2018 · GS Paper 2 · Q15 · 15 marks
Assess the importance of the Panchayat system in India as a part of local government. Apart from government grants, what sources the Panchayats can look out for financing developmental projects?
In short
Panchayats are vital as grassroots democracy, the delivery arm for schemes like MGNREGA and bottom-up planners, and beyond grants they can tap own taxes, user charges, common assets, community contribution and CSR. Article 243H lets states authorise panchayats to levy property, house and market taxes.
Model answer
Ghissu Editorial · Verified 4 Oct 2026 · 275 words
Democracy at the doorstep
Nearly half of elected members are women, and Article 243D seats SC and ST leaders.
Delivery and planning
Gram Panchayats execute at least half of MGNREGA works by cost and prepare Development Plans covering all 29 Eleventh Schedule subjects.
Unrealised potential
The Panchayat Devolution Index was only 43.9% in 2021-22, so many still act as scheme agents rather than a genuine third tier of government.
Own taxes
Article 243H allows house, property and market taxes, and SVAMITVA (2020) property cards widen the base.
User charges and contribution
Water and lighting fees recover costs, while Jal Jeevan Mission contributions and shramdaan, as in Hiware Bazar, build ownership.
Common assets and CSR
Mendha Lekha's Gram Sabha earned from bamboo after gaining forest rights in 2009, and Companies Act 2013 CSR can co-fund village projects.
Timely State Finance Commissions
Only 25 of 28 states had constituted them by 2025.
Reward revenue effort
Link the 16th Finance Commission's 20% performance grant to own-revenue growth and digitised property registers.
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This chapter in the exam
Devolution — Panchayati Raj6 questions
Asked in 6 of 14 sittings since 2013
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Question from the official UPSC Civil Services (Main) Examination 2018 paper. Answer written by Ghissu's engine and checked against our editorial standards. Found an error? Tell us and we correct it within 48 hours.