Road to decentralisation: Rural local bodies need to be strengthened

Overall, devolution to rural local bodies increased from 39.9 per cent in 2013-14 to 43.9 per cent in 2021-22, said the govt report

A recent report released by the Ministry of Panchayati Raj and the Indian Institute of Public Administration offers a comprehensive analysis of India’s decentralisation efforts by creating a state-level devolution index (DI). The index assesses key aspects such as the institutional framework guiding panchayati raj institutions (PRIs), the operations of gram panchayats (GPs), their finances, local capacity building, and accountability. The report does well to present evidence-based rankings of states, showcasing both advancements and areas that need further attention. Overall, devolution to rural local bodies increased from 39.9 per cent in 2013-14 to 43.9 per cent in 2021-22. Across all indicators, the southern states — Karnataka, Kerala, and Tamil Nadu — in particular, seem to outperform the other states. Karnataka leads the rankings with a DI value of 72.23. Other good performers include Maharashtra, Uttar Pradesh, and Tamil Nadu. Meanwhile, Uttar Pradesh and Bihar recorded the biggest improvement over the past decade. At the same time, there are glaring inter-state disparities. The extent of decentralisation remains far from satisfactory in states like Manipur, Arunachal Pradesh, Jharkhand, and Punjab. 

The report highlights inadequate finances, particularly own revenue, and infrastructure and manpower shortages remain major challenges before GPs. The share of GPs’ own revenue in a state’s own revenue remains dismally low, indicating a lack of financial autonomy. Among all the states, GPs in Kerala had the highest share in a state’s own revenue in 2021-22, but that too was a meagre 2.84 per cent. In fact, financial constraints have prevented PRIs from realising their potential because they remain heavily dependent on the upper tiers of government for fiscal support. The irregular constitution of state finance commissions (SFCs) in many states has worsened the situation. So far, only 10 states have constituted their sixth SFC.  A study released by the Reserve Bank of India last year on PRI finances also corroborated the over-centralisation of fiscal power in India, including by state governments. It showed the revenue expenditure of PRIs was less than 0.6 per cent of gross state domestic product for all states. Other than financial management, the report rightly emphasises the severe lack of support staff in GPs. Some of the northeastern and hilly states are facing inadequate physical and digital infrastructure. In terms of representation of women, some states and Union Territories like Punjab, Madhya Pradesh, Karnataka, and Jammu & Kashmir still fail to meet the stipulated threshold. In contrast, seats reserved for women far exceed the mandated quota in states like Jharkhand, Tamil Nadu, and Chhattisgarh.

  Switzerland and some of the Scandinavian countries are examples of how decentralisation of governance and public finance yields better developmental outcomes. While the condition of PRIs has improved over the years, they need to do better in terms of raising fiscal resources and building administrative capacity. In this context, the report makes suggestions that should enrich the policy debate. These include the need to rethink the rotation terms of reservations from every election round to once in two-three tenures; having the same electoral roll for elections to Lok Sabha and Assembly constituencies, municipal bodies, and GPs; timely constitution of SFCs; empowering GPs to levy property tax on all types of residential and other properties, regularly recruiting and training the support staff, and appointing a local government ombudsman to ensure accountability.