Policy Research Working Paper                   10793




Two Hundred and Fifty-Thousand Democracies
           A Review of Village Government in India

                             Siddharth George
                              Vijayendra Rao
                               M. R. Sharan




Development Economics
Development Research Group
June 2024
Policy Research Working Paper 10793


  Abstract
  In 1992, the 73rd Amendment to the Indian Constitution                             central players in the formation of modern India—Gandhi
  created 250,000 village democracies (called Gram Pancha-                           and Ambedkar—and the 73rd Amendment. The paper
  yats) covering 800 million citizens. It mandated regular                           distills key findings from the empirical literature on the
  elections, deliberative spaces, and political reservations for                     effectiveness of local politicians and bureaucrats, political
  women and disadvantaged castes. The unprecedented vari-                            reservations, public finance, deliberative democracy, and
  ation in democratic experience that emerged from this has                          service delivery. It concludes with a set of policy recommen-
  resulted in a large body of research that provides insights                        dations for improving the functioning of the Panchayats
  into the intersection between democracy, governance, and                           in India, emphasizing the need for greater devolution and
  development. This paper reviews this literature, showing                           improved local fiscal capacity. It also argues that urban gov-
  that India’s democratic trajectory has been shaped by four                         ernments in India would benefit from learning from the
  broad forces: a 3,000 year tradition of debate and delib-                          experience of Gram Panchayats.
  eration, colonial policies, the contrasting ideologies of




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  Two Hundred and Fifty-Thousand Democracies:
    A Review of Village Government in India∗

         Siddharth George†                Vijayendra Rao‡               M. R. Sharan§




JEL codes: O12, H7, H11
Keywords: Democracy, Deliberation, Local Government, India, Panchayats



   ∗
      We are grateful to Nivedita Mantha and Sudarshan Aitreya for excellent research assistance, and
to the World Bank’s Research Support Budget for financial assistance. We thank Pranab Bardhan,
Dilip Mookherjee and the India Country Management Unit of the World Bank for valuable com-
ments. A much shorter version of this paper is forthcoming in the Cambridge Companion to Indian
Politics and Society edited by Manali Desai and Indrajit Roy.
    †
      NUS, Singapore
    ‡
      Development Research Group, World Bank
    §
      University of Maryland
1       Introduction

Thirty-two years ago, in April 1992, the 73rd amendment to the Indian Constitution
was passed. It mandated that all of India’s approximately one million villages be
part of a system of local government, with regularly scheduled elections for village
councils and presidencies, deliberative spaces where citizens could make collective
decisions, and political reservations for women and disadvantaged castes. This
resulted in the creation of more than 250,000 (2.5 lakh) local democracies1 with both
electoral and deliberative elements that now cover about 900 million rural Indian
citizens. The unprecedented variation in democratic experience that emerged from
this has resulted in a large body of research that provides a number of insights into
democratic functioning, and the intersection between democracy, governance and
development. We believe that this literature, while greatly relevant for India, also
provides key insights into political economy and the mechanisms of democracy at
large. This paper is an attempt to review this literature, place it in historical context,
and draw some policy recommendations.

Village government in India has a long, varied and dynamic history (Mukerjee
(1923)). Kautilya’s Arthashastra, a treatise on governance that dates back to around
200 BCE, describes a decentralised system of government where villages were ruled
by village headmen who were called by various names gramika, gramakuta or ad-
hyaksha (Kangle (1965), Venkatarangaiya and Pattabhiram (1969)). Scholars, both
Western and Indian, have recently revived arguments that India had participatory
and deliberative institutions that predated Athenian Greece (Trautmann (2023),
Tanwar and Kadam (2022)). Both Hindu and Buddhists sacred texts speak to the
value of debate and deliberation to make collective decisions (Sen (2012), Mook-
erji (1919)). The Rig Veda, a Vedic text which is over 3,000 years old, refers to three
types of institutions - vidhata, sabha, and samiti, which were all assemblies of adults
who gather to voice their views and participate in decision making (Nadkarni et al.
(2018)). However, at least since the advent of British rule, thinkers and policy mak-
ers have engaged in a heated debate (sometimes within themselves) about whether
representative local government was a model suitable to Indians (Tinker, 1954).

The 19th century jurist, imperialist and liberal thinker, Sir Henry Maine, record-
ing the widespread prevalence of self-governing village institutions in the sub-
    1
        Almost all Indian states have multiple villages in a council.


                                                      2
continent said, ”I have good authority for saying that, in those parts of India in
which the village-community is most perfect and in which there are the clearest
signs of an original proprietary equality between all families.., the authority exer-
cised elsewhere by the Headman is lodged within the Village Council. It is always
viewed as a representative body, and not as a body possessing inherent authority,
and it always bears a name which recalls its ancient constitution of Five persons”
(Maine (1880), page 123). The name Maine was referring to was ”Panchayat,”
which has the word pancha (Sanskrit for five) as its root. Modern Indian village
democracy is called Panchayati Raj and we will henceforth use the terms village
democracy and Panchayati Raj interchangeably.

Maine, however, also argued that “Considering how Native [Indian] society was
divided into castes, and sects, and religions, and races, it was surprising that there
should be practicable, anywhere, a system of municipal election at once fair and
free” ((Stokes, 1869), page 127). Nearly a century later, Dr B R Ambedkar – lawyer,
anti-imperialist, progressive – famously argued in the Indian Constituent Assembly
against village democracies. He said: “I hold that these village republics have been
the ruination of India. I am therefore surprised that those who condemn provin-
cialism and communalism should come forward as champions of the village. What
is the village, but a sink of localism, a den of ignorance, narrowmindendness and
communalism?” (Ambedkar, 1948)

Mohandas Karmachand Gandhi, another man of the law, whose life was almost
exactly book-ended by those two quotes, emerged as an early modern figure who
challenged this reading of village life. For Gandhi, the foremost leader of the In-
dian freedom struggle, the village formed the bedrock of his idea of a free India.
India, he famously declared, ”is to be found not in its few cities but in its 700,000
villages.” (Gandhi, 1936). Where critics identified dangers, Gandhi perceived in
Indian villages the seeds of an alternative model of organising society, one that
avoided the pitfalls of western industrial civilization. Gandhi envisioned a village
life centred around three key tenets: self-sufficiency and frugality, deliberative and
representative democracy, and community-spiritedness (Nadkarni et al. (2018)).

Interestingly, Gandhi’s thinking on these matters was shaped both by his personal
experience of village life and, in no small measure, by Henry Maine (Mantena
(2012). Serving in the subcontinent in late 1800s, Maine had, through accounts
of British administrators, familiarised himself with India’s self-reliant village com-


                                          3
munities. Influenced also by J.S. Mill’s theories of the value of democracy at the
local level, Maine came to articulate a theory that offered up local self-sufficient
village communities as an alternative to the centralised state in both ”East and
West” (Maine (1880), (Mantena (2010)). Gandhi, who was at once an ever-strident
critic of concentrated power and a steadfast democrat, elevated Maine’s conceptu-
alization of self-reliant village communities by leavening them with the promise
of deliberative democracy which he believed was reflective of India’s ancient self-
governing institutions.

In Gandhi’s own lifetime, there were a diversity of institutions governing villages.
Some had effective local governments, but were upper caste dominated (Aziz (2000),
Srinivas et al. (1960)). Others mainly in the north, ravaged by colonial revenue poli-
cies and torn apart by caste, creed and gender, were held together by feudal norms
and a set of hierarchical relationships (Retzlaff et al., 1962).

The Gandhian idea of village-led free democratic India was rejected by the principal
architects of post-independent India. Dr Ambedkar prevailed upon the constituent
assembly to relegate village-based semi-autonomous representative institutions –
“Panchayati Raj Institutions” (PRIs) – to the ”directive principles” of the Indian
Constitution. By doing so, the constitution did not mandate the creation of such
institutions, but merely suggested that regional governments consider establish-
ing them. Ambedkar’s critique of village India was grounded in a bottom-up view
of the village. Ambedkar, born in a village himself, belonged to the historically
marginalised Dalit or “untouchable” caste. He wrote: “[The untouchables] have
no rights because they are outside the village republic and because they are out-
side the so-called village republic, they are outside the Hindu fold.” (Ambedkar,
1989). Thus, Ambedkar saw villages not as emancipatory ideals, but as undemo-
cratic spaces unworthy of any legal recognition.

Ambedkar’s apathetic view of Indian villages joined forces with the grand Nehru-
vian vision of a modern India – one of centrally run heavy industries and large in-
frastructure projects (Rao (1990)) – to edge out the Gandhian “small is beautiful”
(Schumacher, 1973) bottom-up view of development. By stymieing the opportu-
nities of village India to self-govern, free India denied itself a real opportunity to
empirically examine the feasibility of the Gandhian vision.

In 1992, the devolution of formal power to Panchayats commenced with the passage


                                          4
of the 73rd amendment. It built on significant reforms implemented in the state of
Karnataka in the 1980s under the Chief Ministership of Ramakrishna Hegde and
his Minister of Panchayati Raj, Abdul Nazirsaab (Aziz (2000)). Among the signifi-
cant changes proposed by the amendment, four key provisions stand out: firstly, it
mandated the creation of a democratically elected village council for every village
(”Gram Panchayat”; henceforth “GP”) that would serve a five-year term; secondly,
a specified number of seats were to be mandated to be reserved for women and
marginalized communities (Scheduled Castes (SCs) and Scheduled Tribes (STs));
thirdly, it required the establishment of a Finance Commission to oversee the de-
volution of funds to Panchayats; and fourthly, it introduced participatory decision-
making in Panchayats, wherein villagers would convene in a ”Gram Sabha” – a pub-
lic meeting – to collectively determine the course of village development alongside
their leaders.

Early scholars of local self-government in independent India characterized five dis-
tinct features of local government (Venkatarangaiya and Pattabhiram, 1969). These
are: (a) a local body (b) local inhabitants electing and ultimately controlling that
body, (c) autonomy of that body in the sense of freedom from the control of higher
authorities within at least a limited sphere (d) a recognition of the distinction be-
tween local and non-local services and (e) local taxation. The 73rd Amendment
formally mandated the introduction of all these.

In the decades that have followed since, a key question revolves around how these
de jure rules have translated to de facto practices. While critics have argued that
Panchayats remain mere implementation outposts of centrally formulated policies
(Raghunandan, 2012), there is no denying that local elections systems across the
country remain, with some exceptions, robust and reasonably well-contested. More-
over, villages have seen the emergence of a new class of local political elites who
are diverse and more representative of the underlying population than their higher-
tiered counterparts.

Over the years, scholars from across disciplines have studied Panchayati Raj insti-
tutions. An early set of studies at the turn of the 20th century came from histori-
ans and political scientists, who used archival material to shine a light on India’s
local institutions, both present and past (Davids (1903), Altekar (1927), Sharma
(1991)). Post-independence, social anthropologists pioneered village studies, that
became the foundation for the understanding of village India (Srinivas (1960),


                                         5
Gough (1955), Thorner (1954), Retzlaff et al. (1962)). Early scholars, however,
grappled with data lacunae: while village studies offered extraordinarily rich de-
scriptions of local problems, lingering doubts remained about how general the in-
sights were.

The passing of the 73rd Amendment coincided with the data revolution of the new
millennium, which allowed a renewed engagement with questions old and new.
This was exemplified by the emergence of the field of empirical political economy
of development. This field uses a range of quantitative empirical tools – regres-
sion and text analysis, causal inference and increasingly machine learning – to pro-
vide new answers – often broad but precise – on a host of long-debated questions.
These include, inter alia, the role of deliberation in improving Panchayat functioning
(Ban et al. (2012), Parthasarathy et al. (2019)), the impacts of quotas for marginal-
ized groups in village government (Chattopadhyay and Duflo (2004), Gulzar et al.
(2020), Chauchard (2017)) and mechanisms to improve targeting of welfare bene-
fits (Bardhan and Mookherjee (2006)).

Yet, as this review documents, gaps remain. The availability of data, while proving
to be a treasure-trove for causal inference-style work, has not automatically trans-
lated to a rich, descriptive characterization of the state of Panchayati Raj institu-
tions, with a comparative focus across states’ varied experiences. Moreover, re-
search could also shed light on how PRIs have evolved over time and the long-run
steady-state consequences of the 73rd Amendment (Lanjouw et al., 2018).

Turning to specific themes, more could be done to unpack who becomes a local
politician and how local political entry differs from that at higher tiers. This needs
to be followed up by the positive question of how to encourage high-ability individ-
uals from all strata of society to contest. There is also a need for thicker descriptions
of varied experience across India in devolution of services to local levels and their
relative successes and failures. Devolution and autonomy of local governments are
closely tied to their ability to raise local revenues: building a careful, empirically
grounded understanding of the drivers of local tax revenues, particularly in the
post-73rd amendment era, is an important area of further research. Finally, more
work needs to be done to understand how the digitization of government func-
tioning – the proliferation of MIS, digital exhaust from financial transactions, the
introduction of biometrics – has affected the nature of functioning of Panchayati
Raj institutions.


                                           6
This review2 will proceed as follows. We will trace the history of Panchayats in
India across three eras: pre-1947, 1947-1993 and 1993 onwards. For each of these
phases, we will characterise the nature of institutions, their roles and responsibili-
ties and the composition of their leadership class. We then argue that PRIs, as they
exist today, are neither emblematic of the localism and ignorance of the Ambed-
karian nightmare nor the self-sufficient spirit of the Gandhian ideal. Instead, these
institutions have forged a path of their own, one that draws from the historical
forces that shaped their early development and the sweeping radical changes of
the modern era. We conclude by offering some prescriptive suggestions on the
way forward.



2       Pre-1947

2.1     Ancient and Medieval India

There is evidence of relatively autonomous village governments in the Indian sub-
continent going back to its earliest recorded history (Nadkarni et al. (2018)) with a
variety of ways of achieving consensus, including the practice of public reasoning
and deliberation. Early debates — in sabhas, samitis, panchayats and samajs —
often included both notable big men and peasants, in contestation with each other
and in opposition to the state. Indeed, “the term sabha (association) itself originally
indicated a meeting in which different qualities of people and opinions were tested,
rather than the scene of a pronunciamento by caste elders” (Bayly (1996) p. 187).

The trope, widespread in public perception, and in the writings of many scholars
(e.g. Buitron-Oliver et al. (1992), Raaflaub et al. (2007)), that democracy is a west-
ern idea with origins in Athenian Greece is an overstatement and has increasingly
come under dispute (Stasavage (2020)). The practice of public reasoning and de-
liberation in India predates the ancient Greeks dating back to at least the fifth cen-
tury BCE (Tanwar and Kadam (2022),Trautmann (2023)), and possibly a thousand
years before that going by the references to deliberative practices in the Rig Veda.

Consensual, deliberative, and democratic decision-making has long been preva-
lent in the Indian sub-continent in a variety of spheres. Religious councils hosted
    2
   For broader reviews of the political decentralization literature see Mookherjee (2015) and
Mansuri and Rao (2012).


                                             7
by early Indian Buddhists, for example, often focused on resolving debates within
and across religious traditions. Importantly, they “also addressed the demands
of social and civic duties, and furthermore helped, in a general way, to consolidate
and promote the tradition of open discussion on contentious issues” (Sen (2012) p.
15). Some scholars have argued that collections of villages were brought together
to form republics called Ganas which were governed by representative assemblies
(Nadkarni et al. (2018)).

In the third century BCE, such practices became celebrated under the reign of Ashoka,
who sought to codify rules for public discussion that emphasized mutual respect
and honor (Lahiri (2015)). By the 16th century CE, under the reign of Akbar, inter-
faith dialogues were explicitly aimed at the pursuit of reason rather than reliance
on tradition. The priority given to equality and reason in deliberation echoes stan-
dards in contemporary deliberative theory. Perhaps even more significantly, their
explicit sponsorship by the state reveals the extent of such deliberative councils’
structural importance in ancient and medieval India. The presence of a bounded,
but critical public sphere suggests an important foundation for future participatory
and democratic politics.

In Tamil Nadu in the Pallava and Pandya period in the 7th and 8th centuries CE,
autonomous village governments existed where decisions were made by a process
of deliberative consensus, though – like Athens – only landowners were allowed
to participate (Mahalingam (1955)). In the Chola period in the 9th century CE,
inscriptions from Uthiramerur describe not only the role of consensus via deliber-
ation but also a transparent election process for village council using sealed bal-
lot boxes. Additionally, the inscriptions mention the presence of various commit-
tees responsible for handling different aspects of village life, including the manage-
ment of water bodies and agricultural land. While candidacy requirements, such
as land ownership and knowledge of the Vedas, effectively excluded lower castes
and classes from the village assembly, these inscriptions highlight the existence of a
robust, deliberative administrative system in local village bodies in medieval India
(Mahalingam (1955)).

Similar institutions existed in the Vijayanagara empire in South India (Ratnam (1972))
with detailed lists of village leaders and administrative officials. Regular village
meetings were held in a public place such as a temple hall to make collective deci-
sions. There is even a recorded instance of a woman named Jirle Mallamma who


                                          8
was conferred with the headship of a village. Village bodies in both the Chola
and Vijayanagara empires had a clear and well-defined powers - control of land-
holdings, management of irrigation and water bodies, management of gardens and
public spaces, and the collection and remission of taxes. With the advent of the
Mughals in the North, the traditional system of village Panchayats - in all its myr-
iad forms - was left largely untouched (Venkatarangaiya and Pattabhiram, 1969).
And, even in the period of ”anarchy” that followed the collapse of Mughal rule in-
dependent village governments prevailed in most parts of the sub-continent (Tin-
ker (1954), Nadkarni et al. (2018)).


2.2    British India

Village democracy as it exists in India today, uniformly applied across the country
with legal and constitutional sanction, was given its initial impetus in the British
era (Tinker, 1954). In the early 1800s, the introduction of new revenue collection
systems, which privileged the district collector as the nodal officer who often dealt
directly with peasants and circumvented the Panchayats, began weakening the tra-
ditional Panchayat systems. Starting in the latter half of the 19th century, due to the
financial distress caused by the First War of Indian Independence in 1857, the British
sporadically introduced a system of local governance in villages, with some suc-
cess particularly in the provinces of Bengal and Madras. This system attempted to
guarantee that a section of local services be provided by local governments, an en-
deavour they hoped would be primarily funded through local taxes alone, thereby
reducing the burden on the colonial treasury.3

During this period, a primary force driving the development of Panchayats was
Lord Ripon’s Resolution on Local Self-Government in 1882, which significantly
shaped future discussions on local governance in India. Lord Ripon4 emphasized
the importance of political education, creation of rural boards at a decentralised
level, the presence of “non-official” (i.e non-bureaucratic) members and the impor-
   3
     Justifying this, James Wilson, the first financial minister to the Indian council, noted: “It is of
the first importance to break through the habit of keeping everything in dependence on Calcutta,
and to teach people not to look to Government for things which they can do far better themselves.”
(as cited by Tinker (1954), pg 35.
   4
     Lord Ripon was arguably the most liberal and reformist person to be appointed Viceroy of India.
His four year (1880-1884) tenure is considered the ”most important Viceroyalty in British Indian
history,” and is the subject of a book by the historian Sarvepalli Gopal (who was the son of India’s
second president Sarvepalli Radhakrishnan) (Gopal (1953)).


                                                   9
tance of the introduction of elections. Around this time – and in line with Ripon’s
recommendations – the British also introduced the three-tier system of local gov-
ernment, featuring governing bodies for Panchayats, Taluks, and Districts. They in-
troduced the system of “reservation” of seats for minorities (Muslims, low castes)
wherever possible. Eventually, the British began making grants to Panchayats for
implementing local projects and providing services.

Following this, the ’Royal Commission on Decentralisation in India’ was estab-
lished in 1907 to assess scope for further decentralization in governance. This Com-
mission was tasked with examining the financial and administrative relationships
between the Government of India, provincial governments, and various subordi-
nate entities. After thorough investigations and the compilation of numerous re-
ports by 1909, the Commission recommended the cautious and gradual introduc-
tion of a new system to strengthen local self-governance. Dismissing the popular
demand to revive the ancient system of Panchayats, the Commission stated: ”We
do not think it possible, nor would it be expedient, to restore the ancient village
system, but an attempt should be made to constitute and develop village Panchay-
ats for the administration of local village affairs” (Royal Commission 1909, p.239).
This, eventually, paved the way for the passage of the Village Panchayat Act in 1920.

However, throughout this period, the powers of Panchayats were limited. They had
restricted autonomy in deciding their constitution regarding the number and type
of members or the timing of elections. The executive government controlled the
Panchayats’ borrowing ability, could remove officers at will, and had the power to
suspend or cancel the orders of local boards. The Collector had extensive powers
over local bodies. Panchayats continued to rely on the executive for funds and tech-
nical functionaries. This hierarchical relationship between the executive and local
boards carried over into the years following independence.

Summarising the progress of Panchayats under the British rule, Venkatarangaiya
and Reddy (1967) noted: “A machinery of local self government consisting of vil-
lage Panchayats, Unions, Taluk Boards ... and District Boards was established.
These bodies were given the responsibility for administering services like educa-
tion, roads and public health. They were empowered to levy certain taxes like
land cess, profession tax and house tax. Their constitution became increasingly
democratic as time went on. Though their autonomy was strictly limited, it may be
said that during these years the foundations of local self-government were laid and


                                         10
some superstructure was raised on them.”


2.3   Gandhi and Panchayats

In Gandhi’s endorsement of Panchayats, one can see the coming together of sev-
eral intellectual – and political – strands he pursued throughout his life: the rejec-
tion of urbanism, western civilization and the power of English-speaking elites; the
emphasis on self-sufficiency and the pursuit of a frugal, non-materialistic life; the
value of dignity of labour for India’s vast masses; and the celebration of community-
spiritedness.

Gandhi posited that the people of the cities were parasitic, incapable of feeding
themselves and living off the agricultural output produced by India’s rural peas-
antry. He argued that the cities served the interests of “the big houses of Eu-
rope, America and Japan” (Gandhi, 1921). Conversely, the vast majority of Indians
resided in villages. Gandhi asserted that the path to prosperity for these rural com-
munities lay in achieving self-sufficiency in food, shelter, and clothing. He envis-
aged villages enriched by a robust cottage industry of local handicrafts, where any
surplus could be traded with neighbouring villages if necessary. Gandhi believed
that by localising both production and consumption of essentials, villages could at-
tain independence and avoid the pitfalls of fraud, adulteration, and dishonest trade
practices he associated with more globalised, interconnected economic systems.

Gandhi’s view of administration of village life was based on trust, cooperation
and deliberation between groups: “As far as possible, every activity will be con-
ducted on the cooperative basis. There will be no castes as we have today with
their graded untouchability. Non-violence, with its technique of Satyagraha and
non-cooperation, will be the sanction of village community.” On maintenance of
law and order, he declared: “There will be a compulsory service of village guards,
who will be selected by rotation from the register maintained by the village.” And
finally, turning to governance, he declared: “The government of the village will
be conducted by the Panchayat of five persons annually elected by adult villagers,
male and female, possessing minimum prescribed qualifications. Since there will
be no system of punishment in the accepted sense, the Panchayat will be the leg-
islature, judiciary and executive combined to operate for its year of service. Here
there is perfect democracy based upon individual freedom. The individual is the


                                         11
architect of his own government ... He and his village are able to defy the might
of a world. For the law governing every villager is that he will suffer death in the
defence of his and his village’s honour.”(Gandhi, 1942).

Gandhi’s vision of independent India’s governing structure ran bottom-up, starting
with its hundreds of thousands of villages. He envisaged India as a loose conglom-
eration of these villages, each village a “republic” in itself. Each village-republic,
he said in an interview in 1946, would be “joined together in ever-widening, never-
ascending, circles” (Gandhi, 1946). Thus, Gandhi envisaged India as an open string
of beads: a horizontal federation of largely independent villages. He did not en-
tirely do away with higher administrative structures: he endorsed a system where
Panchayat leaders would indirectly elect members of state assemblies who would,
in turn, elected members to parliament.



3     Post-Independence (1947)

3.1   Constituent Assembly Debates

The discussions within the Constituent Assembly regarding Panchayats were char-
acterized by two opposing views. The several Gandhians within the Assembly ad-
vocated for the constitutional enshrinement of the Panchayati Raj system, thereby
mandating it. In stark contrast, Ambedkar, the chairman of the drafting committee
of India’s constitution, vehemently opposed this idea and the devolution of powers
to village governments. As a member of the Dalit Mahar community, Ambedkar
had experienced discrimination in his own village upbringing and did not perceive
the village as an egalitarian entity. Instead, he saw village communities as bastions
of unenlightened individuals swimming in their feudal hierarchies, incapable of
fostering a just and equitable society. He expressed concerns that the establishment
of village governments would primarily reinforce traditional caste elites, granting
them not only sustained social influence but also augmented state power. Indeed,
so strong was this view that the Constituent Assembly was initially not inclined
to disturb the wording of the Government of India Act 1935, which left it to indi-
vidual states to determine the nature of Panchayats (and local governments, more
broadly).

However, Dr. Rajendra Prasad, the President of the Assembly, intervened late in the

                                         12
debates to advocate for Panchayats. Several members, including K. Santhanam,
N.C. Ranga, T. Prakasam, and Surendra Mohan Ghose, championed the cause of
Panchayati Raj and opposed Ambedkar. They argued that a representative demo-
cratic framework in villages could serve as the foundation of the newly forming
republic. Ultimately, the Constituent Assembly incorporated a provision concern-
ing Panchayati Raj into the Directive Principles of State Policy under Article 40,
which stated: ”The State shall take steps to organize village panchayats and endow
them with such powers and authority as may be necessary to enable them to func-
tion as units of self-government.” This clause did not impose a specific timeframe
for the establishment of Panchayats, nor did it delineate the precise structure these
bodies should assume. The responsibility for interpreting and implementing this
provision was thus delegated to the individual states.


3.2   From 1950 - 1993

The initial momentum for Panchayats was provided by the Five Year Plans, which
recognized the importance of citizen engagement for achieving their developmen-
tal objectives. These Plans actively involved local government leaders in villages to
advance their developmental agenda. For instance, in the Second Five Year Plan,
tasks assigned to Panchayats were categorized into two groups: administrative
tasks, including civic development such as program planning, budgeting, construc-
tion and maintenance of common public facilities, land management, and land re-
forms; and judicial functions, such as enforcing minimum agricultural wages and
resolving minor disputes.

In a separate initiative, the Community Development Movement, launched in 1952,
further bolstered the role of Panchayats. This program aimed to support commu-
nities in identifying and resourcing their own developmental projects. Panchay-
ats served as crucial coordinating bodies within this framework. Several Panchay-
ats were grouped under a Community Development Block (CDB), overseen by a
Block Development Officer (BDO). The BDO provided technical and managerial
guidance for these projects, although the implementation often became centralized
under the BDO, consequently reducing the Panchayats’ active role.

The Balwant Rai Mehta Committee, established in 1957 to evaluate the Community
Development Projects, advocated for the devolution of powers from the Commu-


                                         13
nity Development Block (CDB) to Panchayats. Furthermore, it underscored the
importance of elected representatives in Panchayats as crucial advocates for the ru-
ral populace. However, as detailed in the Ashok Mehta Committee Report of 1978,
the initial period of ascendancy following the implementation of the Balwant Rai
Mehta recommendations (1959-64) was quickly succeeded by a phase of stagna-
tion (1964-69) and then a decline (1969-71). The Ashok Mehta Committee subse-
quently recommended granting constitutional status to Panchayats to bolster their
effectiveness and sustainability (Raghunandan, 2012).

In the decades following independence, the experience of Panchayati Raj varied
across states. The recommendations of the Balwant Rai and Ashok Mehta Com-
mittees led to some states organising local elections and establishing Panchayat
bodies in villages. In West Bengal, for instance, state Acts in 1957, 1963 and 1973 de-
volved administrative power to the village level, and in 1977 an Act was passed that
brought competitive party-based elections to villages which substantially changed
the nature of politics (Webster, 2008). In Kerala, the thinker-politician and first
Chief Minister E.M.S Namboodiripad (Namboodiripad, 1962), was a key propo-
nent of decentralization. He was also an active member of the Balwant Rai Mehta
Committee. From the 1970’s onward a great deal of thought and experimenta-
tion was devoted to decentralised planning and development in the state (Kannan,
2015).

For most of the country, however, the pre-independence situation of severely cur-
tailed powers of local governments generally persisted. Karnataka’s experiment
with a new Panchayat Raj Act in 1985 under the aegis of the rural development
minister Abdul Nazir Sab and Chief Minister Ramakrishna Hegde proved to be
the first major break from the past (Nadkarni et al., 2018). First, it established a
three-tier pyramidal structure of local government, comprising directly elected rep-
resentatives at the Panchayat level (termed ”Mandal Panchayat”), and a mix of in-
directly elected and nominated members at the block (”Taluk Panchayat Samitis”)
and district (”Zilla Parishads”) levels. Second, it endowed local bodies with exten-
sive powers and the necessary financial resources to implement rural development
initiatives. Third, it mandated biannual Gram Sabhas—open village meetings to
discuss local development agendas, which were crucial to fulfilling the Gandhian
vision. Fourth, the Act introduced seat reservations for women, backward classes,
Scheduled Castes (SCs), and Scheduled Tribes (STs). One observer noted: “ The


                                          14
mandate of Article 40 of the Constitution of India to organise village panchayats
and endow them with powers of self-government – appears, at last, to have been
activised in Karnataka” (Chandrashekar, 1984).



4   1992 and Beyond

The 73rd Amendment, enacted in 1992 under Prime Minister Narasimha Rao with
broad political support, represented a profound transformation in India’s gover-
nance structure through the introduction of a decentralised system of local gov-
ernance via Panchayati Raj Institutions (PRIs). This amendment drew significant
inspiration from the Karnataka Mandal Panchayat model, adopting features such
as the three-tiered structure of local government, reservations for women and lower
castes, and a pivotal role for Gram Sabhas. Its primary aim was to rectify the defi-
ciencies in local governance by formalising the structure and enhancing the stature
of PRIs, which had previously struggled to operate as effective and responsive ve-
hicles of the people’s will.

The amendment mandated a three-tier system of local government across states,
consisting of village (Gram Panchayat), intermediate (Block Panchayat), and dis-
trict (Zilla Panchayat) levels. This structural arrangement was designed to make
governance more accessible and responsive to the grassroots populace. To em-
power these local bodies, the amendment outlined 29 functional areas for adminis-
trative devolution, covering essential sectors such as education, public health, wa-
ter supply, and sanitation. This framework was supported by fiscal decentralization
measures, mandating states to establish State Finance Commissions to recommend
revenue-sharing models and provide grants, thereby ensuring that local bodies had
the necessary financial resources to execute their duties effectively.

Political decentralization was a key aspect of the amendment, introducing elections
for all members of these local bodies every five years to enhance democratic gov-
ernance at the local level. In a significant move towards inclusivity, the amend-
ment required that at least one-third of the seats in these bodies be reserved for
women, aiming to increase female participation in governance processes. It also
mandated reservations for Scheduled Castes (SCs), Scheduled Tribes (STs), and
women for the position of Panchayat heads across the country, as stipulated in the


                                        15
newly inserted Article 243(D) of the Indian Constitution. This policy was designed
to ensure representation for historically marginalised communities and to promote
a more equitable governance framework. Additionally, each village was to demo-
cratically elect a head for a five-year term, and participatory decision-making was
encouraged through the Gram Sabha.

Overall, the enactment of the 73rd Amendment was a comprehensive initiative en-
compassing administrative, fiscal, and political decentralization, aimed at enhanc-
ing the efficiency, responsiveness, and inclusiveness of local governance. While it
was a break from the past, it borrowed elements from much that came before: its
emphasis on Gram Sabhas harked back to the ancient traditions of deliberation; the
constitutional mandate may have given PRIs a push towards the Gandhian ideal,
but in its centring of reservations for marginalised castes, tribes and women, it was
mindful of Ambedkar’s critical perspectives. Finally, the three-tiered structure and,
as we document below, the de facto patchy implementation of the 73rd Amendment
owed its roots to British policies.


4.1   Functionaries and Institutional Norms

The most important change that was wrought by the 1992 amendment was the
creation of a new cadre of locally elected representatives. Almost overnight, over
100,000 new political posts were created, the flailing Panchayat system was gal-
vanised. This represented an increase in the number of constitutionally mandated
elected persons in government by a factor of at least 20. State governments, that
passed their own Panchayati Raj amendments and developed rules around sizes
of Panchayats, defined the number of functionaries that form the elected village
councils, specified the nature of elections to these posts (direct, indirect or by con-
sensus), charted the distribution of powers across functionaries and outlined the
broad contours of the relationships between the elected representatives and local
bureaucrats.

Panchayat elections are typically hotly contested with relatively high voter turnout
rates. In the state of Bihar alone, over half a million candidates contested elections
in the 2021 Panchayat polls across the posts of Mukhiya, ward members, Sarpanch,
Panch and Panchayat Samiti. This seems to reflect voter enthusiasm: the voter
turnout in four of the five states in the most recent wave of state assembly elec-


                                          16
tions was lower than the turnout in the most recent Panchayat elections in those
very states. Owing in part to liberal reservation policies and relatively lower costs
of politcal entry, candidates come from diverse caste and wealth backgrounds and
are more likely to be women than in higher tiers. Indeed, as of 2020, there were 3.2
million elected representatives in Panchayats, of which 1.5 million were women.5

Panchayat sizes vary substantially across states too. The average GP has a popu-
lation of 3602.6 In hilly Mizoram, the average GP has a little over 600 individuals,
whereas in densely populated Kerala the corresponding number is 45,000, nearly 75
times larger. Similarly, GP size measured in terms of area also varies considerably.
These have implications for how GPs function, as we shall see below.

GPs also vary in the formation and composition of village councils. Typically, the
council comprises the Panchayat head and a series of ward members. A key dif-
ference is whether the Panchayat head – called ”Adhyaksha”, ”Pradhan”, ”Presi-
dent,” ”Sarpanch” or “Mukhiya” across different states – is directly or indirectly
elected. In the case of the latter, citizens typically elect their local leader – called a
“ward member” or “ward councilor”. These local leaders collectively elect a leader
among themselves. This is an old debate going back to the early years of indepen-
dence (Varadan, 1962). Over the years, more states have adopted the direct system
of elections. Systematic empirical evidence on the relative merits of these two sys-
tems has been hard to come by.7 The total number, caste and gender composition
of the entire village council varies considerably, within and across states. More re-
search needs to be done to understand how the size and composition of the village
council affects governance.

Some early observers of local elections opposed decentralization on the grounds
that elections caused tensions by intensifying existing differences between castes.
In the last three decades, there is very little evidence to suggest that elections have
   5
      Source: Press Information Bureau Release: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1658145.
   6
      Source: Authors’ calculations based on statewise rural population estimates from Jal Jeevan Mis-
sion and Panchayats data from Local Government Directory.
    7
      Normatively, one could make the case that the GP head, as a representative of all citizens in the
village, should be directly elected. This assumes greater importance in a context where higher-tiered
legislative bodies have directly elected representatives in MLAs and MPs. Moreover, given that the
average GP has only 850 households, it is not uncommon for citizens to be personally acquainted
with candidates for the post of the GP head: this makes it harder to justify the need to delegate
responsibility of electing village heads to even more local actors. On the other hand, proponents of
the indirect system argue that having a GP head be one among ward members prevents too much
power from being vested in one individual.


                                              17
worsened community-spiritedness in villages. Mukulika Banerjee in an ethno-
graphic study of panchayats in West Bengal writes sensitively about how competi-
tive local electoral democracy, with all its challenges, ”cultivates” a culture of active
citizenship (Banerjee (2021). Similarly Gabi Kruks-Wisner (Kruks-Wisner (2018)
shows that in Rajasthan, citizens from poor and marginalised communities rou-
tinely engage in a process of democratic claims-making in an active, informed man-
ner that serves their interests. Some state governments, motivated by concerns that
political competition in GPs may reduce local social cohesion, incentivise GPs to
nominate unopposed candidates (called “samras” candidates). Recent work, both
descriptive and causal, shows that rather than increasing cohesion this reduces the
presence of marginalised groups in government and worsens targeting of welfare
benefits (Arora (2022), Guha (2014)).

Historically, Panchayats were seen as having three distinct roles: supervising com-
munity works, collecting local taxes and resolving disputes (Retzlaff et al. (1962),
Venkatarangaiya and Pattabhiram (1969), Tinker (1954)).8 While the post-independence
era formally recognised the former two roles, elected GP leaders continue to infor-
mally involve themselves in attending to a host of local disputes across households
and communities.9 Bihar is the only state that elects a representative called the
“Sarpanch”, who, under the institution of the Gram Katchahry is responsible for
resolving local disputes (Sharan and Das, 2023).10

An active research question is the degree to which panchayats are captured by elites
and clientelistic politics (Bardhan and Mookherjee (2000). There is a fair amount
of evidence showing that panchayats allocate resources in a clientelist manner from
various states including West Bengal (e.g. Mookherjee and Nath (forthcoming)),
Maharashtra (Anderson et al., 2015) and from South India (Besley et al. (2012).
However, discourse within gram sabhas does not seem to be driven by elites (Ban
et al. (2012).
   8
      As Tinker (1954) notes: “[In the Mughal era],] the Panchayats supervised almost all the affairs
of the village, decided disputes and apportioned taxes.”
    9
      Unelected leaders, like khap Panchayat leaders found in Haryana (Kumar, 2012), continue to
involve themselves in informal dispute resolution in a major way. In Karnataka ”traditional” pan-
chayat leaders have been observed to closely cooperate with elected GP members on both gover-
nance and dispute resolution (Ananthpur and Moore (2010).
   10
      See: https://www.hindustantimes.com/cities/patna-news/bihars-village-courts-resolve-87-of-
local-disputes-empower-grassroots-democracy-and-boost-women-s-participation-in-panchayati-
raj-institutions-101682319671589.html




                                                 18
Morever, recent work has shown that democratically elected panchayat presidents
can be incentivised to improve their performance and reduce clientelistic alloca-
tions, if an independent and credible system of performance monitoring and as-
sessment is established. In an experiment with village presidents in Tamil Nadu
(Mansuri et al. (2023)), which has such an assessment system, panchayat presi-
dents were either incentivised with a higher public budget, or a publicly posted
certificate of good performance. Both incentives improved access to public invest-
ments and private transfers. The nonfinancial incentive also led to a more equitable
between-hamlet allocation of resources within the village, especially when the pres-
ident faced potentially competitive elections.

A final set of questions pertain to the role of political parties in local government.
Many, like the freedom-figher-turned-activist Jayaprakash Narayan, argued that
parties at the local level, among other things, would only serve to increase strife and
destroy community spirit in villages (Narayan, 1962). On the other hand, others
like the first Chief Minister of Kerala, E. M. S. Namboodiripad argued that parties
could help empower the poor and check elite capture in local government (Nam-
boodiripad, 1962). Over the years, different state governments adopted different
approaches: today, while states like Kerala and West Bengal allow for parties to
formally support candidates in elections, others like Bihar do not. Even when for-
mally banned, parties continue to involve themselves with local politics (Dunning
and Nilekani, 2013).11 Data from a sample of over 7700 ward members in Bihar
finds that about 20% of them report being involved in political parties and 3% re-
port having received some support in the elections (Bamezai et al., 2024).12 A study
shows that in Kerala and Tamil Nadu citizens who had the same party affiliation as
the panchayat president were more likely to receive welfare benefits (Markussen
(2011)). More research is required to unpack the effect of party presence on local
governance.

Aside from elected representatives, GPs constitute a host of local bureaucrats whose
roles and responsibilities vary considerably from state to state. The most important
  11
     In their paper, Dunning and Nilekani state: “Althought candidates for local councils in most
Indian states are banned from using party symbols in their campaigns ... Partisanship nonetheless
plays a key role in village councils. Pooling across states, about 72% of our survey respondents
can identify the part of the council president ... Indeed, our data suggest that knowledge of the
president’s party is nearly as widespread as knowledge of the president’s caste.”
  12
     These could be underestimates since ward members would not want to reveal having received
party support in a state where parties are explicitly banned in local government.


                                               19
GP-level actor is the Panchayat Secretary, who performs two broad roles: first, as
implementer, they work alongside the village council members to implement a host
of welfare programs and carry out development works; second, as record keeper.
they act as agents of the higher – district and block – bureaucracy, maintaining ac-
counts and paper trails, keeping village leaders in check. Like with the bureaucracy
at higher tiers of government, the local bureaucracy suffers from having too small
a footprint: there are, on average, 0.67 Panchayat Secretaries per GP, with the num-
ber falling to 0.33 in states like Uttar Pradesh (Verma and Ranjan, 2023).13 Aside
from the secretary, Panchayats boast a constellation of local bureaucrats: bill col-
lectors, bureaucrats for large welfare schemes like the NREGA, PDS and PMAY,
teachers, Anganwadi and ASHA workers, agriculture extension officers, pump op-
erators and so on. Understanding these actors, their roles, motivations, presence or
absence and impacts on local governance remains a key area of further research.


4.2    Reservations

India’s local government is far more representative of its people than the higher
tiers. While under a sixth of the national parliamentary seats are occupied by
women leaders, nearly half of all local leaders are women. A key reason for this is
the presence of substantial reservation of seats for women and members of disad-
vantaged caste groups.14 . While the 73rd Amendment mandated a third of the seats
to be reserved for women and seats for SCs and STs reserved in proportion to their
share in the population, many states have expanded the quotas along the intensive
(increasing the share of female reserved seats to 50%) and extensive (adding addi-
tional reserved seats for backward castes in the reserved category) margins. Broad-
ening representation in this manner upends historical inequities and increases the
diversity of voices with power. Normatively speaking, these are both desirable
goals, since they serve to reduce the long-documented problem of elite capture in
  13
      Places like Bihar and West Bengal, which both have large GP sizes and huge staffing issues,
suffer the most.
   14
      The need for affirmative action in political entry in villages was recognised by the Planning
Commission in as early as the 1950s. While writing about the development of village life through
Panchayati Raj it stated: “it would be difficult to maintain a system in which, because of accident of
birth or circumstances, certain individuals are denied the opportunity of rising in the social scale
by becoming cultivators and owners of land. It is, therefore, necessary to consider the problem in
terms of institutional changes which would create conditions of equality for all sections of the rural
population” (Thorner, 1954)



                                                 20
local government institutions.

Yet, reservations in India are hotly debated. Critics make five main arguments:
first, that reservations reduce candidate quality and this worsens outcomes for the
average citizen; second, that they create term-limits for candidates and thus reduce
electoral accountability; third - with respect to caste reservations - that the benefits
are cornered by a tiny elite among a minority of castes and do not substantially
change inequality across groups; fourth, that gender reserved seats are governed by
males by proxy; fifth, that the logic of reservation dictates that the share of reserved
seats increases with time.

A vast literature documents how reservation changes candidate type and quality.
The average candidate in Panchayat elections is more educated than the average
citizen (Besley et al. (2012), Bamezai et al. (2023)). However, reservation results
in candidates who are younger, have less political experience and lower education.
Data from Bihar suggests that the education differential between citizens and candi-
dates is smaller for reserved candidates, even when such candidates are compared
to members of their own group (Bamezai et al. (2023)). This could influence a
candidate’s ability to govern: if education and experience are correlated with per-
formance in office, one could argue that reservation selects a pool of candidates that
is less competent. Yet, a wealth of evidence points to the fact that caste reservation
changes the profile of households that produce candidates: contesting households,
besides being lower caste, also have less land, income and wealth (Besley et al.,
2012). Recent work extends this result to gender reservation too: Cassan and Van-
dewalle (2021) argue that gender reserved (but caste unreserved) seats crowds in
the participation of low caste women, who have more mobility and freedom. In Bi-
har, Bamezai et al. (2023) argue that gender reservation results in the participation
of less wealthy households, even while holding caste reservation fixed. Candidates
from households with less wealth and incomes are desirable, especially when elec-
tions are dominated by elites. Aside from this being important in a normative sense,
these leaders’ policy preferences could be more in line with the needs of the aver-
age citizen. Whether or not reservation improves governance outcomes, therefore,
could depend on a trade-off between competence of politicians and representativeness
of their backgrounds.

The empirical literature suggests that women leaders could bring outcomes more in
line with preferences of women. Chattopadhyay and Duflo (2004), in an extremely


                                          21
influential study, use the randomised allocation of seats for women in West Bengal
and Rajasthan to document that women leaders make more investments in drink-
ing water, a key concern for women in these areas. While these findings were found
to be true in this context even in the longer run (Beaman et al., 2010), they did not
necessarily replicate all over the country (Ban and Rao, 2008; Bardhan et al., 2010a;
Rajaraman and Gupta, 2012). There is also the question of the equity-efficiency
trade-off, which here would prime us to assume that women leaders’ ability to rep-
resent female preferences occurs at the expense of others. This appears to not be
the case: women typically perform no worse than men in office (Ban and Rao, 2008;
Duflo et al., 2004; Gajwani and Zhang, 2014). Using data from NREGA audits from
erstwhile Andhra Pradesh, Afridi et al. (2017) argue that women leaders, owing to
inexperience, perform worse than men initially, but catch up by the end of their
terms.

These results hold despite evidence that in many instances women leaders are merely
proxies for other male members in their households (Ramesh and Ali (2001), Ban
and Rao (2008)). More work needs to be done to unpack proxiness: despite its
ubiquitous usage in popular writings around reservations, we are yet to theorise a
clear definition for who is a proxy leader, how to measure proxiness, characterise
its spread across regions and understand its consequences on governance and wel-
fare. Insofar as the extent of proxy governance reduces over time, one plausible
hypothesis is that the positive effects of gender reservation documented in the liter-
ature represent a lower-bound on the true effects. More work also needs to be done
to understand the effects of women’s reservations on their bargaining power both
within and outside the household, and the possible tradeoffs between processes of
empowerment and resistance to empowerment or ”backlash” (Brule’ (2020).

Caste reservation in Panchayats, with some exceptions (Palaniswamy and Krish-
nan, 2012; Dunning and Nilekani, 2013), has largely shown positive effects on a
range of outcomes: it has been found to decrease discriminatory intentions among
upper castes (Chauchard (2014)), enhance the accessibility of welfare schemes like
the NREGA (Gulzar et al. (2020), Kumar and Sharan (2023)) and local public
goods (Besley et al. (2004); Gulzar et al. (2020)) for SCs/STs, as well as contribute
to a reduction in inequality between the two groups (Kumar and Sharan (2023)).
Most of this work indicates that there is no equity efficiency trade-off associated
with reservations. In other words, there is little evidence to support the claim that


                                         22
reserved leaders reduce the size of the economic pie or welfare of the average citizen
in a village (Bardhan et al. (2010a), Bardhan et al. (2010b)).

Given the relative recentness of reservations in local government, a concern is if
these effects of reservations largely reflect short-run gains. While this is plausible,
early evidence suggests that the gains from reservation only serve to grow stronger
over time. For instance, Ban and Rao (2008) show that women presidents who
serve more than one term, and those who belong to more mature panchayat sys-
tems, perform better. Similarly, Beaman et al. (2012) find that gender reservation
closes gender gaps in aspirations and educational attainment for girls, but only in
villages exposed to reservation for at least 2 terms. A slew of papers show that the
distributional benefits of SC/ST reservation only grow larger as time passes (Gulzar
et al., 2020; Bardhan et al., 2010a; Kumar and Sharan, 2023).

These results could be read to indicate that a time may come when reservations
may longer be required. Indeed, both caste and gender reservations seem to create
a pool of leaders who contest and win elections even after reservation is withdrawn
(Bhavnani (2009), Deininger et al. (2015), Beaman et al. (2009), Kumar and Sharan
(2023)). Perhaps, reservations could act as the initial ballast that spurs a virtu-
ous cycle of greater distributional gains and more political entry for marginalised
groups. Yet, politically, reservation policies, once put in place, are almost never
withdrawn. In fact, most states increase the quantum of reserved seats, expanding
reservation policies beyond SCs/STs to include backward castes. These groups are
higher up in the caste pecking order, both numerically and social hierarchy-wise.
Consequently, new research on these groups finds that that results vary consider-
ably based on the underlying shares of members of these groups in the GP (Ander-
son and Francois (2023), Das et al. (2023)).


4.3   Panchayat Finances and Taxes

Conventional theories of public finance strongly advocate for local decentraliza-
tion by positing that local governments are subjected to competitive pressures from
neighbouring jurisdictions, as individuals can “vote with their feet” (Tiebout, 1956).
This competition is purported to enhance the efficiency of local governments rel-
ative to higher tiers of governance. However, Pranab Bardhan and others have
critically evaluated this premise in the context of developing countries (Bardhan


                                          23
Figure 1. Statewise 15th Finance Commission Transfers to per Gram Panchayat,
FY2022-2023


(2002),Bardhan (2016)). In India, the migration patterns of rural households—which
predominantly occur for reasons such as marriage rather than economic opportu-
nity—suggest that the phenomenon of “voting with your feet” is largely absent,
except possibly in the movement towards urban areas. This limitation exacerbates
governance inefficiencies, predisposes communities to elite capture, and fosters
clientelism, thereby underscoring the importance of robust systems for account-
ability and local deliberation.

This context raises several pertinent questions at the intersection of political econ-
omy and public finance, such as the drivers of village expenditures, the dynamics
of tax compliance and the determinants of corruption and avenues for prevention.
The literature on GPs is largely silent about these important questions; research on
public finance in Panchayats largely consists of a set of valuable overviews of central
and state government allocations to Panchayats, and their de jure fiscal capacities.

The ability of panchayats to self-finance their activities is central to their effective-
ness, yet the degree of autonomy allowed them in both revenue generation and
choice of expenditure is limited. Although many state governments adhere to con-
stitutional mandates in appointing panchayat functionaries and delineating their
functions, financial empowerment does not consistently follow (Oommen, 2022).


                                           24
Figure 2. Karnataka GP expenditure, tax liability & collections by decile, FY2020-
2021


Unlike most local governments around the world, GPs are largely financed by trans-
fers from central and local governments. For instance, in Kerala, which boasts the
most decentralised panchayat system, only 9.16 per cent of expenditures were fi-
nanced by local taxes in 2013-14, The corresponding figure in Tamil Nadu was 3.15
(Oommen, 2022). In Karnataka, for which we have data for 2020-21, the percentage
was 2.77.

Central allocations to GPs come via a set of central schemes, most prominently
the MNREGA and the rural Pradhan Mantri Awaz Yojana, which are both imple-
mented at the GP level. Additionally, allocations to GPs are made via the Union Fi-
nance Commission and by State Finance Commissions. Figure 1 provides a graph
of the transfers made by the 15th Finance Commission in 2022-23 to GPs across the
country. The black bars indicate the average allocations per GP by state, and the
grey bars show the percentage of those funds that are ”untied” - where the pan-
chayat has complete discretion in how the funds are allocated. The numbers on the
top of the graph provide the average population per GP in the state. While transfers
are clearly influenced by GP population size, they are not the only determinant of
transfers and there is wide variation across states. Moreover, the proportion of cen-
tral transfers where the panchayat has discretion over allocation range from about
40 to 60 per cent. Thus, for most panchayats, a majority of the sources of funding do

                                         25
not allow agency over their allocation but are tied to central and state schemes. This
leaves Panchayats to function largely as implementation partners (Raghunandan,
2012).

The de jure ability of panchayats to generate revenues varies considerably across
states (Rao and Mahendhiran, 2014). Most states give GPs jurisdiction over the
collection of local property taxes which constitute the bulk of their revenues, with
the important exception UP and Uttarkhand where district (Zila) panchayats levy
and collect property taxes. Most states also have other sources of GP revenue in-
cluding various fees and cesses for things such as sanitation services, entertainment
tax, and house construction fees. These de jure powers do not translate into de facto
collections.

In Karnataka, extensive public records on panchayat expenditures, property tax
collection, and compliance are available for all 6,000 GPs. We plot these data by
percentile for 2020-21 in Figure 2 which demonstrates the high degree of hetero-
geneity across the state. The lowest 10 per cent of GPs in the state have expendi-
tures of about 1.5 crores15 , while the wealthiest GPs have expenditures of above
50 crores. Tax collections, while low, also vary considerably across the state. The
average GP in Karnataka has a tax potential of INR 34 lakhs16 , with a standard de-
viation of INR 66 lakhs. Overall compliance, including past arrears, is very low at
38 per cent. However, because of concerted efforts in the last five years, 89 per cent
of current property taxes have been paid in the state, and GPs at the 95th percentile
have a potential tax base of 82.5 lakh rupees.

This brief overview highlights the fact that the potential for GPs to generate their
own revenue has been largely unrealised—a longstanding observation by scholars
(Oommen, 2022). The reliance on externally sourced, earmarked funds curtails
the discretionary power of GPs. Understanding the practical implications of these
financial dynamics within the political economy of panchayat finances remains an
underexplored area ripe for future research.
  15
       One Crore=10 million
  16
       One Lakh=100,000




                                         26
4.4      Deliberation and Participation

The modern gram sabha that was introduced by the 73rd amendment brought de-
liberative democracy to all Indian villages making it the largest deliberative insti-
tution in human history.17 Prior to the 73rd amendment, gram sabhas were im-
plemented by the Government of Karnataka with its 1985 Mandal Panchayat Act
where they played a central role. All eligible voters in a mandal were members of
the sabha, which would be held twice a year. The sabhas were tasked with dis-
cussing and reviewing all development problems and programs in the village, se-
lecting beneficiaries for anti-poverty programs, and developing annual plans for
the village (Aziz, 2000; Nadkarni et al., 2018). In practice, the sabhas were resented
by village councilors because they were subject to queries and demands for expla-
nations from citizens. Their answers often elicited heated reactions. Gram sabhas
were largely abandoned after the first year of the implementation of the 1985 Act. If
the meetings were held, they were conducted without prior announcement or were
held in the Mandal office, which could not accommodate more than a few people
(Crook and Manor, 1998).

With the passage of the 73rd Amendment, gram sabhas were formally codified
throughout the country. The Amendment mandated that in addition to the elected
representatives that there would be a “legislature” formed by the gram sabha, an
assembly of all citizens of the village, that would hold public meetings at least two
times a year. Subsequently, all Indian states implemented Acts that were required
to stick with the letter of the 73rd amendment if not its spirit which resulted in
a great deal of heterogeneity across states on the powers granted to gram sabhas
(Rajshekhar and Manjula, 2022).

Kerala, India’s most literate state, which had a long history of progressive poli-
tics, initiated a radical program of participatory decentralization (Isaac and Franke,
2002), where the gram sabha played a central role. The Kerala program rested
on three pillars. It devolved 40 per cent of the state’s development budget to vil-
lage panchayats, gave substantial powers to these councils, and instituted a People’s
Campaign. This was a grassroots program to raise awareness, train citizens to exer-
cise their rights, and help them become active participants in the panchayat process.
The latter goal was to be achieved primarily by participating in gram sabhas.
  17
       For a detailed review of deliberative democracy in India see Parthasarathy and Rao (2018)



                                                  27
Gram sabhas have become central to Kerala’s village planning process, which is
based on a set of nested piecemeal stages (Isaac and Heller, 2003). Working com-
mittees and “development seminars” are held in conjunction with gram sabhas to
make them practical spaces of deliberative decision making and planning. Instead
of open deliberation, attendees are divided into resource-themed groups or com-
mittees. The discussions within each group yield consensual decisions regarding
the designated resource. This structure is geared towards increasing the efficiency
of consensual decision making. And it is facilitated by various training programs
to instruct citizens on deliberative planning as well as local bureaucrats on methods
for turning plans into effective public action.

Heller et al. (2007) studied the impact of the People’s Campaign in Kerala with
qualitative and quantitative data from 72 gram sabhas. They found that the cam-
paign has been effective, with positive effects on the social inclusion of lower-caste
groups and women in decision making. Gibson (2012) examining the same data,
has argued that the key explanation for the effectiveness of gram sabhas in Kerala
is the high level of participation by women. Over the last two decades all other
Indian states have implemented the various tenets of the 73rd amendment. They
have done so with varying levels of intensity and commitment.

Unlike most local deliberative spaces around the world, gram sabhas are deliber-
ative forums embedded within an electoral system. They are held a minimum of
two times a year and some states hold several more. In these forums citizens en-
gage with elected officials and local bureaucrats. The politicians who participate are
acutely aware that they are interacting with potential voters who have the power
to re-elect them or vote them out of office. This creates a relatively egalitarian dis-
cursive space (Rao and Sanyal, 2010). Low-caste citizens who may hesitate to say
some things in social settings, are less hesitant to say them in the gram sabha know-
ing that they are engaging in a kind of political performance. Politicians are also
attuned to not turn away potential voters.

A small and growing body of scholarship has analyzed whether gram sabhas are
mere “talking shops,” or true deliberative fora in which citizens are able to raise and
resolve issues of public relevance. Sanyal and Rao (2018) recorded, transcribed,
and analyzed 300 village meetings in South India. They sampled the villages, fol-
lowing a natural experiment, to be matched by language and ecology across neigh-
boring districts, which belonged to linguistically different states. Prior to 1956 these


                                          28
matched districts were part of the same state. Since the villages matched across the
paired districts, spoke the same language, had the same ecological structure, the
same caste structure, and had 300 years of shared history, they belonged to the same
linguistic community. Everything else equal, they should have, therefore, had the
same patterns of public discourse.

However, they authors found that deliberative meetings were very different in dif-
ferent states which, because of the natural experiment, they attribute to state gov-
ernment policy in implementing the 73rd amendment. Thus, are able to show that
deliberation – or what they call “oral democracy” to distinguish it from the kinds of
deliberation theorised about in western countries – is possible in poor, highly un-
equal, contexts with low literacy, and that the quality of deliberation is less related
to levels of inequality or literacy, but determined by state government policy.

In earlier work Rao and Sanyal (2010) analyzing the same transcripts find that par-
ticipation in gram sabhas acts as a vehicle for creating a shared, “intersubjective”
understanding of what it means to be poor. They highlight how lower caste vil-
lagers use the discursive space of the gram sabha to transgress social norms and
make claims for dignity. They show how marginal groups use the gram sabha to
voice their concerns, and how, through them, previously hidden transcripts be-
came public and forced public discussion to take place on sensitive social issues
that many would rather have avoided.

In an econometric analysis of 5,180 randomly chosen households from a sub-set of
the same villages analyzed by Rao and Sanyal, Besley et al. (2005) find that when
gram sabhas are held governance sharply improves. Focusing on a specific policy
administered at the local level (access to a Below Poverty Line (BPL) card which
provides an array of public benefits), they find that policies were more effectively
targeted to landless and illiterate individuals when a gram sabha was held. Effects
were large, raising the probability of receiving a BPL card by 25 per cent.

Public discussions of common issues at the gram sabha are most effective when
citizens are well informed and can demand accountability from public officials.
Limited information and media coverage, however, often leave citizens at a “disad-
vantage when negotiating with local governments” (Bhattacharjee and Chattopad-
hyay, 2011, p. 46). Analyzing transcripts from gram sabhas in West Bengal, Bhat-
tacharjee and Chattopadhyay find that villagers try to use information from media


                                          29
to negotiate with elected officials and inquire about entitlements. These requests,
however, are easily ignored or dismissed by GP members, who can evade requests
by claiming that the media is misleading audiences or is uninformed. The authors
attribute this to the “thinness” of news coverage, which does little to empower cit-
izens to confront officials.

The low literacy and high-inequality contexts in which deliberation within gram
sabhas usually takes place raises the possibility that they are simply “talking shops”
that bear no relationship to democratic dialogue. This hypothesis is explicitly tested
by Ban et al. (2012) econometric analysis of gram sabha transcripts. They test three
competing hypotheses concerning the types of equilibria that characterise gram
sabha interactions: (a) “cheap talk,” in which discussions are not substantive even
though they may appear equitable; (b) elite capture, in which discussion is domi-
nated by the interests of landowning and wealthy citizens; and (c) “efficient democ-
racy,” in which meetings follow patterns of good democratic practice. They find
that in villages with more caste diversity, and less village-wide agreement on pol-
icy priorities, the topics discussed track those of interest to the median household
which suggests that rather being driven by extreme views it tracks with the prefer-
ences of those in the center. Thus the study concludes that gram sabhas are much
more than mere opportunities for cheap talk. Rather, they closely follow patterns
observed in a well-functioning democracy.

Scholars have begun to examine whether deliberation in gram sabhas is gendered in
nature, and how policies aimed at inclusion might mitigate gender biases (Parthasarathy
et al., 2019; Palaniswamy et al., 2019). These authors use text-as-data methods on
a sample of 100 gram sabhas transcripts recorded in 2014 from Tamil Nadu to eval-
uate whether and how women participate in village assemblies. They find that de-
spite the relatively high rates of attendance, women speak much less than men, and
are listened to less by village leaders. However, this substantially changes when the
panchayat president is a woman, who are significantly more likely allow women to
speak for a longer period of time but also to respond on topic to their concerns. They
also show that a state intervention which builds women’s networks and trains them
to engage with village government dramatically increases both women’s presence
and frequency of speech at the sabha. Though the authors are optimistic about
the potential of such policies to make deliberative spaces more inclusive, they also
caution that the women’s intervention also shifts the discussion toward issues that


                                         30
relate to specific details about the process of the intervention and thus crowds out
organic demands and requests.

A related question is whether citizenship training and facilitation can help improve
the quality of participation. Rao et al. (2017) study the impact of a two year citizen-
ship training program whose goal it is to improve the quality and quantity of par-
ticipation, not just in gram sabhas but in the panchayat system more broadly. They
combine a randomised control trial in 200 villages split evenly between treatment
and control groups, with a two year long ethnographic analysis in a 10 per cent
sub-sample to understand the mechanisms underlying the estimated impact. They
find that the program failed largely because the context where it was implemented
- northern Karnataka - was dominated by landed upper-castes, and citizens found
it hard to break through the power structure. It was also, for a variety of reasons,
poorly implemented.


4.5   Last Mile Agents

Even as far back as the first five-year plan, Panchayats were seen as “the chief
agency for carrying out a great and substantial part of development work at the
village level” (Venkatarangaiya, 1953). Yet, as we have documented above, Pan-
chayats played a minor role in both decision-making regarding and implementation
of development works for most of independent India. While the 73rd Amendment
and the consequent institutionalization of Panchayati Raj enhanced the role of Pan-
chayats as “last-mile” implementers, progress has been slow on actually devolving
decision-making powers to GPs.

On the implementation front, Panchayats play three key roles: first, for a slew of
welfare schemes, they are centrally involved in beneficiary management: they select
beneficiaries for welfare programs (often based on a strict set of pre-specified rules
that is set by the higher state) and oversee delivery (Besley et al., 2007). The wel-
fare delivery occurs via agents reporting to higher-level officials (for example: the
NREGA Sevak, who reports to a block-level NREGA officer) or, increasingly, digital
means (for example: pension payments are directly sent to beneficiary accounts).
Second, Panchayats play a key role in local infrastructure governance. They help lay
village roads, build drains, construct electric lines, build pipes and household tap-
water connections, and maintain – and sometimes construct – brick-and-mortar


                                          31
structures for key local services like schools and health care centres. To do so, they
procure materials, hire contractors and carry out compliance activities. Third, Pan-
chayats also act as local service monitors: Panchayat officials serve on school mon-
itoring committees, village health committees and monitor performance of these
services and redress grievances.

Some open questions remain: how does the nature of the local politician-bureaucrat
relationship – for instance, the Pradhan-Secretary - affect Panchayats’ ability to de-
liver as last-mile agents? Given how reliant Panchayats are on higher bureaucrats,
what are effective upward management practices they could adopt? (Gupta and
Chhibber, 2024) What role does caste/gender play here? (Purohit, 2023) How has
the recent wave of digitization, which takes away Panchayats’ discretion to select
beneficiaries based on local knowledge, affect their functioning and legitimacy as
last-mile agents?



5        How Much to Decentralize?

Most Panchayat heads today will argue that the devolution of funds, functions and
functionaries is insufficient.18 The typical Panchayat’s decision-making powers are
strictly circumscribed by the rules formulated by politicians and bureaucrats at
higher tiers. Take, for instance, the implementation of the Mahatma Gandhi Na-
tional Rural Employment Guarantee Scheme (MGNREGS or NREGA). The NREGA
Act mandates that the Panchayat provide work on demand to unskilled workers in
the village. Panchayat leaders are empowered to generate work by assigning work-
ers to village-based projects. Panchayats, after consultations with citizens via the
Gram Sabha, are allowed to formulate their own “shelf of works” – a list of projects
to be undertaken over the next year – but these are subject to approval by higher-
tiered officials.19 . Moreover, once a project is approved, there are strict guidelines
around how much labour costs to incur, what materials to procure, from whom
    18
      This has been a feature, as we have seen, since the early years of independence: as far back as
in 1962, the freedom-fighter and activist Jayaprakash Narayan, lamenting the circumscribing of the
roles of Panchayats, noted: “It is absurd to consider any tier [of Panchayati Raj] as being merely
advisory or co-ordinatory[sic], or to consider them as agents of the State Government (Narayan,
1962).
   19
      Data from interviews with a sample of GP heads in Rajasthan suggests that in nearly 50% of GPs,
GP heads suggest that the shelf of works for the NREGS was not determined by them or citizens,
but by either block or sometimes even district-level officials (Himanshu et al., 2015)


                                                 32
and at what cost. Muster rolls – attendance sheets for workers – are generated on-
line. Attendance is marked digitally using finger-prints/ photographs. Payments
are automated and sent directly to workers’ bank accounts. Thus, while Panchayats
are on paper responsible for the NREGA, they do not have a strong say in project
selection, project implementation or payments. This makes fixing accountability
particularly problematic. When citizens complain about wage delays from their
Panchayat heads, Panchayats often point to the fact that delays occur elsewhere
(Narayanan et al., 2019).

Yet, recent evidence has emerged that Panchayats are important sites for enhanc-
ing citizen welfare. Arora et al. (2024) demonstrate that elected Panchayat offi-
cials in Karnataka allocate budgetary resources more in line with what citizens
care about, when compared to appointed administrators. In 2020, the COVID-19
pandemic led to a postponement of elections in GPs, and administrators assumed
governance roles. However, elected officials continued to govern in 162 GPs be-
cause these GPs were on a different electoral cycle. It is this natural experiment
that simultaneously creates variation in the presence of absence of elected leaders
that the authors study. In addition to aligning budgetary spending with citizens’
demands, the study shows that elected representatives are more responsive to cit-
izens’ immediate needs – NREGA work during the wake of the reverse-migration
to villages induced by the COVID-19 pandemic – and also get local bureaucrats to
work harder.

Narasimhan and Weaver (2023), studying over 60,000 GPs in Uttar Pradesh, ar-
gue that smaller Panchayats – and therefore, greater decentralization – results in
citizens having better access to local public goods and welfare benefits. This ad-
vantage is attributed to heightened civic engagement, including more active par-
ticipation in Gram Sabhas, and a lower likelihood of elected representatives having
criminal records in smaller GPs. The authors establish causal effects by exploiting
a rule that mandates that villages with a population of greater than 1000 should be
part of their own GPs. This rule causes villages with populations just below 1000 to
end up in much more populous GPs than those with populations marginally above
1000.

These empirically rigorous pair of studies both argue that local democracy matters:
while Arora et al. (2024) shows that elected representatives bring value, Narasimhan
and Weaver (2023) argue that more decentralised set-ups see even better function-


                                        33
ing of Panchayats and greater welfare gains. Put together, these studies suggest
that, perhaps, there is not enough decentralization in Panchayats, both in terms of
jurisdiction size but also functionaries.



6   Panchayati Raj and Local Democracy: The Way Forward

In the thirty-two years since the passage of the 73rd amendment, a substantial body
of research has illuminated the workings of India’s local governance system and
suggested avenues for its enhancement. At the heart of rural governance in India is
the ideal of citizen-centered decision-making. The system, largely, functions inclu-
sively, owing in no small measure to constitutionally enshrined affirmative action
policies—a testament to the enduring legacy of Mahatma Gandhi’s vision, albeit
refined by Babasaheb Ambedkar’s critical perspectives. Moreover, this framework
not only echoes the aspirations and concerns of these pivotal figures but also revi-
talises the ancient Indian traditions of village governance and collective decision-
making, weaving together historical continuity and modern reform.

Yet Panchayats are not quite independently functioning units. They rely almost
entirely on grants made by state and national authorities. As one observer noted:
“Most [local governments] spend most of their time negotiating with their princi-
pals, officers in higher levels of government, rather than carry out their functions”
(Raghunandan, 2012). Consequently, members of GP councils – both elected and
bureaucratic – find themselves spending an exorbitant amount of time in the corri-
dors of Block Development Offices and District Collectorates. Their days are con-
sumed with soliciting funds or personnel, inputting data on various schemes, gath-
ering information on new initiatives, or seeking redress for grievances with staff.
This routine fosters a peculiar equilibrium where Panchayats don’t quite see them-
selves as the architects of their community’s welfare. They act as intermediaries
tasked with project implementation—glorified middle-men, so to speak—rather
than empowered decision-makers charting their own course.

Several actions can be taken to improve this status quo and make Panchayats more
citizen-orientated, and bring them closer to the ideals enshrined in the 73rd Amend-
ment. These actions are arguably also applicable to improving the quality of local
democracies around the world.


                                         34
1. Reassess the levels of devolution. Pay more attention to the three critical
   Fs—functions, finance, and functionaries—and delegate more authority to
   panchayats rather than stripping them of power. Enhance their capacity to
   generate revenue and grant them broader decision-making authority over lo-
   cal matters. These steps are crucial in an era where the proliferation of on-
   line payment systems, MIS-based beneficiary selection, and digital tracking
   of beneficiaries has led to a ”recentralization” process, eroding the autonomy
   of local governments over key functions. More devolution to GPs comes with
   an additional benefit: it reduces the burden on BDOs and higher-level bu-
   reaucrats, who are already considerably over-burdened and unable to func-
   tion effectively (Dasgupta and Kapur, 2020).
   Another way to increase devolution within a Panchayat is to empower ward
   members. Each village council comprises the GP head and ward members
   (WMs). In many states, WMs have no access to financial resources and are
   mere rubber stamps: yet, they could act as important checks on the GP heads.
   Moreover, with increasing evidence that smaller polity size improves devel-
   opment outcomes, empowering WMs – by financially allocating resources to
   them – could actually help Panchayats function better (Sharan, 2021).
   However, levels of capture, clientelism and corruption at the local level may
   either be lower or higher than those at higher levels of government. The in-
   creasing use of technology to target welfare programs could also shift such
   differential degrees of inefficiency. If these are worse at the local level than
   at the national or state level, it may call for a process of recentralization of
   some welfare programs, but such decisions should draw on careful evidence
   (Mookherjee, 2023).

2. Build Local Tax Capacity: Panchayats’ autonomy will always be curtailed if
   they cannot raise revenue levels from above the very low levels at which they
   stand. Tax collection by Panchayats could improve with devolution of func-
   tions: when Panchayats are seen to be responsible for a wider range of tasks,
   their legitimacy improves in the eyes of the citizens, which could translate to
   greater local revenues. However, tax collection can also improve with a range
   of other fixes. These include: filling up of bill collector vacancies; building bet-
   ter property records, including digitised village maps; and giving GPs more
   freedom to levy their own taxes and cesses.


                                        35
   3. Strengthen Gram Sabhas: Gram sabhas are central to effective village gov-
      ernance. To enhance their efficacy, it is recommended to increase their fre-
      quency and expand their powers to encompass critical areas such as village
      planning and the selection of beneficiaries for public programs. Utilising
      gram sabhas as platforms to actively listen to citizens is essential; attendees of-
      ten voice a range of concerns, complaints, and aspirations. Addressing these
      inputs can significantly improve governmental performance if these insights
      are not only heard but also acted upon.

   4. Improve Administrative Data Quality: Enhance the quality of administra-
      tive data and ensure its public availability in an accessible format that does
      not necessitate a college education to interpret. Employ effective visualiza-
      tions, maps, and interactive dashboards, co-created with citizens, to facilitate
      comprehensive understanding and analysis by all community members. This
      approach empowers citizens to utilise the data for informed decision-making.

   5. Develop Scoring Systems for Panchayats: Create an independent and cred-
      ible system of scoring GP performance – this requires systems to be set up
      to ensure that the data used to assess performance is credible and not “self-
      reported” where it is keyed in by a village official who has a self-interest in
      making sure the data tell only a positive story. The scoring system should be
      assessed using standard metrics evaluated by an independent body that is set
      up in such a manner that it cannot be compromised. Incentivise the perfor-
      mance of panchayat elected officials and staff drawing on this independent
      scoring system – by rewarding them with certificates of achievement, more
      finances for the village, and possibly cash rewards and higher salaries, but do
      it in a way that is credible and unquestionably fair (Mansuri et al. (2023).

   6. Build Grievance Redressal Systems: If governments devolve more powers to
      local bodies, then seting up formal and effective grievance redressal systems
      could allow individual citizens to report problems to the concerned higher
      authorities who can then directly act on them. Such systems can be effective
      tools for keeping Panchayats in check.20
  20
    Sharan and Kumar (2021) show that grievance redressal systems could also allow local leaders
to keep each other in check. They find that Dalit Ward Members use a grievance redressal system
in Bihar to complain against the GP heads and that this emerges as an effective way of improving
local public good provision.



                                              36
7. SHG-Panchayat Linkages: A significant difference in the quality of village
   governance can be achieved by integrating women’s self-help groups (SHGs)
   with panchayats; what in the policy world is known as “convergence” (Desh-
   pande, 2022) (though the word is misleading because it is not a convergence
   between the two modalities but a process of coordination). SHGs have emerged
   as key sites for women’s financial access and collective action (Prillaman (2023),
   Sanyal et al. (2015)). More recently, work from Bihar indicates that SHGs
   empower women from marginalised groups to contest local elections (Sha-
   ran and Sen, 2024). Even when formally not in government, SHGs often also
   double up as local arms of the higher bureaucratic state: for instance, SHG
   leaders have been tasked with setting up village kitchens, distributing masks
   during covid or taking over as “mates” for NREGA projects. Yet, their roles
   are seen as being parallel to the Panchayats. Creating more scope for SHG-
   Panchayat coordination would not only improve the functioning of the SHGs
   (by making their functioning subject to scrutiny by elected representatives), it
   would also improve the functioning of panchayats and balance their decisions
   more towards the needs of women.

8. Apply Lessons from the 73rd Amendment to Urban Governance: These
   suggestions are, because of the nature of 73rd amendment and the NRLM,
   restricted to rural areas. Urban government is regulated by the 74th amend-
   ment to the constitution that has well-known weaknesses. It still largely dom-
   inated by bureaucratic rule vested in powerful municipal commissioners. Ur-
   ban governments lack adequate financing, and elections for corporations and
   councils (who have much less power than GPs) are often not held (Ahluwalia
   (2019), Panagariya (2014)). With the evidence from a natural experiment
   that rule by democratically elected representatives generates better outcomes
   at the local level than rule by appointed bureaucrats (Arora et al. (2024)), ur-
   ban governance could learn from the rural experience by reducing the power
   of unelected bureaucrats, reducing the size of wards so that elected represen-
   tatives have smaller constituencies (Narasimhan and Weaver (2023), and in-
   troduce ward sabhas that allow more direct citizen engagement (Ramanathan
   (2007)). Introducing a new urban citizen-empowering constitutional amend-
   ment is perhaps the best way forward in the long-run. In the short-run, it is
   relatively easy for state governments to draw on ideas from panchayats and
   SHGs to set up similar institutions in urban areas – a topic that several NGOs

                                       37
and scholars have thought about for many years. Making this happen could
substantially improve the quality of urban life.




                                38
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