Author : Niranjan Sahoo

Expert Speak India Matters
Published on Aug 15, 2022
Despite many structural shortfalls, the 73rd and the 74th Amendments were able to create critical democratic space for these underrepresented groups such as women, SCs, and STs.
Decentralisation @75: How the third-tier institutions have deepened India’s Democracy? This piece is part of the series,  India @75: Assessing Key Institutions of Indian Democracy.
As India celebrates its 75th anniversary of Independence, the country has shown immense progress in self-governance. Throughout its evolution as the world’s largest democracy, the third-tier institutions—Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs)—have emerged as a crucial building block in taking governance to the people at the grassroots. Billed as the biggest experiment in direct democracy anywhere in the world, India’s decentralised governance offers some hope at a time when democracies across the world are in retreat. This brief tries to capture the evolution and the tumultuous yet inspiring journey of the third-tier institutions in India.

Evolution of local self-governance in India: A rocky start

Even during British colonial rule, governance was not entirely centralised as the importance of local administration in supporting central policies was recognised.  In 1883, for instance, the Punjab District Boards Act was introduced which claimed to make “better provision for local self-government in the Districts of the Punjab”. In the same year, the Central Provinces Local-Self Government Act, 1883, was introduced, establishing local boards and district councils with the duties of maintaining and managing civic infrastructure. Despite these legislations, the actual development and growth of local bodies during British rule was highly limited. In 1885-86, for instance, there were only 749 municipalities across the country, decreasing to 713 in 1913–14. While calls for greater local governance grew with demands for independence, the third-tier institutions became an important locus of debate in politics and policy: Even as Gandhiji declared that “Panchayat Raj represents true democracy realised”, formal recognition of local bodies was limited to Part IV of the Constitution, within the ambit of the non-enforceable Directive Principles of State Policy. With the exit of the British, the institutionalisation of local bodies regressed as several Indian states dissolved district councils, bringing their duties and functions within the ambit of state governments, such as in Bihar in 1958. However, the first Five Year Plan (1951-56) recognised the importance of decentralised governance, stating that local self-governing bodies play a vital role in a democratic system where there is a “proper diffusion of power and responsibility”. The impetus for establishing local bodies gained further currency with recommendations from the Balwant Rai Mehta Committee of 1957. The Committee emphasised that the central function of local bodies lies in their role in constituting an intermediary between the general public and the government, recommending a three-tier structure of Panchayati Raj (consisting of Zilla Parishads, Panchayati Samitis, and Gram Panchayats) and reservation for women. While these recommendations were accompanied by a rise in the number of panchayats—over 200,000 village panchayats were functioning in India by 1959—they were largely ineffective due to a lack of functional and financial autonomy. This led to the recommendations of the Ashok Mehta Committee of 1978 which included direct elections to Panchayats, mandatory quotas for marginalised communities particularly the Scheduled Castes and Scheduled Tribes, and “transfer (of) substantial quantum of powers from the State Government to the local bodies”. At the same time, the Constitution (64th Amendment) Bill and The Constitution (65th Amendment) Bill of 1989 were introduced to formally institutionalise local bodies at the national level. The Bills, however, failed to receive enough support in Parliament.

The 73rd and 74th Amendment Acts, 1992

After decades of struggles and half starts, finally, the Congress-led coalition government in 1992 passed the 73rd and 74th Constitution (Amendments) to lay the legal and constitutional foundation for genuine self-governance in India. The 73rd Amendment Act echoed the recommendations of the Balwant Rai Mehta Committee. The 73rd Amendment unveiled three-tier rural institutions: Gram Panchayats at the village level, Panchayat Samitis, and Zilla Parishad at the district level. Further, the act mandated direct and regular elections every five years and a mandatory quota for the SCs and STs. Importantly, the Act mandated one-third of the seats at all levels of panchayats be reserved for women. Apart from recommending the devolution of 29 functions to panchayats, the 73rd Amendment mandated the formation of state finance commissions and provision for grants-in-aid from state governments to PRIs. Whereas the 74th Amendment Act made provisions for urban local bodies (ULBs) by mandating a three-tier arrangement of ULBs, with Nagar Panchayats in peri-urban areas, Municipal Councils in small towns, and the Municipal Corporations (MCs) in bigger cities/metropolis. Much like the 73rd Amendment, the 74th Amendment enables direct elections every five years at the municipality level, with a mandatory quota for SCs and STs apart from reserving one-third of seats for women. The Twelfth Schedule— a list of 18 subjects that can be devolved to ULBs in due course—was established. The Act also provides for the creation of a Finance Commission to determine the sharing of taxes, duties, and funds from the State Consolidated Fund. Lastly,  the government passed the landmark Panchayat Extension to Tribal Areas (PESA) Act in 1996 to extend self-governance to Scheduled and Tribal Areas of the country. Significantly, the Act reserves 50 percent of local body seats for STs, while reserving the office of chairperson solely for the ST community. In short, these three legislations have formed the key pillars of local self-governance in India, forming the foundations upon which today’s third-tier institutions rest.

Major achievements

The twin acts have in many ways genuinely opened up the democratic spaces by bringing new voices and issues to the fore. The sheer number of elected representatives at the third tie is a testimony to the legitimisation of local governance. The most noteworthy development is significant women’s representation in Panchayats. The proportion of elected women representatives has been steadily rising since the enactment of the 73rd Act. Currently, India has 260,512 Panchayats with 3.1 million elected representatives, of which a record 1.3 million are women. Thus far, this is India’s most transformative affirmative action policy for women as far as grassroots politics goes.  While there is merely 7–8 percent representation in Parliament and State Assemblies for women, an astounding 49 percent of elected local representatives (in states like Odisha it has crossed 50 percent) are women. Out of this, 86,000 chair their local bodies. With regards to urban local bodies, by 2021, India had 4,672 ULBs, a 22.9-percent increase from the 3,799 ULBs functioning in 2001.

The twin acts have in many ways genuinely opened up the democratic spaces by bringing new voices and issues to the fore. The sheer number of elected representatives at the third tie is a testimony to the legitimisation of local governance.

While there are stories of the ineffectiveness of such representation, especially in the case of women (in many instances male members act as proxies), scholarly and empirical studies in recent years have found a positive correlation between affirmative action and outcomes. For instance, Esther Duflo and Raghavendra Chattopadhyay, in a major field study involving the working of PRIs in West Bengal and Rajasthan observed that women’s representation in the local bodies has had a net positive impact on the delivery of local public goods to marginalised communities.  Further, evidence indicates that notwithstanding low education, poor managerial skills and exposure, many elected members particularly women, SCs, and STs are beginning to assert their constitutional rights and slowly emerge as leaders in their own right. Finally, the passage of the twin acts has also created healthy competition among various states regarding devolution (the 3Fs: funds, functions, and functionaries). For instance, while Kerala has devolved all 29 functions to Panchayats, Rajasthan took the inspiration from Kerala to devolve many key departments such as health, education, women, and agriculture to PRIs. Similarly, Bihar came out with the idea of “Panchayat Sarkar” and states such as Odisha have increased 50 percent seats for women.  In other words, democratic decentralisation has taken a deep root and looks very much ‘irreversible’.

Challenges ahead

While the decentralisation process has taken a strong root with many visible positive outcomes, several challenges exist that act as a hurdle to the deepening of decentralisation and local self-governance. The primary challenge lies in the lack of devolution of the 3Fs to local bodies. Since the 73rd and 74th amendments do not mandate devolution of functions, local bodies have limited functional capacities—of the 18 subjects listed in the Twelfth Schedule, in Karnataka, ULBs have complete control of only three, while PRIs, in states such as Punjab, Jharkhand, and Goa, have extremely limited autonomy. This problem is compounded by the fact that the 15thFinancial Commission has failed to provide compressive, integrated measures for the devolution of functions for social welfare and civic infrastructure.

The third-tier institutions lack the power to make policy and only function as instruments of state government directives due to the prevalence of inter-governmental hierarchical relations. This challenges the very notion of local self-governance and poses ramifications for effective localised planning for socio-economic development, as well as responses to the COVID-19 pandemic.

Additionally, the third-tier institutions lack the power to make policy and only function as instruments of state government directives due to the prevalence of inter-governmental hierarchical relations. This challenges the very notion of local self-governance and poses ramifications for effective localised planning for socio-economic development, as well as responses to the COVID-19 pandemic. Under the Epidemic Diseases Act, 1897, for instance, implemented by states including Andhra Pradesh and Assam during the pandemic, District Magistrates (DMs) were conferred with powers, such as the ability to preside over the allocation of funds to medical facilities, which infringe on local body autonomy. Moreover, these challenges are compounded by financial constraints – from 2014-15 to 2018-19, municipal bodies’ own revenue has always been less than 50 percent of total revenue. Local bodies have been facing a decline in overall revenues - the share of municipal revenue in national GDP touched 0.43 percent in 2017-18, the lowest in eight years. This has led to local bodies being dependent on state governments for grants accompanied by low levels of fiscal devolution. Lastly, additional challenges in the form of extant corruption among local body officials, low level of awareness coupled with the prevalence of caste, class and gender hierarchies which has stymied public participation in local governance, and the functioning of parastatal structures which result in inhibited local government autonomy, prevent robust decentralised governance in contemporary India.


The march of decentralisation largely led by two landmark acts has come a long way. Despite many pitfalls and structural challenges, the mandatory quota for women, STs and SCs has created a critical democratic space for these hitherto underrepresented groups to assert their political rights and emerge as leaders. However, for decentralisation to become a reality, states or sub-national governments have to devolve finances, functions, and functionaries to local bodies and take real ownership of the process.
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Niranjan Sahoo

Niranjan Sahoo

Niranjan Sahoo, PhD, is a Senior Fellow with ORF’s Governance and Politics Initiative. With years of expertise in governance and public policy, he now anchors ...

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Keerthana Chavaly

Keerthana Chavaly

A graduate of Lady Shri Ram College for Women Delhi University Keerthana is currently pursuing a Master's programme in Development Studies. She has a keen ...

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