One of the greatest weaknesses of erstwhile Panchayati Raj Institutions (PRIs) was that they were starved of funds. They had very little resources of their own and were usually dependent on the government for their funds. If the local bodies fulfill the functions expected of them, there is a need for mobilization of substantial resources. However, they operate under certain constraints. They tend to be weak because their financial resources are limited. Mobilization of resources has not been a strong point of the local governments, at least in the rural areas. Thus, internal resource generation of Panchayats at all levels is very poor. The receipts from all sources do not cover more than a fifth of their total receipts. As a result, they are considered as totally dependent on the state. This paper attempts to examine the existing status of Panchayati Raj (PR) finances in West Bengal with reference to their composition and trends (both receipts and expenditure) and to assess the revenue mobilization effort of the PRIs in both tax and non-tax spheres. It then tries to suggest measures to improve the financial administration of the PRIs. Further, it focuses on some newer sources of revenue, which could possibly be utilized by the PRIs with political will. The third-tier of the PRIs, viz., the Gram Panchayats (GPs) have been mostly dealt with in the analysis.

Decentralized efficient decision-making system is essential for rapid and balanced development of the Indian economy. The Panchayati Raj Institutions (PRIs) have to play a major role for the economic transformation of the rural economy. In this connection, a sound financial system is essential for the proper functioning of the PRIs.

Panchayats, the lifeblood of villages in India, ought to have been mentioned in the Directive Principles of State Policy (DPSP). It was believed that real devolution of power from the Center to Panchayat will make the villagers enthusiastic in making success of rural development schemes. Though the structure of PRIs consisting either of three-tier or two-tier or one-tier or traditional has been erected all over India, the power to plan and execute the programs of rural development could not be made successful without revenue resources at hand. An institution cannot deliver goods without adequate resources. Therefore, funding or financing of local self-governing body have important implications for local autonomy, development and democratic process. An ideal system of local self-government should have freedom to raise taxes and decide on how the resources are used rather than rely largely or wholly on resources allocated by the higher tiers of the State and Central governments.

Different committees appointed to look after the working and performance of PRIs in India, such as Balwant Rai Mehta Committee, Santhanam Committee, Ashok Mehta Committee, and L M Singhvi Committee broadly came to the conclusion that finance was the main problem before the PRIs. Every state has its own system regarding the finance. No one can be taken as an ideal to be emulated throughout the country.

The system of grassroots governance has been in existence in India since the early Vedic times. However, following the Balwant Rai Mehta Committee report, the present system of PR was first introduced in the year 1959. Since then, this system has evolved differently in different states. It has seen many ups and downs. Barring a few notable exceptions, the PRIs could not become vibrant institutions of self-governance due to lack of political will and committed support of the bureaucracy. Irregular elections, inadequate representation of weaker sections of society, prolonged super session, absence of financial and functional autonomy, insufficient devolution of powers, and lack of resources became the common characteristics of these institutions. Nevertheless, the system of PR was always considered as the only hope to facilitate participatory process at the grassroots level besides meeting the local needs and aspiration of rural masses in general, and hitherto excluded ones, in particular.

Public Finance journal, Local Self-Governments, Gram Panchayats, Decision-Making System, Financial Resources, Economic Transformations, Indian Economy, Grassroots Governance, Democratic Process, Public Expenditure Policy, Resource Mobilization, Agriculture Productivity, Economic Development, Public Distribution System.