Local Governments in India: PRIs, ULBs, Functions & Challenges

Published on 19 September 2025 by
Local Governments in India

Local governments are the foundation of India’s democratic framework at the grassroots level. They function as the third tier of governance after the Union and State governments, ensuring that development, justice, and welfare reach the common people directly. By bringing decision-making closer to citizens, local bodies not only improve service delivery but also strengthen participatory democracy. Their constitutional recognition through the 73rd and 74th Amendments of 1992 marked a major step in decentralization and empowerment of people.

Local Governments in India

India’s democratic framework is structured into three levels of governance—Union, State, and Local. Local governments, being the third tier, function at the grassroots level and are directly responsible for meeting the immediate needs of citizens. With constitutional recognition through the 73rd and 74th Amendments (1992), they form the backbone of participatory democracy and decentralized planning.

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Historical Background

The concept of local governance in India has deep historical roots. In ancient India, village assemblies like the Sabha and Samiti were vital institutions for administration and justice. The Gramini was a key village functionary in the Vedic period. During the medieval era, centralization weakened local autonomy, but village communities managed to preserve their existence.

In the British period, several reforms shaped local governance:

  • Mayo’s Resolution (1870): Gave importance to local institutions.
  • Lord Ripon’s Resolution (1882): Regarded as the “Magna Carta” of local self-government, emphasized democratic participation.
  • Royal Commission on Decentralization (1907): Advocated elected local bodies.
  • Montagu-Chelmsford Reforms (1919): Introduced dyarchy and made local government a provincial subject.

These initiatives laid the foundation for modern local government institutions in independent India.

Panchayati Raj Institutions (PRIs) – Rural Local Government

The 73rd Constitutional Amendment Act, 1992 gave constitutional status to PRIs, introducing a three-tier system across states:

  1. Gram Panchayat (village level)
  2. Mandal/Block Panchayat (intermediate level)
  3. Zila Parishad (district level)

The amendment also mandated the establishment of Gram Sabhas as forums for direct democracy, reservation of seats for women and marginalized groups, and periodic elections conducted by State Election Commissions. The Eleventh Schedule assigned 29 subjects to Panchayats, including agriculture, irrigation, health, sanitation, and education.

Committees like the Balwant Rai Mehta Committee (1957), Ashok Mehta Committee (1977), and L.M. Singhvi Committee (1986) played a crucial role in shaping democratic decentralization. Later, the PESA Act (1996) extended these provisions to Scheduled Areas, empowering tribal Gram Sabhas with control over forests, land, and natural resources.

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Urban Local Governments

The 74th Constitutional Amendment Act, 1992 provided constitutional recognition to urban local bodies, strengthening self-governance in towns and cities. It created a three-tier system of:

  1. Nagar Panchayats – for transitional areas moving from rural to urban.
  2. Municipal Councils (Nagar Palikas) – for smaller urban towns.
  3. Municipal Corporations (Nagar Nigams) – for large cities with higher populations.

The Twelfth Schedule listed 18 functions for municipalities, including urban planning, land use regulation, water supply, solid waste management, urban forestry, public health, and slum improvement. Urban governance is further supported by District Planning Committees (Art. 243ZD) and Metropolitan Planning Committees (Art. 243ZE), which consolidate development plans at the district and metropolitan levels.

Types of Urban Bodies

Urban governance in India includes different types of institutions based on size, function, and administrative needs:

  • Municipal Corporations: For large metropolitan cities; headed by a Mayor, assisted by a Commissioner (usually an IAS officer).
  • Municipal Councils: For smaller towns, with similar functions but limited financial and administrative powers.
  • Nagar Panchayats: For transitional areas moving from rural to urban.
  • Notified Area Committees & Town Area Committees: Created by State notifications for specific areas; often fully nominated.
  • Cantonment Boards: Established under the Cantonments Act (2006), functioning under the Ministry of Defence.
  • Townships & Port Trusts: Set up by PSUs or Parliament for providing civic amenities in industrial or port areas.
  • Special Purpose Agencies: Function-based organizations (e.g., urban transport authorities, water supply boards) that operate independently of municipalities.
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Finance of Local Governments

Local governments need financial resources to carry out their constitutional responsibilities effectively. However, financial devolution remains one of the weakest aspects of decentralization in India.

Panchayati Raj Institutions (PRIs): Article 243G empowers Panchayats to prepare plans for economic development and social justice. Article 243H allows State Legislatures to authorize Panchayats to levy, collect, and appropriate taxes, duties, tolls, and fees. They can also receive assigned revenues and grants-in-aid from the State’s Consolidated Fund. State Finance Commissions (SFCs) are set up every five years to recommend revenue-sharing between States and PRIs.

Urban Local Bodies (ULBs): Empowered to collect taxes like property tax, professional tax, and user charges. They receive grants and shared taxes from the State government. Financial health is reviewed by SFCs. However, the introduction of GST has limited their tax domain by subsuming several local taxes, making them more dependent on State and Central transfers.

Challenges in Local Finances: Narrow tax base and inefficient tax collection, overdependence on higher governments for funds, poor implementation of SFC recommendations, limited financial autonomy to design and raise revenue sources, and weak capacity to mobilize resources in both rural and urban bodies.

Also Read: Centre-State Relations in India

Challenges in Local Governance

Despite constitutional backing, local governments face persistent hurdles. States often hesitate to transfer the “3 Fs” – Funds, Functions, and Functionaries. Financial and administrative dependence hampers autonomy. Many Panchayats lack power to recruit staff or plan independently. Gram Sabhas are often sidelined, reducing citizen participation. Urban bodies struggle with trained manpower, technology, and infrastructure. Excessive control from higher authorities reduces effectiveness.

Significance of Local Governments in India

Despite challenges, local governments remain critical pillars of Indian democracy.

  • Grassroots Democracy: Gram Sabhas and Ward Committees promote direct participation in governance.
  • Women & Social Justice: Reservation ensures greater representation of women, SCs, STs, and OBCs in decision-making.
  • Developmental Role: Handle crucial functions like sanitation, primary education, health, water supply, and rural/urban infrastructure.
  • Inclusive Growth: Empower marginalized communities, especially in Scheduled Areas through PESA, by giving them control over resources and local governance.

Also Read: Constitutional & Non-Constitutional Bodies in India

FAQs on Local Governments in India

1. What is the role of local government in India?
 Local governments act as the third tier of governance, ensuring delivery of basic services, promoting participation, and strengthening grassroots democracy.

2. Which constitutional amendments gave recognition to local governments?
 The 73rd Amendment (1992) gave constitutional status to Panchayati Raj Institutions, and the 74th Amendment (1992) did the same for Urban Local Bodies.

3. What are the three levels of Panchayati Raj Institutions?
 Gram Panchayat at the village level, Block/Mandal Panchayat at the intermediate level, and Zila Parishad at the district level.

4. What is the role of Gram Sabha?
 Gram Sabha is a body of all adult voters in a village that ensures direct democracy by discussing and approving local development plans and decisions.

5. How are urban local bodies classified?
 They are classified as Nagar Panchayats for transitional areas, Municipal Councils for smaller towns, and Municipal Corporations for larger cities.

6. What functions do municipalities perform?
 Municipalities handle urban planning, water supply, sanitation, public health, waste management, and slum improvement.

7. What is the role of State Finance Commissions?
 SFCs review the financial position of local bodies every five years and recommend how revenues should be shared between States and local governments.

8. How does the PESA Act empower tribal areas?
 The Panchayats (Extension to Scheduled Areas) Act, 1996 gives Gram Sabhas in tribal areas power over land, forests, markets, and natural resources.

9. What are the major challenges faced by local governments?
 Challenges include weak devolution of powers, dependence on State governments, financial constraints, weak Gram Sabhas, and political interference.

10. Why are local governments important for democracy?
 They promote inclusive governance, empower marginalized groups, strengthen democratic participation, and improve delivery of services at the grassroots level.