How Local Governments Actually Work in India
India has three tiers of elected government: the Union, the states, and local bodies. The 73rd Constitutional Amendment (1992) gave constitutional status to rural local bodies — the Panchayati Raj Institutions (PRIs) — mandating a three-tier system of gram panchayats (village level), intermediate panchayats or panchayat samitis (block level), and zila parishads (district level) in states with populations exceeding two million.
The 74th Constitutional Amendment (1992) did the same for urban areas, requiring Municipal Corporations for large cities, Municipal Councils for smaller towns, and Nagar Panchayats for transitional areas. Both amendments required regular elections every five years, mandated reservation of seats for Scheduled Castes, Scheduled Tribes, and women (one-third of total seats reserved for women), required State Finance Commissions to recommend devolution of funds to local bodies, and listed subjects that states should devolve to these bodies — 29 subjects for PRIs (Eleventh Schedule), 18 subjects for ULBs (Twelfth Schedule).
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| Representational Image: How Local Governments Actually Work in India |
But financial devolution
has been inconsistent: most PRIs and ULBs remain heavily dependent on state
grants rather than own revenues; the 29 Eleventh Schedule subjects and 18
Twelfth Schedule subjects have been transferred to local bodies in most states
on paper but with highly variable functional and financial backing; parastatals
controlled by state governments continue to manage many urban services that the
74th Amendment intended for municipalities.
Before You Read On
- The
73rd Constitutional Amendment (adding Part IX, Articles 243–243O to the
Constitution) came into force on April 24, 1993; the 74th Amendment
(adding Part IXA, Articles 243P–243ZG) gave constitutional status to Urban
Local Bodies; both required states to enact conforming legislation for
their state-specific local government systems within one year.
- India
conducts elections to approximately 2.5 lakh (250,000) gram panchayats,
approximately 6,000 intermediate panchayats, and approximately 600 zila
parishads across 28 states; in addition, elections are held for
approximately 4,000 urban local bodies; these are among the world's
largest democratic exercises.
- As
of 2024, more than 1.3 million women hold elected positions in panchayats
— approximately 46% of total panchayat elected representatives — making
India's panchayat system the largest system of elected women's
representation in any country; 13 states require over 50% reservation for
women in panchayats, exceeding the constitutional minimum of one-third.
- State
Finance Commissions — constituted every five years by state governments
under Articles 243I and 243Y — are supposed to recommend devolution of
state taxes and grants to local bodies; PMC research (2021) found that
devolution from states to local governments is dramatically lower in
poorer states (Bihar, Assam, Chhattisgarh transfer a few hundred rupees
per capita) than richer southern states (Kerala transfers more than ten
times higher per capita), directly affecting local government capacity.
- The
74th Amendment listed 18 functions for urban local bodies including urban
planning, land use regulation, roads and bridges, water supply, public
health, and solid waste management; in practice, many of these functions
remain with state-level parastatals rather than ULBs in most states; PRS
analysis of Bengaluru found that crucially important functions like water
supply (Delhi Jal Board in Delhi; BWSSB in Bengaluru) remained outside the
municipal corporation even 30 years after the 74th Amendment.
How It Works in Practice
1. The gram panchayat as the basic unit: A gram
panchayat serves one or a cluster of villages with an elected panch for each
ward and a president (Sarpanch, Mukhia, or Pradhan depending on the state). It
is responsible — in theory — for planning village development, managing common
property resources, implementing government schemes, maintaining village roads
and water supply, and providing basic sanitation. Its budget typically comes
from a small share of state grants, Finance Commission grants channelled through
the state, and minimal own revenues (tax on property and trades). The gap
between the gram panchayat's mandate and its resources is the central
functional reality of rural local governance.
2. The intermediate and district tiers: The
intermediate panchayat (panchayat samiti or block panchayat) coordinates across
gram panchayats in a revenue block and typically implements government schemes
that span multiple villages — MGNREGA wage payment verification, Pradhan Mantri
Awas Yojana (housing scheme) lists, mid-day meal scheme monitoring. The zila
parishad at district level in some states has significant planning and
coordination authority; in others it is largely ceremonial. The actual locus of
effective local governance varies by state — in some states the gram panchayat
has real decision-making authority; in others it is essentially a
scheme-delivery body with little discretion.
3. Women's reservation and political change: The
mandatory reservation of one-third of seats for women — implemented from 1993
in all gram panchayats — has fundamentally changed the demographic face of
rural governance. Research consistently finds that female-headed gram
panchayats invest more in drinking water and sanitation; NBER research found
that reservation also changes the preferences of subsequent (non-reserved) male
leaders who had female predecessors, creating lasting effects on policy
priorities. The 106th Constitutional Amendment (2023) extended reservation for
women to 33% of Lok Sabha and state assembly seats, following the panchayat
precedent.
4. Urban local bodies and the parastatal problem:
Urban governance in India is characterised by a proliferation of agencies with
overlapping jurisdiction. A metropolitan area typically has a municipal
corporation for civic amenities, a development authority for urban planning and
land use, a water supply board for water and sewerage, a state transport
authority for public transit, a housing board for public housing, and other
specialised agencies — all controlled by state governments and accountable to
state ministers rather than to elected mayors and municipal councillors. This
fragmentation makes mayors largely powerless over the actual functioning of
cities despite their formal positions.
5. Finance and the three Fs: The standard diagnosis
of local government weakness identifies the "three Fs" — Functions,
Functionaries, and Funds — as the domains that must be devolved for local
governments to become genuine self-governing institutions. Most states have formally
transferred functions on paper; few have transferred the functionaries (staff)
who actually execute those functions; even fewer have provided the funds
necessary to finance them. The result is local governments with formal mandates
but without the administrative capacity or financial resources to fulfil them.
What People Often Misunderstand
- The
73rd Amendment gave constitutional status, not constitutional powers:
The amendment mandated that states must have elected panchayats and must
devolve powers to them; it did not itself transfer any substantive powers
to panchayats; the actual devolution is determined by each state's
Panchayati Raj Act, producing enormous variation.
- Women's
reservation has produced structural change, not just symbolic
representation: Research consistently shows that female-elected
leadership changes public good investment priorities; the reservation was
not merely a quota exercise but has produced measurable changes in
governance priorities in many states.
- Municipal
corporations in large cities are resource-constrained despite managing
megacities: The Brihanmumbai Municipal Corporation (Mumbai) and the
Greater Hyderabad Municipal Corporation manage cities of comparable size
and complexity to Singapore, with a fraction of Singapore's municipal
fiscal resources and authority; the comparison illustrates the scale of
under-resourcing.
- GST
has affected local body finances: Pre-GST, local governments received
some revenue from octroi (a local commercial tax) and entry tax; GST
absorbed these sources; local governments now depend more heavily on state
devolution and Finance Commission grants; the GST transition has generally
been adverse for urban local body revenues.
- Electoral
accountability alone does not ensure functional accountability: Local
bodies have regular elections and competitive democratic accountability;
but if they have no real financial or administrative authority — because
parastatals and state departments retain the functional responsibilities —
electoral accountability cannot substitute for genuine local authority.
What Changes Over Time
The 16th Finance Commission allocated ₹5.10 lakh crore to local bodies for 2026–31 — the largest-ever Finance Commission grant to local governments; the previous 15th FC had allocated ₹4.36 lakh crore. These grants require local bodies to maintain functioning elected bodies, complete annual accounts, and achieve specific public health and sanitation outcomes.
The PM
SVAMITVA scheme — which maps village property rights and issues property cards
to rural households — is creating an evidence base for property taxation at the
gram panchayat level for the first time in many states, potentially enabling
local bodies to raise their own revenue for the first time at scale.
Sources and Further Reading
- GRAAM
— 73rd and 74th Constitutional Amendments in Practice: https://graam.org.in/73rd-and-74th-constitutional-amendments-how-local-self-governance-works-on-the-ground/
- PRS
Legislative Research — Urban Local Bodies, Bengaluru case: https://prsindia.org/theprsblog/examining-urban-local-governance-in-india-through-the-case-of-bengalurua
- BA Notes — Urban Local Bodies Governance Assessment: https://banotes.org/governance-issues-challenges/urban-local-bodies-governance-assessment-india/
- PMC — Battling COVID-19 with dysfunctional federalism: https://pmc.ncbi.nlm.nih.gov/articles/PMC8250807/