which are limited. So for effective implementation and optimum use of resources and

for the benefit of the people and in a view that benefit should go to the people effectively, the

reforms must be undertaken.

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(i) Technology must be used at the max level to ensure the sync between state and district

officials rather than officials and the local community.

(ii) Decentralization and devolution of powers should be done.

(iii) Corruption has to be reduced by encouraging social audits, RTI etc.

(iv) Unproductive working process should be weaned away and management principles has to

be applied for the effective working of the institutions at the low cost.

The optimum level of bureaucracy at the grass root level is the need of the hour as they are the

real executive bodies who has a direct contact with the people. Reduction of corruption,

prevention of excessive centralization, coordination among the state and district level

institutions, empowering of redressal mechanism, giving financial and administrative powers

to the local governmental bodies need to be done in order to realize the Gandhian principles.

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