Evaluating the panchayati raj institutions at 25

Evaluating the panchayati raj institutions at 25

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Panchayati raj institutions are simultaneously a remarkable success and a staggering failure

Last week marked the 25th anniversary of the 73th Amendment, a good time for some examination and introspection on panchayati raj. Panchayati raj institutions (PRIs) are simultaneously a remarkable success and a staggering failure, depending on the goalposts against which they are evaluated. If the goal was to create another layer of government and political representation at the grass-roots level, then there is no parallel to the PRIs. And if the goal was to provide better governance, then PRIs are a failure and not equipped to succeed anytime in the foreseeable future.

Soon after the 73rd and 74th Amendments, every state government began the process of creating the requisite layer of PRIs and urban local bodies. State election commissions were in charge of the infrastructure required to elect local representatives. There are about 250,000 PRIs and urban local bodies, and over three million elected local government representatives. The 73rd and 74th Amendments required that no less than one-third of the total seats in local bodies should be reserved for women. At 1.4 million, India has the most women in elected positions. Seats and sarpanch/pradhan positions were also reserved for SC/ST candidates.

While India has always had reservations for elected representatives from disadvantaged groups like SC/STs, this is the only level of government with reservation for women. And this is the only level of government, where SC/ST candidates have a genuine voice in governance (unlike the candidates from reserved constituencies at the parliamentary level). Research using PRIs (by Lakshmi Iyer, Anandi Mani, Prachi Mishra, and Petia Topalova) has shown that having female political representation in local governments makes women more likely to come forward and report crimes. Further, female PRI leaders are more likely to focus on issues pertinent to women. R. Chattopadhyay and E. Duflo show that in districts with female sarpanch/pradhans, significantly greater investments are made in drinking water, a priority public goods issue for women. They also show that SC sarpanch/pradhans are more likely to invest in public goods in SC hamlets—an important change in the severely segregated villages of India. In a country where access is determined by gender and caste, even more than economic status, these changes are remarkable.

On all other margins except representation, PRIs are either a failure or, at best, a series of missed opportunities. Before 1993, India had only two levels of government. The 73rd Amendment introduced local governing bodies across India. This amendment, however, did not require the implementation of local self-governing bodies. It only mandated the creation of local self-governing bodies, and left the decision to delegate powers, functions, and finances to the state legislatures. And therein lies the failure of PRIs.

The first failure of the 73rd Amendment was that the transfer of various governance functions—like the provision of education, health, sanitation, and water was not mandated. Instead the amendment listed the functions that could be transferred, and left it to the state legislature to actually devolve functions. There has been very little devolution of authority and functions in the last 25 years. PRIs cannot govern unless they are given the authority to actually perform functions related to governance.

To make matters worse, because these functions were never devolved, state executive authorities have proliferated to carry out these functions. The most common example is the terrible state water boards, performing tasks that should have been left to elected representatives of local governments who best understand local water problems and can be disciplined through the democratic process.

The second failure of the 73rd Amendment is the lack of finances for PRIs. Local governments can either raise their own revenue through local taxes or receive intergovernmental transfers. The 73th Amendment recognized both forms of public finance, but did not mandate either. The power to tax, even for subjects falling within the purview of PRIs, has to be specifically authorized by the state legislature. The 73rd Amendment let this be a choice open to the state legislatures—a choice that most states have not exercised.

A second avenue of revenue generation is intergovernmental transfers, where state governments devolve a certain percentage of their revenue to PRIs. The constitutional amendment created provisions for State Finance Commissions to recommend the revenue share between state and local governments. However, these are merely recommendations and the state governments are not bound by them. Though finance commissions, at every level, have advocated for greater devolution of funds, there has been little action by states to devolve funds.

As a result, PRIs are so starved for funds that they are often unable to meet even payroll obligations. They are reluctant to take on projects that require any meaningful financial outlay, and are often unable to solve even the most basic local governance needs. The only long-term solution is to foster genuine fiscal federalism where PRIs raise a large portion of their own revenue and face hard budget constraints, i.e. fiscal autonomy accompanied by fiscal responsibility.

Now that there are millions of elected representatives giving voice to Indians at the grass-roots level, these representatives need clear mandates of local functions, and the ability to raise their own revenue, to foster better local governance. Without the functions and finances, PRIs will only be an expensive failure.

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Panchayati raj at 25

Every state is progressing, some at snail’s pace, others leapfrogging. Much remains to be done.

It’s been 25 years since decentralised democratic governance was introduced in India by the 73rd and 74th Constitution Amendments, which came into force on April 24 and June 1, 1993, respectively. The structural reforms that followed heralded an inclusive, responsive, participatory democracy which was tasked to deliver economic development and social justice at the grass-roots level. These reforms did not mean de-concentration or delegation. They were not even variants of fiscal federalism, which is much-theorised by Western public finance pundits and generally endorsed by their Indian counterparts. The creation of lakhs of “self-governing” village panchayats and gram sabhas, with over three million elected representatives mandated to manage local development, was a unique democratic experiment in the contemporary world. Parts IX and IXA of the Constitution, introduced following the two Constitution Amendments, initiated a process with standardised features such as elections every five years; reservations for historically marginalised communities and women; the creation of participatory institutions; the establishment of State Finance Commissions (SFCs), a counterpart of the Finance Commission at the sub-national level; the creation of District Planning Committees (DPCs); and so on. Moving the 73rd Amendment Bill on December 1, 1992, the Minister of State in the Rural Development Ministry underscored the “duty on the Centre as well as the States to establish and nourish the village panchayats so as to make them effective-self-governing institutions.”
Today, the moot question is, what impact has this reform package had on democratic practices in India? Have these reforms ensured every citizen a comparable level of basic services irrespective of one’s choice of residential jurisdiction? While the economic reforms that were launched almost simultaneously with the decentralisation reforms made tremendous headway, making India the fastest-growing economy in the world today, local democracy has not much to write home about. Given the unprecedented growth of the economy over the last 25 years, its limited success in ensuring primary health care, access to drinking water supply, street lighting, education, food security, and so on is an enigma. The media and mainstream economists who get nervous when there is even a small slippage in the quarterly economic growth rate have been silent on this social failure in local democracy. Indeed, the village panchayats have not succeeded in enhancing the well-being, capabilities and freedom of citizens.
A systemic failure
What went wrong? Skipping the several success stories, which are exceptions, what happened to the third tier may be hypothesised as a systemic failure. While the economic reforms were championed by the political class and received support from the bureaucracy, there was no perceptible hand-holding and support by the States to foster decentralised governance. (The people’s planning in Kerala is a conspicuous exception.) From the beginning, whether it was postponing elections or the failure to constitute SFCs and DPCs, it became evident that States can violate the various provisions of Parts IX and IXA with impunity. These are the provisions which envisage the delivery of social justice and economic development at the local level. It appears that the judiciary has been indifferent to the two momentous amendments and their potential.
There was no institutional decentralisation except in Kerala. The roles and responsibilities of local governments remain ill-defined despite activity mapping in several States. States control funds, functions and functionaries, making autonomous governance almost impossible. Most States continue to create parallel bodies (often fiefdoms of ministers and senior bureaucrats) that make inroads into the functional domain of local governments. For example, Haryana has created a Rural Development Agency, presided over by the Chief Minister, to enter into the functional domain of panchayats. Legislative approval of these parallel bodies legitimises the process of weakening decentralised democracy. Increasing allocations to Members of Parliament Local Area Development Scheme, or MPLADS, which started in 1993, and their State-level counterparts, known as the MLALADS, hastened the process of euthanasia. There is no mandate to create a DPC tasked to draft a district development plan that takes into account spatial planning, environmental conservation, rural-urban integration, etc. In States like Gujarat, the DPC has not been constituted. A potential instrument to reduce growing regional imbalances is left to rot.
Continuity and change
Looking back, there was a clear lack of continuity, and change for the better. Following the Constitution Amendments, Article 280, establishing the Finance Commission, was amended to add 280 (3) (bb) and (c), designed to empower the third tier. Following the recommendation of the 11th Finance Commission, there were reforms in budget and accounting, and efforts towards streamlining the financial reporting system at the local level. Even so, there is no credible fiscal data base and budget system among local governments now. That accountability arrangements remain very weak even after 25 years shows a lack of will. The 13th Finance Commission made significant steps to carry forward decentralised governance by linking the grants to local governments to the divisible pool via Article 275 besides taking various measures to incentivise the process of decentralisation. The 14th Finance Commission enhanced the grant substantially but did not take the change forward. The Terms of Reference of the 15th Finance Commission, which sought to abolish Article 275 and ignore an integrated public finance regime, do not seem to opt for continuity.
Despite the reservation of seats for Adivasis, Dalits and women, these categories remain on the periphery, often as victims of atrocities and caste oppression rather than as active agents of social change. This means that involving women’s agencies and the marginalised to lead social transformation at the grass-roots level remains an uphill task.
Even after 25 years, local government expenditure as a percentage of total public sector expenditure comprising Union, State and local governments is only around 7% as compared to 24% in Europe, 27% in North America and 55% in Denmark. The own source revenue of local governments as a share of total public sector own source revenue is only a little over 2% and if disaggregated, the Panchayat share is a negligible 0.3% (several States like Rajasthan, Punjab and Haryana have abolished property taxes and others do not collect taxes). This speaks of the fiscal weakness of village panchayats.
Local democracy in India is in deep disarray. Will the Prime Minister take time to look into this pathology and take remedial action in the interest of democracy, social inclusion and cooperative federalism?

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