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map_of_indiaPopulation: 1,236,686,732

HDI ranking: 136/187

HDI score: 0.554

India’s constitution calls for strongly decentralized, participatory local democracy. However, the state governments often refrain from transferring power to the local level (Rao and Raghunandan, et al., 2011).

Local governance at a glance

  • India is a federal republic with central, state, and local governments. It is comprised of 28 states and seven union territories, which are governed by the central government. The local government is divided into urban authorities (municipalities) and rural authorities (panchayats) (UCLG, 2007; CLGF, 2013).
  • Three types of municipalities exist. A nagar panchayat is in transition from rural to urban, municipal councils are smaller urban areas, and municipal corporations are larger urban areas (CLGF, 2013).
  • In most states, the panchayat system is a three-­tiered structure: village, intermediate and district. At the village level, citizens elect their governing council (gram panchayat) and its chairperson, who serves on the intermediate panchayat council. The intermediate panchaya council elects representatives to the district panchayat (Encyclopedia Britannica, 2013).
  • State municipal law mandates that urban municipalities with over 300,000 people must elect ward committees led by councilors (CLGF, 2013).
  • The task of devolving power and developing local institutions lies with the state. Local governments are under the control of state governments, whose governor is appointed by the president (UCLG, 2007).
  • According to the Constitution, 33% of all seats within local government bodies must be reserved for women. Some states have raised this quota to half of all seats in both panchayats and municipalities (Quota Project, 2014).

Civil society actors include

Capacity building institutions

Fiscal control

  • There is not an abundance of information about panchayats’ finances. According to different sources, local governments can impose taxes, user fees, and other charges. Municipalities’ property taxes account for nearly 60% of their revenue and some cities also levy taxes on incoming goods. Panchayats also receive intergovernmental transfers, which account for approximately 90% of rural panchayat revenue (UCLG, 2007; Rao and Raghunandan et al., 2011).
  • Most urban infrastructure projects undertaken by municipal local governments depend primarily on funds from state governments and other agencies (CLGF, 2013).
  • According to the Central Finance Commission “less than half of municipal expenditure is financed through own sources and the size of municipal expenditure as part of GDP has declined from 1.7% in 1998/99 to 1.5% in 2007/08” (CLGF, 2013).

Key initiatives for participatory local governance

  • Article 40 of the Indian Constitution mandates that states “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” (UCLG, 2007).
  • In 1959, a series of committees spearheaded the evolution of India’s institutional framework for local government. This eventually led to the 73rd and 74th constitutional amendments aimed at governance of rural decentralization and addressing urban decentralization (UCLG, 2007).
  • In 1992, the 73rd and 74th amendments passed. They include the creation of the three tier structure of local government, direct elections in urban and rural areas, greater political and fiscal authority for panchayats, the creation of an independent state election commission, and the reservation of seats of Scheduled Castes and Scheduled Tribes (UCLG, 2007; World Bank, 2013).
  • In 2010, India implemented the Centralized Public Grievance Redress and Monitoring System for citizen complaints. Through this, citizens can submit grievances and subsequently track progress toward them. This accountability mechanism improves public service response and delivery (Zeenews, 2012).
  • Every year, the Ministry of Panchayati Raj (MPR) assesses states’ devolution and publishes rankings on their the MPR website (MPR, 2014).  
  • Kerala, regarded as one of the most decentralized states in India, has had great success pursuing a ‘big bang’ decentralization approach, implementing significant fiscal decentralization and then building local government capacity. Kerala has developed a high degree of citizen participation in the decentralization process and implemented resource themed committees to divide discussions and lead to consensual decisions regarding the designated resource (World Bank, 2013).

Challenges for participatory local governance

  • States have been restrained to transfer powers to local governments (Rao and Raghunandan, et al., 2011).
  • “Despite Constitutional recognition, the design and implementation of rural decentralization do not enable the panchayats to be the institutions of rural self government. (…) in terms of both the revenues raised and expenditures incurred, panchayats play a negligible role” (Rao and Raghunandan et al., 2011).
  • In order to act as a functional institution of self government, panchayats need “a greater degree of political willingness & effective fiscal devolution” (Mohapatra, 2012).

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List of sources:

All India Institute of Local Self­-Government (AIILSG), 2014:

Commonwealth Local Government Forum (CLGF), 2013: “Country Profile: India.”

Decentralization Community of Practice (CoP), 2011:–solution-exchange-india/.

Encyclopedia Britannica, 2013: “India. State and local governments.”

Ministry of Panchayati Raj (MPR), 2014: “Ranking of States/UTS based Devolution of Funds, Functions and Functionaries to PRIS.”

Mohapatra, B., 2012: “Local Self-Governing Institutions and Fiscal Decentralisation in India: Form to Function.”

National Council of Applied Economic Research (NCAER), 2012:

Quota Project, 2014: “India.”

Rao, M., and T. Raghunandan et al., 2011: “Fiscal Decentralization to Rural Local Governments in India: Selected Issues and Reform Options.”

Society for the Promotion of Area Resource Centers (SPARC), n.d.:

United Cities and Local Governments (UCLG), 2007: “UCLG Country Profiles: Republic of India.”

World Bank, 2013, Mansuri, G. and V. Rao: “Localizing Development. Does Participation Work?”, 2012: “Over 27,000 public grievances received in 2011.”


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