UNIT-3 PANCHAYATI RAJ AND RURAL ADMINISTRATION:

SYLLABUS TOPICS - Panchayati Raj & Rural Administration: Administrative Structure:

bureaucracy, structure of administration; Panchayati Raj Institutions Emergence and Growth
of Panchayati Raj Institutions in India; People and Panchayati Raj; Financial Organizations
in Panchayati Raj Institutions, Structure of rural finance, Government & Non-Government
Organizations / Community Based Organizations, Concept of Self-help group.

A three-tier structure of the Indian administration for rural development is called Panchayati
Raj. The aim of the Panchayati Raj is to develop local self-governments in districts, zones and
villages.
The three-tier of government are: UNION Government; it manages the issues of the country.
State Government; it manages the issues of the states. Panchayats and Municipalities; it
manages the issues of the district levels.

Introduction to Panchayati Raj

Rural development is one of the main objectives of Panchayati Raj and this has been established
in all states of India except Nagaland, Meghalaya and Mizoram, in all Union Territories except
Delhi. and certain other areas. These areas include:

a. The scheduled areas and the tribal areas in the states

b. The hill area of Manipur for which a district council exists and
c. Darjeeling district of West Bengal for which Darjeeling Gorkha Hill Council exists

Evolution of Panchayati Raj

The Panchayati system in India is not purely a post-independence phenomenon. In fact, the
dominant political institution in rural India has been the village panchayat for centuries. In
ancient India, panchayats were usually elected councils with executive and judicial powers.
Foreign domination, especially Mughal and British, and the natural and forced socio-economic
changes had undermined the importance of the village panchayats. In the pre-independence
period, however, the panchayats were instruments for the dominance of the upper castes over
the rest of the village, which furthered the divide based on either the socio-economic status or
the caste hierarchy.
The evolution of the Panchayati Raj System, however, got a fillip after the attainment of
independence after the drafting of the Constitution. The Constitution of India in Article 40
enjoined: “The state shall take steps to organise village panchayats and endow them with such
powers and authority as may be necessary to enable them to function as units of self-
government”.
There were a number of committees appointed by the Government of India to study the
implementation of self-government at the rural level and also recommend steps in achieving
this goal.
The committees appointed are as follows:

 Balwant Rai Mehta Committee

 Ashok Mehta Committee
  G V K Rao Committee
 L M Singhvi Committee

Balwant Rai Mehta Committee & Panchayati Raj

The committee was appointed in 1957, to examine and suggest measures for better working of
the Community Development Programme and the National Extension Service. The committee
suggested the establishment of a democratic decentralised local government which came to be
known as the Panchayati Raj.
Recommendations by the Committee:

 Three-tier Panchayati Raj system: Gram Panchayat, Panchayat Samiti and Zila
Parishad.
 Directly elected representatives to constitute the gram panchayat and indirectly elected
representatives to constitute the Panchayat Samiti and Zila Parishad.
 Planning and development are the primary objectives of the Panchayati Raj system.
 Panchayat Samiti should be the executive body and Zila Parishad will act as the
advisory and supervisory body.
 District Collector to be made the chairman of the Zila Parishad.
 It also requested for provisioning resources so as to help them discharge their duties
and responsibilities.
The Balwant Rai Mehta Committee further revitalised the development of panchayats in the
country, the report recommended that the Panchayati Raj institutions can play a substantial role
in community development programmes throughout the country. The objective of the
Panchayats thus was the democratic decentralisation through the effective participation of
locals with the help of well-planned programmes. Even the then Prime Minister of India, Pandit
Jawaharlal Nehru, defended the panchayat system by saying, “. . . authority and power must be
given to the people in the villages …. Let us give power to the panchayats.”

Ashok Mehta Committee & Panchayati Raj

The committee was appointed in 1977 to suggest measures to revive and strengthen the
declining Panchayati Raj system in India.
The key recommendations are:

 The three-tier system should be replaced with a two-tier system: Zila Parishad (district
level) and the Mandal Panchayat (a group of villages).
 District level as the first level of supervision after the state level.
 Zila Parishad should be the executive body and responsible for planning at the district
level.
 The institutions (Zila Parishad and the Mandal Panchayat) to have compulsory taxation
powers to mobilise their own financial resources.

G V K Rao Committee & Panchayati Raj

The committee was appointed by the planning commission in 1985. It recognised that
development was not seen at the grassroot level due to bureaucratisation resulting in Panchayat
Raj institutions being addressed as ‘grass without roots’. Hence, it made some key
recommendations which are as follows:

 Zila Parishad to be the most important body in the scheme of democratic

decentralisation. Zila Parishad to be the principal body to manage the developmental
programmes at the district level.
 The district and the lower levels of the Panchayati Raj system to be assigned with
specific planning, implementation and monitoring of the rural developmental
programmes.
 Post of District Development Commissioner to be created. He will be the chief
executive officer of the Zila Parishad.
 Elections to the levels of Panchayati Raj systems should be held regularly.

L M Singhvi Committee & Panchayati Raj

The committee was appointed by the Government of India in 1986 with the main objective to
recommend steps to revitalise the Panchayati Raj systems for democracy and development.
The following recommendations were made by the committee:

 The committee recommended that the Panchayati Raj systems should be

constitutionally recognised. It also recommended constitutional provisions to recognise
free and fair elections for the Panchayati Raj systems.
 The committee recommended reorganisation of villages to make the gram panchayat
more viable.
 It recommended that village panchayats should have more finances for their activities.
 Judicial tribunals to be set up in each state to adjudicate matters relating to the elections
to the Panchayati Raj institutions and other matters relating to their functioning.
All these things further the argument that panchayats can be very effective in identifying and
solving local problems, involve the people in the villages in the developmental activities,
improve the communication between different levels at which politics operates, develop
leadership skills and in short help the basic development in the states without making too many
structural changes. Rajasthan and Andhra Pradesh were the first to adopt Panchayati raj in
1959, other states followed them later.
Though there are variations among states, there are some features that are common. In most of
the states, for example, a three-tier structure including panchayats at the village level,
panchayat samitis at the block level and the zila parishads at the district level-has been
institutionalized. Due to the sustained effort of the civil society organisations, intellectuals and
progressive political leaders, the Parliament passed two amendments to the Constitution – the
73rd Constitution Amendment for rural local bodies (panchayats) and the 74th Constitution
Amendment for urban local bodies (municipalities) making them ‘institutions of self-
government’. Within a year all the states passed their own acts in conformity to the amended
constitutional provisions.
Also read: Caste system and Panchayati Raj

73rd Constitutional Amendment Act of 1992

Significance of the Act

 The Act added Part IX to the Constitution, “The Panchayats” and also added the
Eleventh Schedule which consists of the 29 functional items of the panchayats.
 Part IX of the Constitution contains Article 243 to Article 243 O.
 The Amendment Act provides shape to Article 40 of the Constitution, (directive
principles of state policy), which directs the state to organise the village panchayats and
provide them powers and authority so that they can function as self-government.
 With the Act, Panchayati Raj systems come under the purview of the justiciable part of
the Constitution and mandates states to adopt the system. Further, the election process
in the Panchayati Raj institutions will be held independent of the state government’s
will.
 The Act has two parts: compulsory and voluntary. Compulsory provisions must be
added to state laws, which includes the creation of the new Panchayati Raj systems.
Voluntary provisions, on the other hand, is the discretion of the state government.
 The Act is a very significant step in creating democratic institutions at the grassroots
level in the country. The Act has transformed the representative democracy into
participatory democracy.
Salient Features of the Act

1. Gram Sabha: Gram Sabha is the primary body of the Panchayati Raj system. It is a
village assembly consisting of all the registered voters within the area of the panchayat.
It will exercise powers and perform such functions as determined by the state
legislature. Candidates can refer to the functions of gram panchayat and gram panchayat
work, on the government official website – https://grammanchitra.gov.in/.
2. Three-tier system: The Act provides for the establishment of the three-tier system of
Panchayati Raj in the states (village, intermediate and district level). States with a
population of less than 20 lakhs may not constitute the intermediate level.
3. Election of members and chairperson: The members to all the levels of the Panchayati
Raj are elected directly and the chairpersons to the intermediate and the district level
are elected indirectly from the elected members and at the village level the Chairperson
is elected as determined by the state government.
4. Reservation of seats:
o For SC and ST: Reservation to be provided at all the three tiers in accordance
with their population percentage.
o For women: Not less than one-third of the total number of seats to be reserved
for women, further not less than one-third of the total number of offices for
chairperson at all levels of the panchayat to be reserved for women.
o The state legislatures are also given the provision to decide on the reservation
of seats in any level of panchayat or office of chairperson in favour of backward
classes.
5. Duration of Panchayat: The Act provides for a five-year term of office to all the levels
of the panchayat. However, the panchayat can be dissolved before the completion of its
term. But fresh elections to constitute the new panchayat shall be completed –
 o before the expiry of its five-year duration.
o in case of dissolution, before the expiry of a period of six months from the date
of its dissolution.
6. Disqualification: A person shall be disqualified for being chosen as or for being a
member of panchayat if he is so disqualified –
o Under any law for the time being in force for the purpose of elections to the
legislature of the state concerned.
o Under any law made by the state legislature. However, no person shall be
disqualified on the ground that he is less than 25 years of age if he has attained
the age of 21 years.
o Further, all questions relating to disqualification shall be referred to an authority
determined by the state legislatures.
7. State election commission:
o The commission is responsible for superintendence, direction and control of the
preparation of electoral rolls and conducting elections for the panchayat.
o The state legislature may make provisions with respect to all matters relating to
elections to the panchayats.

8. Powers and Functions: The state legislature may endow the Panchayats with such
powers and authority as may be necessary to enable them to function as institutions of
self-government. Such a scheme may contain provisions related to Gram Panchayat
work with respect to:
a. the preparation of plans for economic development and social justice.
b. the implementation of schemes for economic development and social justice as
may be entrusted to them, including those in relation to the 29 matters listed in
the Eleventh Schedule.
9. Finances: The state legislature may –
a. Authorize a panchayat to levy, collect and appropriate taxes, duties, tolls and
fees.
b. Assign to a panchayat taxes, duties, tolls and fees levied and collected by the
state government.
c. Provide for making grants-in-aid to the panchayats from the consolidated fund
of the state.
d. Provide for the constitution of funds for crediting all money of the panchayats.

10. Finance Commission: The state finance commission reviews the financial position of
the panchayats and provides recommendations for the necessary steps to be taken to
supplement resources to the panchayat.
11. Audit of Accounts: State legislature may make provisions for the maintenance and audit
of panchayat accounts.
12. Application to Union Territories: The President may direct the provisions of the Act to
be applied on any union territory subject to exceptions and modifications he specifies.
13. Exempted states and areas: The Act does not apply to the states of Nagaland, Meghalaya
and Mizoram and certain other areas. These areas include,
a. The scheduled areas and the tribal areas in the states
b. The hill area of Manipur for which a district council exists
 c. Darjeeling district of West Bengal for which Darjeeling Gorkha Hill Council
exists.
However, Parliament can extend this part to these areas subject to the exception
and modification it specifies. Thus, the PESA Act was enacted.
14. Continuance of existing law: All the state laws relating to panchayats shall continue to
be in force until the expiry of one year from the commencement of this Act. In other
words, the states have to adopt the new Panchayati raj system based on this Act within
the maximum period of one year from 24 April 1993, which was the date of the
commencement of this Act. However, all the Panchayats existing immediately before
the commencement of the Act shall continue till the expiry of their term, unless
dissolved by the state legislature sooner.
15. Bar to interference by courts: The Act bars the courts from interfering in the electoral
matters of panchayats. It declares that the validity of any law relating to the delimitation
of constituencies or the allotment of seats to such constituencies cannot be questioned
in any court. It further lays down that no election to any panchayat is to be questioned
except by an election petition presented to such authority and in such manner as
provided by the state legislature.

PESA Act of 1996:

The provisions of Part IX are not applicable to the Fifth Schedule areas. The Parliament can
extend this Part to such areas with modifications and exceptions as it may specify. Under these
provisions, Parliament enacted Provisions of the Panchayats (Extension to the Scheduled
Areas) Act, popularly known as PESA Act or the extension act.
Objectives of the PESA Act:

1. To extend the provisions of Part IX to the scheduled areas.

2. To provide self-rule for the tribal population.
3. To have village governance with participatory democracy.
4. To evolve participatory governance consistent with the traditional practices.
5. To preserve and safeguard traditions and customs of tribal population.
6. To empower panchayats with powers conducive to tribal requirements.
7. To prevent panchayats at a higher level from assuming powers and authority of
panchayats at a lower level.

As a result of these constitutional steps taken by the union and state governments, India has
moved towards what has been described as ‘multi-level federalism’, and more significantly, it
has widened the democratic base of the Indian polity. Before the amendments, the Indian
democratic structure through elected representatives was restricted to the two houses of
Parliament, state assemblies and certain union territories. The system has brought governance
and issue redressal to the grassroot levels in the country but there are other issues too. These
issues, if addressed, will go a long way in creating an environment where some of the basic
human rights are respected.
After the new generation of panchayats had started functioning, several issues have come to
the fore, which have a bearing on human rights. The important factor which has contributed to
the human rights situation vis-a-vis the panchayat system is the nature of Indian society, which
of course determines the nature of the state. Indian society is known for its inequality, social
hierarchy and the rich and poor divide. The social hierarchy is the result of the caste system,
which is unique to India. Therefore, caste and class are the two factors, which deserve attention
in this context.
Thus, the local governance system has challenged the age-old practices of hierarchy in the rural
areas of the country particularly those related to caste, religion and discrimination against
women.
Short Important Questions:

Who is the father of Panchayati Raj?

Balwant Rai Mehta was a parliamentarian who is credited for pioneering the concept of the
Panchayati Raj in India and was also known as the ‘Father of Panchayati Raj’.

What is the importance of Panchayati Raj?

Panchayati Raj institutes village local government that plays a significant role in the
development of villages especially in areas like primary education, health, agricultural
developments, women and child development and women participation in local government,
etc.

Which state in India has no Panchayati Raj institution?

All states of India have Panchayati Raj systems except Nagaland, Meghalaya and Mizoram, in
all Union Territories except Delhi; and certain other areas.

What are the features of Panchayati Raj?

1. Gram Sabha: Gram Sabha is the primary body of the Panchayati Raj system. It is a
village assembly consisting of all the registered voters within the area of the panchayat.
2. Three Tier System: village, intermediate and district levels.
3. Election of members and chairperson: The members to all the levels of the Panchayati
Raj are elected directly and the chairpersons to the intermediate and the district levels
are elected indirectly.

Government and NON-Government Organizations for the RURAL DEVELOPMENT:

The majority of the population of India dwells in villages. However, due to poor connectivity
with cities and towns, lack of schools, and lack of knowledge of modern farming techniques,
life in most of these villages is delinked from the modern conveniences one enjoys in towns
and cities.
For the overall development of the country, rural development programmes and schemes are
important. In general, rural development denotes community and economic development
initiatives and actions taken to improve the standard of living of remote villages, non-urban
localities and the countryside.
The Government organizations for rural development in India aim to better the social and
economic lives of poor people by providing financial aid.
Here are the names of a few such organizations that have contributed greatly to the
development and welfare of the Indian rural sector:

1. National Bank for Agriculture and Rural Development

» NABARD is an apex of Indian development financial institution, headquartered in Mumbai.
» The institution has regional offices all across the country.
» The bank has been entrusted with matters concerning policies, planning, and operations in
the credit field for agriculture and similar activities in the rural areas.
» NABARD looks after the development of small-scale village industry and cottage industry.
» The bank also coordinates the financing activities of all institutions involved in
developmental work at the field level and maintains an association with the Reserve Bank of
India, State Government, Central Government, and various national-level organizations
concerned with the formulation of the policies.

2. Khadi and Village Industries Commission

The Government of India formed a statutory body, the Khadi and Village Industries
Commission, under the Parliament Act, in 1956. Under the Ministry of Micro, Small and
Medium Enterprises, this apex organization seeks to promote, plan, organize, assist, and
facilitate the development and establishment of village and khadi industries in the rural
locations in coordination with other organizations involved in rural development wherever
required.
The Commission aims to fulfil three objectives by monitoring and implementing various
programmes and schemes. The objectives are –
» Providing employment opportunities to the rural population
» Providing saleable articles
» Creating self-reliance among rural people and building a strong community spirit.

3. Centre of Science and Technology for Rural Development

Headquartered in Thrissur and operative in 13 other sub-centres including Gurgaon and Kerala,
the organization strives to change the economic and social status of the poor by providing eco-
friendly, low-cost housing technology using transparent, gender-sensitive, and participatory
procedures.

4. Ministry of Rural Development

The Ministry of Rural Development is a branch of the Indian Government, entrusted with the
task of advancing the socio-economic development of rural India with special respect to
education, health, hygiene, drinking water, roads and housing.

Besides, nowadays, several Non-governmental Organizations like Salaam Bharat, Sehgal

Foundation, Sanjeevani, and Rural Development Foundation, India are actively participating
in rural development programmes, and reaching out to the poor to provide financial aid with
the aim of improving the current scenario of rural India.
Rural development in India is an important topic for your upcoming NABARD exams, so make
sure you have a comprehensive knowledge of the same. Practice previous years’ question
papers and sit for regular mock tests to nail your preparation.
STRUCTURE OF RURAL FINANCE:

The International Fund for Agricultural Development (IFAD) is an international financial

institution and a specialized agency of the United Nations dedicated to eradicating poverty and
hunger in rural areas of developing countries.

The vast majority of rural people do not have reliable, secure ways to save money, protect and
build assets, or transfer funds. This is particularly true for vulnerable groups, such as women,
youth, and displaced people.

Basic formal financial services still reach only 10 per cent of rural communities. Weak
infrastructure, the limited capacity of financial service providers, and low levels of client
education all contribute to this complex problem.

An engine of rural transformation: IFAD recognizes the vast potential of rural finance to
improve the livelihoods of rural people. Over the past 30 years, the development of financial
systems has had an enormous impact on rural livelihoods. Ground-breaking institutions and
new instruments have allowed financial services to grow and broaden their reach.

Technology has allowed clients in remote communities to access a wider range of financial
products. IFAD has worked on rural finance systems in more than 70 countries for over four
decades, and has invested over US$3 billion in rural finance systems.

But there is still much to be done. In a changing global economy, amidst financial crises,
volatile food and agricultural commodity prices, and the perils of climate change, inclusive
rural finance remains a crucial element in rural transformation.

Managing risks and leveraging investments: There are many risks affecting smallholder
farmers that discourage the private sector from investing.

Financial institutions often perceive small-scale agriculture as being too risky and are reluctant
to lend money to farmers and agribusinesses. Farmers themselves are reluctant to borrow for
agricultural production because of their difficulty in managing risks such as climate-related
shocks and livestock disease.

Over the past ten years, IFAD has become a leader in the field of agricultural risk management
(ARM). The Fund promotes a holistic approach to protect and strengthen rural economies and
food production systems, at the same time as leveraging rural financing and investment in
smallholder farmers.

As part of the holistic approach to ARM, insurance is a valuable financial tool for unavoidable
risks that cannot be managed in other ways.

IFAD hosts the Platform for Agricultural Risk Management (PARM), a G20 initiative that
brings a comprehensive risk management approach and process, where risks in agriculture are
assessed, prioritized and tackled in a structured way.
PARM provides technical support to developing country governments to support them in
moving away from a culture of coping with disasters towards a smart management of risk.

PARM is also home to two technical assistance initiatives focused on agricultural and climate
risk insurance that support IFAD’s portfolio: INSURED (Insurance for Rural Resilience and
Economic Development) and Managing Risks for Rural Development: Promoting
Microinsurance Innovations (MRRD).

The power of microfinance and remittances: IFAD-supported projects increase access to

financial services and loans, so that small-scale producers can invest in their businesses and
increase their productivity.

As one of the leading microfinance funders worldwide, IFAD's ongoing investments in rural
finance at 31 December 2017 was around US$1.14 billion. Approximately 13 per cent of our
ongoing investment portfolio is dedicated to rural finance.

Remittances are a powerful instrument for fostering financial inclusion and livelihood
development in rural communities. Our multi-donor Financing Facility for Remittances (FFR)
aims to maximize the impact of remittances on development, and promotes migrants’
engagement in their countries of origin.

INSURANCE:

Smallholder farmers and poor rural households live and work in a high-risk environment and
are extremely vulnerable to local and global shocks. Agriculture is their main source of food
and income, and this is the sector hardest hit by the climate breakdown. Climate-related shocks,
including droughts, floods and pests, can strike whole communities and wipe out agricultural
production. But there are other multiple interlocking risks that severely undermine the
resilience of poor rural populations, as demonstrated by the impacts of the COVID-19 crisis.

Without tools to address these risks, poor rural households are locked into a vicious cycle of
shocks and poverty traps that reduce consumption, deplete precious savings and assets, and
limit productive investments. Strengthening the resilience of poor rural women and men – their
capacity to cope and recover – is a vital part of IFAD’s work and is enshrined in the first
Sustainable Development Goal.

Insurance can play a key role in building resilience, and in increasing and protecting the impact
of IFAD-financed projects. Approached in the right way, insurance contributes to economic
growth, providing financial stability, fostering investment, facilitating trade and commerce,
and enabling risks to be managed more efficiently.

Focus on agricultural and climate risk

Together with the multi-donor Platform for Agricultural Risk Management (PARM), WFP and
other partners, IFAD has been working to develop and share insurance expertise since 2008.
The Fund has a particular focus on agricultural and climate risk insurance, recognizing it as a
tool within a holistic approach to agricultural risk management and rural development.
Agricultural and climate risk insurance can be ‘bundled’ with financial and non-
financial services and inputs, including seed, fertilizer, credit, and even other types of inclusive
insurance, such as for health or business interruption.
IFAD-financed programmes can play a critical role in supporting and facilitating the growth of
sustainable insurance markets in rural areas and in scheme delivery to smallholder farmers and
rural entrepreneurs. This catalyses private sector investment in development, enabling financial
service providers to reach out to typically ‘risky’ clients, and making it possible for them to
secure their businesses.

The IFAD-financed portfolio is currently supported by two special technical assistance

initiatives managed by PARM: the Sida-financed INSURED programme (Insurance for Rural
Resilience and Economic Development programme) and the IFAD-financed grant Managing
Risk for Rural Development: Promoting Microinsurance Innovations, implemented by the
MicroInsurance Centre@Milliman (MIC@M). These initiatives build on IFAD’s insurance
cooperation with WFP through the Weather Risk Management Facility.

Remittances and migration:

The challenge
For over a century, people have been moving from rural to urban areas, and across national
borders in search of better opportunities. Of the 250 million international migrants,
approximately 200 million leave home to work and send remittances home to their families.

Helping these families make the most of their own resources is vital to reach the Sustainable
Development Goals (SDGs) by 2030. The international community may now recognize
migrant workers and their families as agents of change and key partners in this effort.

The potential is clear: between 2022 and 2030, an estimated US$5.4 trillion will be sent by
migrant workers back to their communities of origin in developing countries. IFAD is
advocating to leverage the impact of these flows towards rural transformation and sustainable
development.

The solution
In 2021, US$605 billion were sent to low- and middle-income countries. That’s a growth of
more than 8 per cent compared to 2020. It is estimated that 75 per cent of remittance flows go
towards immediate needs, but the other 25 per cent – over US$100 billion per year – is available
for other purposes.

The amount that matters most is measured in the individual US$200 or US$300 sent home
regularly. This amount represents 60 per cent of total household income and, if leveraged, it
can most effectively improve the living standards of migrants and their communities back
home.

With these apparently small funds, most remittance families commit to reaching ''their own
SDGs'' – reduced poverty, better health and nutrition, education, improved housing and
sanitation, entrepreneurship, financial inclusion and reduced inequality, and the ability to deal
with the uncertainty in their lives by increasing their savings and building assets to ensure a
more stable future.
The SDGs provide a unique opportunity to create a convergence between the goals of
remittance families, government development objectives, private sector strategies to tap
underserved markets, and the traditional role of civil society to promote positive change. In
particular:

 Financial inclusion and literacy for remittance recipient families can increase
opportunities for formal savings and investment. In turn, these mechanisms can build
the human capital of remittance families and improve their living standards through
better education, health and housing.
 Migrant investments beyond remittances can change the development landscape of
local communities, if given appropriate options.
 Remittance markets improved through an adapted legal and regulatory framework,
greater transparency and competition can lower cost and provide more resources to
remittance families.

Since 2006, IFAD, through its US$43 million, multi-donor Financing Facility for
Remittances (FFR), has worked to increase the impact of remittances for development by
enhancing competition, reaching rural areas, empowering migrants and their families through
financial education and inclusion, and encouraging migrants’ investment and entrepreneurship.