Who Needs the Panchayats?: Exploring Links between Panchayats and Economic Development

Prof. Hari K. Nagarajan, Infosys Foundation Chair of Societal Development at IIMA will be delivering the Inaugural Chair Lecture on "Who Needs the Panchayats?: Exploring Links between Panchayats and Economic Development", today.

Abstract of the lecture by Prof Hari K Nagarajan:

Successive Governments since the time of Independence have expressed concern for efficiency of decision making and suggested that decentralization might be a solution. Of particular concern was the state of the rural economy. The rural economy was in general poor and households were left out of the decision making process. It was felt that creating decentralized institutions could help in enabling greater participation by rural households and enable inclusive development. The 73rd Amendment to the Constitution (Panchayati Raj Amendment) was passed in 1992 and created legally constituted units of self-governance called the Gram (Village) Panchayats. Nominally based on the principle of subsidiarity, this administrative structure is designed to enable Panchayats to effectively manage and provide a range of public goods and services. The assigned functions listed include schools and literacy, sanitation, health care, agricultural extension, drinking water, roads, common water bodies, livelihoods, and social justice. To enable the Panchayats to carry out these assigned functions, the Constitutional Amendment recommends that the State Governments devolve adequate number of functions, finances and functionaries. 

However, the functioning of Panchayats and their role in enabling local economic development has been poor to nonexistent. As a result, successive governments appointed committees and commissions to come up with optimal the design and ideas to improve functioning of such institutions. These include the Ashok Mehta, Balwant Rai, Justice Venkatachaliah, Ramachandran, Justice Punchhi and G.V.K Rao committees, as well as various administrative reforms commissions. The first two pre-date the 73rd Amendment. Finally, the Mani Shankar Aiyar committee sought to explore further ways of strengthening the Panchayats. The various committees and commissions have for the most part repeated the recommendations of the earlier ones.

Since the Amendment recommends that the States devolve powers to the local governments to carry out the assigned functions, a majority of the state governments have not devolved optimally. In addition, there are myriad State Level Acts as well as line departments (such as PWD) that compete and work at cross purposes with the mandates of the Panchayats. In addition, the recommendations of the various committees and commissions have been consistently ignored. Contrary to the economics of subsidiarity, both State and Central governments have expanded their respective roles in provision of local public goods. Panchayats are increasingly seen as mere spending institutions and a convenient tool for implementing the state or central mandates. There is also an expansion of literature that provides a critique of Panchayats and their ability to be a part of the development process. 

In this lecture we provide evidence of the ability of Panchayats to function effectively in spite of the overwhelming administrative and operational odds stacked against them. Evidence in Nagarajan, Binswanger and Meenakshi sundaram (2016 and 2019 (forthcoming))[1] suggests that in spite of significant flaws in implementation, Panchayats have succeeded in enabling economic development across rural India. Empowerment of women has been enabled. Women in villages are increasingly able to access public goods, participate in the process of governance, social audit and extract grievance redressal. The effects of political reservations for women in local governments are persistent and long term. In spite of the lack of incentives Panchayats raise local revenues and this has resulted in the improvement in the provision of a range of public goods. Significant welfare effects have been produced as a result of improved provision of public goods. In spite of pathologies such as bribes and identity based voting (parochial politics) targeting and management of welfare programs have improved. Contrary to what public commentators continue to say about women Pradhans, the quality of governance has improved during their tenure. 

Given that India is a signatory to the “Paris Accords”, and based on the preceding and other evidence we will outline the heuristics of how policies can be designed to enable Panchayats to engage in what may be termed as “green governance”. By incentivizing Panchayats to transit from assigned to assumed functions we will show that a range outcomes that can be broadly classified as “green outcomes” is attainable. This will not only enable broad based economic development but also result in “green development”.

[1] Decentralization and Empowerment for Economic Development, Cambridge University Press (2016 and 2019 (forthcoming)