PANCHAYATS AND ECONOMIC DEVELOPMENT

Balveer Singh Gothwal Bikram Singh Jantwal Dev Raj Dharm Pal Yadav E. Sonia Himanshu Behl

Issues to be covered
Decentralization as a strategy for inclusive development of the country

How policy and institutional reforms can be designed and implemented to make the panchayats effective catalysts in the developmental process in rural areas

Scope
1. Introduction 2. Decentralization 3. International Examples & PEAIS 4. Relationship between Decentralizaion and Economic Development 5. Success Stories: Case Study 6. Shortcomings and Reform Issues

Mahatma Gandhi Independence must begin at the bottom. Thus, every village will be a republic or Panchayat having full powers.

Rabindranath Tagore Our aims must be restore to the villages the power to meet their own requirement.

Economic Development
Economic Development is a wider term than Economic growth Economic Growth- Sustained increase in a country's output of goods and service (GDP) Economic Development- Progressive changes in the socio-economic structure of a country. (Technology intensive, high industrialization, high standard of living)

Decentralization
Meaning First Generation Theories vs Second Generation Theories Arguments against decentralization

PRESENT STATUS OF PANCHAYATS

2,34,676 Village Panchayats, 20,73,715 elected representatives. (40 % women, 16% SC and 11% ST) 6097 Intermediate Panchayats, 1,10,070 elected representatives. (43 % women, 22 % SC, 13 % ST) 37 District Panchayats, 11,825 elected representatives. (41 % women, 18 % SC, 11 % ST) At the Village Panchayat level, each elected representative s constituency comprises of a out 340 people, (70 families) making India the largest and most intensely democratic country in the world.

Decentralization

Phases of Decentralization (Through Panchayati Raj) in India

Phase 1: From 1959-1992 Phase 2:From :1992 onward

Phase 1
DIFFERENT STAES ASSINGNED DEVLOPEMENT FUNCTIONS TO DIFFERENT PRI RURAL ILLETRECY LACK OF FUND

POVERTY INEXPERIENCED REPRESNTATIVE GOVT. INTERFERANCE LACK OF CONTINUITY IN WORKING OF PRI LACK OF INTERST OF RURAL PEOPLE

Decentralization: Political Reasoning

Government closer to people. Makes people

participate in decision making and reflects their needs and preferences. Accountable governance through voter information, participation and monitoring.

Increase sections

capabilities

of

vulnerable

Decentralization: Economic Reasoning

Efficiency gains from public service delivery: Wastages and leakages minimized Wider choice and better matching of public service with preference of people Resulting efficient allocation of resources increases welfare

Phase II
FROM : 1992 onwards (REFORM OF PANCHAYTI RAJ 73rd AMENDMENT ACT 1992)

Salient Feat res of the 73rd Constit tion mendment ct

Panchayats will be instit tions of self-government .

Basic Units of Democratic System - Gram Sabhas (villages) comprising all the ad lt members registered as voters. Three-tier system of panchayats at village, intermediate bloc /tal /mandal and district levels. Smaller states with pop lation below 2 million only two tiers

Salient Feat res of the 73rd Constit tion mendment ct

cont

Seats reserved for Sched led Castes (SCs) and Sched led Tribes (STs) and women. Independent Election Commission in each state for s perintendence, direction and control of the electoral rolls. In each State a Finance Commission to determine the principles on the basis of which adeq ate financial reso rces wo ld be ens red for panchayats.

Structure of financial administration

1. Own Income (a) Tax revenues and (b) Non-tax Revenues 2. Grants from the State Government. 3. Grants from the Central Government

International Examples & Panchayat Empowerment and Accountability Incentive Scheme

Some International Examples

Oates (1972) was not clear whether decentralisation is a cause or a result of economic growth. Martinez-Vazquez and MacNab (2002)-fail to find a statistically significant and robust relationship between fiscal decentralisation and economic growth for developing countries. Faguet (2004)- .decentralisation significantly changed national public investment patterns. Investment changed unambiguously in education, water and sanitation, water management, agriculture, and urban development after 1994 reform.

Conti

Faguet (2005) showed that decentralisation led to fivefold increase in municipal investments without increasing the running costs.

In Brazil, Baiocchi (2007) :1988 constitution devolved greater political and fiscal autonomy to the local governments and the share of tax revenues of local governments increased from 11 to 13 per cent between 1987 and 1991. Public services showed a substantial increase since the late 1980s and the disparity in services between regions substantially decreased.

Conti

Hofman and Kaiser ( 2007): The big bang decentralisation in Indonesia initiated after the fall of the Suharto regime in 1988 devolved responsibility for delivering health, education, infrastructure and environmental services to local governments.

Based on their survey, they found that there were significant improvements in local service delivery and satisfactory ratings for local civil services.

Panchayat Empowerment and cco ntability Incentive Scheme (PE IS)

Implemented since 2005-06 Objectives:

Incentivizing states to empower panchayats through devolution of Funds, Functions and Functionaries Incentivizing PRIs for Accountability System

Performance of states measured through DI

Evaluation Frame work

First Stage (Framework Criteria)
State Election Commission Elections of PRIs State Finance Commission District Planning Committees (DPCs)

Second Stage (3Fs)

Funds Functions Functionaries

Performance of States and UTs (as per Devolution Index 2010-11)

Over all Ran 1 2 3 4 5 6 7 8 9 10 11 12 13 14 State/UTs Devol tion Index 70.01
Over all Ran 15 16 17 18 19 State/Uts State/Uts Devol tion Index 30.03 28.21 25.65 20.23

Kerala Karanta a West Bengal Rajasthan Maharshtra Tamil nad

P d cherry Uttra hand Bihar Goa Jhar hand

62.39 59.56 53.89 53.58 53.45 52.74 47.78 47.69 47.66 44.49 40.83 40.03 31.22

11.70

North East States

1 2 3 4 5 Si

Madhya Pradesh G jarat Andhra Pradesh Chhattish Garh Haryana Himachal Pradash Orissa Uttar Pradesh

im

60.22 45.60 13.31 39.31 19.70 42.38

Trip ra Manip r Assam Ar nachal Pradesh

National Average:

INCENTIVE AWARDS FOR CUMULATIVE ACHIEVMENT

(Based on Devolution Index)

Prize
1 2 3 4

State
Kerala Karnataka Sikkim West Bengal

Amount (Rs in Crores)

3.0 2.0 1.0 1.0

RELATIONSHIP BETWEEN DECENTRALIZATION AND ECONOMIC DEVELOPMENT

STATE WISE RANKING ACCORDING TO PER CAPITA INCOME & GROWTH

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 State/UT (Rupee)

% Growth 81.1 79.8 77.4 76.8 75.0 71.3 69.0 68.6 65.8 62.9 62.5 60.3 59.4 59.0 58.9 54.6 53.3 51.6 49.6 46.9 43.5 41.0 36.6 32.5 26.3 63.9

Gujarat Uttarakhand Sikkim Haryana Tripura Chhattish garh Andhra Pr Arunachal Pr. Goa Karnataka Himachal Pr. Meghalaya West Bengal Kerala Maharashtra Tamil Nadu Manipur Assam Jharkhand A & N islands Punjab Uttar Pradesh Bihar Rajasthan Madhya Pr All India

1999-2000 18864 13672 14890 21966 14119 11761

15507 14107
42296 16758 20806 14611 15826 19294 23340 19378 13260 12269 12747 23728 25611 9405 5766 13477 12384 15839

2005-2006 34157 24585 26412 38832 24706 20151 26211 23788 70112 27291 33805 23420 25223 30668 37081 29958 20326 18598 19066 34853 36759 13262 7875 17863 15647 25956

State-wise per capita income

80000 70000 60000 50000 40000 30000 20000 10000 0

(Rupee) 1999-2000 (Rupee) 2005-2006

Percentage of Rural Population Below Poverty Line by States & UTs (2004-05)

Average Growth rate-GSDP% (Current Prices)

S.No. S.No. State/Uts State/Uts Average Growth(2004Growth(2004-05 to 2009-10) 200916.54 21.31 11.84 17.00 17.22 18.83 16.96 17.36 13.07 11.84 17.10 15.62 13.29 19.02 S.No. S.No. State/Uts State/Uts Average Growth(2004Growth(2004-05 to 2009-10) 200917.64 14.10 15.53 15.98 8.83 17.90 14.24 14.83 16.02

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Andhra Pradesh Ar nachal Pradesh Assam Bihar Chhattish Garh Goa G jarat Haryana Himachal Pradesh Jamm and Kashmir Jhar hand Karnata a Kerala Madhya Pradesh

15 16 17 18 19 20 21 22 23 24 25 26 27 28

Maharshtra Manip r Meghalaya Mizoram Nagaland Orissa P njab Rajsathan Si

im

Tamil Nad Trip ra

Uttar Pradesh Uttra hand West Bengal

17.68 11.66 14.83 20.43 13.34

Ranking by literacy rate in 2011

Ran k 1 2 3 4 5 6 7 8 9 10 11 12 13 14 State Kerala Mizoram Tripura Goa Himachal Pradesh Maharshtra Sikkim Tamil Nadu Nagaland Manipur Uttrakhand Gujarat West Bengal Punjab Literacy rate 93.91 91..58 87.75 87.40 83.78 82.91 82.20 80.33 80.11 79.85 79.63 79.37 77.08 76.68 Rank 15 16 17 18 19 20 21 22 23 24 25 26 27 28 State Haryana Karnatka Meghalaya Orissa Assam Chhattish Garh Madhya Pradesh Uttar Pradesh J&K Andhra Pradesh Jharkhand Rajasthan Arunachal Pradesh Bihar Literacy rate 76.64 75.60 75.48 73.45 73.18 71.04 70.63 69.72 68.74 67.66 67.63 67.06 66.95 63.82

Growth rate of Rural Employment (1993-94 to 2004-2005)

S.N o. 1 2 3 4 5 6 7 8 9 10 State/Uts State/Uts Andhra Pradesh Assam Bihar G jrat Haryana Himachal Pradesh Jamm and Kashmir Karnata a Kerala Madhya Pradesh Growth 0.75 2.76 1.51 2.08 3.07 1.08 1.68 1.56 1.34 1.16 All India 1.67 S.No . 11 12 13 14 16 17 18 State/Uts State/Uts Maharshtra Orissa P njab Rajasathan Tamil Nad Uttar Pradesh West Bengal Growth 1.54 1.50 2.22 1.66 -0.74 1.94 1.65

RELATIONSHIP BETWEEN DECENTRALIZATION AND ECONOMIC DEVELOPMENT

RANK PER CAPITA INCOME GROWTH RURAL POPULATION BPL GROSS STATE DOMESTIC AVERAGE GROWTH LITERACY RATE RURAL EMPLOYMENT GROWTH

DEVOLUTION INDEX RANKING

GUJARAT

J&K

ARUNACHAL PRADESH

KERALA

HARYANA

KERALA

UTTARAKHAND

DAMAN &DIU AND GOA PUNJAB

UTTARAKHAND

MIJORAM

ASSAM

KARNATAKA

SIKKIM

MADHYA PRADESH GOA

TRIPURA

PUNJAB

SIKKIM

HARYANA

HIMACHAL PRADESH ANDHRA PRADESH

GOA

GUJARAT

WEST BENGAL

TRIPURA

ORISSA

HIMACHAL PRADESH

UTTAR PRADESH

RAJASTHAN

Decentralization and inclusive development

No clear causal linkage between decentralization and economic growth: Neither the theoretical studies nor empirical analyses show clear evidence that decentralisation leads to development.

Effectiveness of decentralization as a development catalyst is context and design specific

Success Stories

Case: People s Planning Process in Kerala



The most important innovation in a decentralised development strategy is the People s Planning Campaign (Janakeeya Aasoothranam) of Kerala. 33 per cent of the states plan budget is devolved for spending on development projects formulated by the PRIs. Based on people s preferences articulated by the gram sabhas , village panchayats formulate their plans, which are coordinated at block level and approved at the district level

Case: The Green Kerala Express Social Reality Show

The Kerala state government has employed a novel method to activate competition among the panchayats and showcasing the best performing panchayats through a social reality show called, The Green Kerala Express .

The competition first invited all Local Governments in the state to provide a short video showcasing their sustainable development projects . More than 200 local governments responded with the stories of local development, covering different developmental aspects.

The jury visited the 15 LGs shortlisted for the second round along with the video team and evaluated their performance on the ground. Based on a final jury interaction onscreen, the best three panchayats were selected with audience participation in the selection.
Elappully (Palakkad district): First Prize. Akathethara (Palakkad district): Second Prize. Adatt (Thrissur district) : Third Prize

Elapully Panchayat: First prize winner

Over two years(2008-2010), the milk production increased from 2,400 litres a day to 12000 litres, increasing incomes by Rs. 7.5 crore in 2009-10. Paddy farmers adopt dairying as a second livelihood option.

The panchayat provided direct support to women to set up more than 600 diary units. It also provided support services, such as fodder cultivation on 50 acres of land and setting up a model veterinary hospital.

To ensure that NREGA activities did not create a shortage of farm labour, the NREGA programme was put on hold during paddy cultivation season.

Case: Revenue Mobilisation

P ne and Satara districts in Maharashtra present an interesting example of how it is it is possible to significantly enhance the reven e from property taxes by introd cing a simple area based tax system at the panchayat level.

Looking at the successful transition and improvement in revenue productivity, the Maharashtra state amended the rules under the Panchayat Act to enable the gram panchayats to adopt the area based system. Substantial increase in revenue from property tax by almost threefold from Rs. 147.56 crore in 1999-2000 to Rs. 425.93 crore in 2003-04.

Case: Efficient Provision of Water Supply in Karnataka

In G tta aad Panchayat, construction of the system was taken up under the Rajiv Gandhi Rural Water and sanitation Scheme System has a bore-well as the source of water, which is to a 50,000 litre capacity overhead tank. There are nearly 100 individual household connections and the total cost of the system was about Rs.7 lakh . According to the guidelines, the village community had to contribute in advance 10 per cent of the capital cost. The panchayat raised the required amount of Rs.70000 from the villagers

SELF-SUSTAINING WATER SUPPLY SYSTEMS

They initially collected a onetime flat rate charge of Rs. 1000 for each household connection. Thereafter, as follows:For pto the first 10,000 litres For the next 10,000 litres For the next 10,000 litres Rs. 50 flat rate Rs. 50+Rs.10 per additional kilolitre Rs. 150+Rs.20 per additional kilolitre

Experience reflects the foresight of the leaders to make the water supply system economically viable, their sagacity, and the willingness of the people to pay for a service.

Case: Effective use of technology

Piplantri village of Rajasthan has made effective use of simple technology to provide a solution for water scarcity in the village.

Shortcomings and Reform Issues

Summary of the Experiences

The examples of successful experiences of panchayats provide a number of lessons.

Under favourable conditions, and if the system is designed properly, panchayats can be effective catalysts in development.

Putting together a compendium of successful experiences , can inspire other panchayats to embark on developmental initiatives. Horizontal learning through effective dissemination of successful experiences and creation of systems to share the experiences can be a great source of inspiration.

Some Glaring Shortcomings

Top down approach of planning- Centrally sponsored schemes Tax system heavily skewed in favour of the Centre. Less scope of revenue generation in PRIs Lack of awareness and information among the elected representatives of panchayats.

Panchayats don t have any right over natural resources

Catalysing Panchayats for Development: Reform Issues

Delivery of services is better in case of even distribution of assets and land reforms. This ensures even distribution of power and prevents elite capture of public services. Eg. West Bengal

Human development and harnessing the pool of educated manpower. The analysis of the performance of panchayats in different states and regions in India shows that panchayats have been relatively more successful in contributing to development in places where the literacy rate and education standards were higher

Reservation of seats for women in the panchayats : Studies show that gender of village president significantly alters expenditure composition.

Strong, visionary and committed leadership : feature of successful panchayats Proper information system: Precondition for grass root planning There should be direct linkage between tax payments and benefits received.

Creating institutions and systems to share experiences: Inter-panchayat cooperation and coordination. Empowerment of the panchayats in appointment- Significant improvement in education (Bihar).

Thank You