India’s local self-government institutions, especially Gram Panchayats (GPs) and Urban Local Bodies (ULBs), stand at a pivotal crossroads. On one hand, robust constitutional provisions grant them autonomy and a mandate for grassroots democracy. On the other, persistent challenges—ranging from financial dependency to administrative hurdles—continue to hamper their effectiveness. As the nation eyes a future of empowered local governance, calls for reform and entrepreneurial thinking are gaining new urgency.
The State Election Commission (SEC) is at the heart of this framework. According to Vajiram & Ravi, the SEC is an autonomous and constitutional authority responsible for conducting elections to local self-government bodies. Its constitutional basis is rooted in Part IX and Part IXA of the Indian Constitution, specifically Articles 243K and 243ZA. These articles empower the SEC to oversee elections for Panchayats and Municipalities, ensuring that the democratic process at the grassroots remains free, fair, and impartial.
But what does this mean in practice? The SEC’s role is multi-faceted. It supervises the preparation and revision of electoral rolls, issues election notifications, enforces the Model Code of Conduct, and resolves election-related disputes. The Governor of each state appoints the State Election Commissioner, whose removal is only possible through the same rigorous process as that of a High Court Judge. This safeguard is designed to preserve the Commission’s independence from political interference—a vital bulwark for democracy at the local level.
Yet, despite these constitutional protections, the reality on the ground is often less than ideal. Many SECs remain administratively dependent on state governments for staff and logistics, which can limit their operational freedom. There have been notable delays in conducting local body elections, such as in Madhya Pradesh, where disputes over OBC reservations held up the process for years. Financial autonomy is another sore spot; SECs often lack an independent budget and rely heavily on state grants, which can constrain their ability to deploy new technologies or respond swiftly to emerging needs. Politicised appointments further erode public trust, as seen in several states where serving or recently retired bureaucrats have been tapped for the SEC role, raising questions about neutrality. Frequent litigation over election schedules and decisions, as witnessed in Maharashtra’s urban local body polls, adds another layer of complexity and uncertainty.
Calls for reform are growing louder. The Supreme Court has directed state governments to comply strictly with SEC orders during Panchayat and Municipal elections, emphasizing the need for timely and independent processes. In a landmark 2021 ruling, the Court also held that appointing serving government officials as State Election Commissioners undermines the institution’s independence and should be avoided. The Second Administrative Reforms Commission (2nd ARC) has recommended a collegium-based appointment system involving the Chief Minister, Speaker of the Legislative Assembly, and Leader of the Opposition, while the 255th Law Commission Report has called for a permanent, independent secretariat for SECs, akin to the Parliament Secretariat.
But even the most robust election machinery cannot compensate for weak financial foundations at the local level. Here, the story of India’s Panchayats—brought into focus by the 73rd Constitutional Amendment Act of 1992—offers both cautionary tales and hope. As reported by 5 Dariya News, Panchayats were envisioned as fiscally empowered, politically accountable, and innovative engines of grassroots democracy. Article 243H grants them the power to raise their own revenue. Yet, the reality is stark: a 2025 study by the National Institute of Public Finance and Policy (NIPFP) found that Own Source Revenue (OSR) contributes only 6–7% of Panchayat finances nationally. The remaining 93–94% comes from state and central grants, leaving most GPs financially dependent and largely reduced to implementing government schemes rather than charting their own development paths.
Some states, however, are bucking the trend. Kerala, Karnataka, and Goa boast higher per capita OSR—₹286, ₹148, and ₹1,635 respectively—thanks in part to digitised tax collection and greater community participation. In contrast, states like Jharkhand, Bihar, and Himachal Pradesh collect negligible OSR, highlighting the uneven landscape of local fiscal empowerment.
There are shining examples of entrepreneurial Panchayats that have taken their destinies into their own hands. In Dharmaj, Gujarat, the Gram Panchayat runs a ₹5 crore annual budget, with half of it generated locally. By redeveloping uncultivated land into a multi-purpose park, collecting property and water taxes digitally, and leveraging contributions from the NRI diaspora, the village has built reserves of over ₹2.5 crore. In Sirasu, Uttarakhand, the GP earns ₹15–20 lakh a year by charging nominal fees for pre-wedding photo shoots in its scenic locales, using the proceeds to fund solar lights and roads. Mukundapurpatna, Odisha, saw its revenue jump from ₹93,000 in 2006 to ₹36.78 lakh in 2018 through temple rents, market leases, and geo-tagged assets. These Panchayats didn’t wait for state funds—they innovated and became financially viable institutions.
Still, such success stories are the exception rather than the rule. Most Panchayats struggle with political reluctance to levy taxes, fearing voter backlash. Manual property assessments, outdated user charges, and a narrow tax base further hamper progress. As the NIPFP report notes, legal fiscal empowerment means little without genuine operational autonomy.
Technology is beginning to shift the landscape, albeit slowly. Tamil Nadu’s VP Tax Portal enables real-time monitoring of property and professional taxes, while Jharkhand’s PoS-enabled tax collection has improved efficiency and transparency. Linking such systems with the SVAMITVA property mapping initiative could vastly expand Panchayats’ revenue base. Small behavioral nudges—like publicly recognizing timely taxpayers or highlighting tangible results (“your tax built this road”)—can also boost voluntary compliance by building fiscal trust.
The Ministry of Panchayati Raj (MoPR), in collaboration with IIM Ahmedabad, has launched a capacity-building initiative for Panchayat functionaries, aiming to unlock the immense potential of OSR at the grassroots. A digital platform called “Samartha” was also rolled out in 2025 to facilitate end-to-end digitisation of OSR management. MoPR is nudging states to revise OSR rules, and is supporting high-revenue or peri-urban Panchayats in formulating commercially viable projects. The concept of ‘Fiscal Fellows’ is being explored to provide hands-on support for financial planning and digital integration.
Performance-linked grants, tied to OSR growth, are also on the table, and the upcoming 16th Finance Commission may incentivise Panchayats that demonstrate tangible outcomes rather than mere procedural compliance. As one recent study found, GPs embracing circular economy models—biogas and composting plants, solar energy sales, community markets, and eco-tourism—are not only more fiscally independent but also poised for further growth.
Ultimately, the dream of Gram Swaraj—self-rule at the village level—will be realized not by the volume of funds flowing from above, but by how effectively resources are generated and used at the source. As the authors in 5 Dariya News put it, “Panchayats need to think less like accountants and more like entrepreneurs, spotting opportunities, managing risks, and reinvesting gains into the community.” India’s rural transformation, they argue, will come when its 2.5 lakh-plus Gram Panchayats learn to earn, and when local governance becomes the country’s most vibrant entrepreneurial ecosystem.
For now, as India’s local self-government institutions strive for greater autonomy and innovation, the interplay between constitutional safeguards, administrative reforms, and entrepreneurial zeal will determine whether this vision becomes reality—or remains an unfinished chapter in India’s democratic journey.
