Having panchayats as self-governing institutions

La Excellence IAS Academy

Having panchayats as self-governing institutions

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La Excellence IAS Academy | February 21, 2024 | Indian Polity



Syllabus: GS-II

Subject: Polity

Topic: Local government

Issue: Financial empowerment of Panchayats

Panchayat’s dependence on grant and underutilization of own source of revenue:

  • State governments’ commitment to decentralization is crucial for effective local governance through panchayati raj institutions.
  • Despite constitutional amendments for fiscal devolution, panchayats still rely heavily on grants rather than generating own revenue.
  • Major avenues for own source of revenue include property tax, land revenue cess, stamp duty surcharge, and user charges.
  • Gram Sabha play a vital role in leveraging local resources for revenue generation and promoting sustainable development.
  • Dependency on grants has reduced the inclination of panchayats to generate own revenue.
  • Overcoming the dependency on grants requires educating elected representatives and the public on the importance of revenue generation for local development.
+1 Advantage for mains (Data point)

·       Discrepancy in utilization of own source of revenue at different stages

Ø     While gram panchayats collect 89% of own taxes, the intermediate panchayats collect 7% and the district panchayats a nominal amount of 5%.

·       “Panchayats earn only 1% of the revenue through taxes”, with the rest being raised as grants from the State and Centre

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