Author: Dr. Anshuman Karol | 27-Oct-2026
India’s roughly 2.55 lakh Gram Panchayats remain the first point of contact between citizens and the State. Yet their capacity to plan, deliver services and raise resources varies sharply. Recent policies the new Rashtriya Gram Swaraj Abhiyan (RGSA), the Atma Nirbhar Panchayat sub-scheme launched for 2026-27 and the 16th Finance Commission’s performance grant aim to push Panchayats toward greater self-reliance. A recent NITI Aayog consultation held on 21 October 2026 framed the agenda around three linked themes:
One of the key questions that formed part of the consultation was on strengthening the DRDA as an institutional driver of Gram Panchayat development in peri-urban areas.
These themes cannot be addressed in isolation. Incomplete and outdated devolution (most activity maps date to 2006-07), weak technical capacity, GPDPs that lack local disaggregated data and genuine Gram Sabha participation and persistent top-down control through parallel agencies leave most Gram Panchayats under-capacitated and grant-dependent. OSR still accounts for only around 6 percent of total Panchayat revenue nationally. NITI Aayog have flagged the ambition of raising this share substantially, with the intermediate targets to 16 percent by 2030 and far higher levels 50 percent by 2047 in the longer Viksit Bharat horizon. Political reluctance to levy taxes, low taxpayer compliance and under-used common property resources compound the problem. As per the NITI Aayog note, in peri-urban zones about 450 Gram Panchayats are targeted to become models of economic growth by 2030. The Atma Nirbhar Panchayat sub-scheme aims to build self-reliance through sustainable own source revenue (OSR), by using idle assets and drawing on technical assistance and innovative financing such as public-private partnerships, CSR and convergence of schemes. It is important as these areas face land-use pressure, rising demand for services, and commercial interest, but often lack the planning capacity and institutional support needed to capture the benefits.
Two institutions sit at the heart of this institutional puzzle- the constitutionally mandated District Planning Committees (DPCs) and the long-standing parallel structures of District Rural Development Agencies (DRDAs).
Why DPCs Are Indispensable
Article 243ZD requires every States to constitute a District Planning Committee (DPC) to consolidate the plans prepared by Panchayats and Municipalities in the district and prepare a draft development plan for the district as a whole. In preparing that plan, the DPC must have regard to matters of common interest between rural and urban local bodies, spatial planning, sharing of water and other physical and natural resources, integrated infrastructure development, and environmental conservation. It must also consult institutions and organisations as specified by the Governor of the State.
This is not a procedural formality. DPCs are the only constitutionally designed mechanism that can integrate Gram Panchayat Development Plans (GPDPs) with municipal plans, especially in the peri-urban transition zones where rural and urban realities collide. Without functional DPCs, district planning remains driven by line departments and the district administration; Gram Panchayat plans stay disconnected lists; and peri-urban growth challenges like land conversion, service gaps, economic opportunity capture receive fragmented responses.
Yet DPCs in most States are not constituted or function largely as ceremonial approval bodies. Meetings are infrequent, expert and grassroots representation is thin, dedicated secretariats are rare or absent and real authority over resource allocation or convergence is limited. Non-functional DPCs leave a vacuum that parallel agencies and top-down schemes readily fill. Strengthening Gram Panchayats as units of governance therefore requires making DPCs operational in letter and spirit with dedicated secretariats, clear powers to integrate rural and urban plans (especially peri-urban), and the ability to drive evidence-based prioritisation using real-time data from platforms such as eGramSwaraj, Mission Antyodaya and SVAMITVA.
The Undermined Role of DRDAs and Decades of Unheeded Recommendations
DRDAs were created as specialised agencies to implement anti-poverty and rural development programmes. Over time they became powerful parallel structures that often overlapped with or effectively curtailed the functions of Panchayati Raj Institutions. Funds, technical staff and decision-making authority flowed through DRDAs rather than elected Zilla Parishads, weakening the constitutional design of local self-government.
This tension was recognised early and repeatedly. The First-Round Table of State Ministers of Panchayati Raj (Kolkata, 2004) resolved that the role of DRDAs should be reconceived through progressive merger with Zilla (District) Panchayats so that their technical expertise becomes available to all three tiers of PRIs under elected control. Subsequent State Finance Commissions (notably Odisha’s Fourth SFC) and expert committees reinforced the same logic that parallel agencies contradict the spirit of the 73rd Constitutional Amendment.
The V. Ramachandran Committee on Restructuring of DRDAs (2012) was particularly clear. It found that DRDAs had failed to realise their original objectives, lacked professional multi-disciplinary capacity in many cases and stood in direct conflict with the constitutional mandate for Panchayats. The Committee recommended abolition of the DRDA structure and its merger into Zilla Parishads (or location of professional support within DPCs as District Plan Support Units). Successive governments signaled intent; the Centre finally discontinued the DRDA Administration Scheme with effect from 1 April 2022 and advised States to merge DRDAs with Zilla Parishads (or equivalent bodies). Some States including Karnataka, Madhya Pradesh, Tamil Nadu, Uttar Pradesh and Odisha have acted. Many others are yet to complete the transition, leaving residual parallel arrangements, unclear accountability and limited technical support for integrated peri-urban planning.
The result is predictable, weak coordination, inadequate focus on spatial planning and convergence and continued dependence of Gram Panchayats on schemes that bypass elected institutions. In peri-urban areas the cost is especially high, rapid growth demands precisely the kind of integrated rural-urban planning that only empowered DPCs, supported by professional capacity formerly housed in DRDAs can deliver.
Own Source Revenue: Current Status, Stark State-Wise Variation and the Case for Targeted Approach
National data from the Expert Committee on Own Source Revenue of Rural Local Bodies (covering 2017-18 to 2021-22) show that Gram Panchayats raised only about ₹5,119 crore in OSR over five years translating to a national average of just ₹59 per capita and roughly ₹2.27 lakh per Panchayat. OSR constitutes only around 6 percent of total Panchayat receipts, the rest comes overwhelmingly from Central and State grants.
Performance varies dramatically across States
Does Average Population per Gram Panchayat Explain the Variation?
One structural factor that contributes to these differences is the average population size of Gram Panchayats. According to data presented by the Ministry of Panchayati Raj (Finance Commission Conclave – Devolution to Development, 14 November 2024), the national average population per Gram Panchayat stands at 4,659. There is wide variation: Kerala has among the highest average populations per GP (approximately 18,567), followed by West Bengal (around 18,623) and Assam. In contrast, several northern and hilly States have significantly smaller average populations per GP (for example, Uttar Pradesh around 2,629, Madhya Pradesh around 2,304, and Uttarakhand as low as 884).
Larger average population per GP provides a structural advantage. It expands the potential tax base, supports greater commercial activity (higher scope for professional tax, licence fees and user charges) and creates better economies of scale for assessment, collection and enforcement. This helps explain why Kerala and West Bengal perform relatively strongly on per capita OSR, and why absolute collections are higher in States that combine reasonably large GPs with functional systems.
Conversely, a large number of relatively small GPs (as seen in Uttar Pradesh and Madhya Pradesh) fragments the revenue base, raises the relative cost of collection, and weakens the political and administrative incentive to impose and enforce local taxes.
Important Caveat: Population Size is only a Partial Explanation
While average population per Gram Panchayat is a real and measurable contributing factor, it is not the primary driver of OSR performance. The Expert Committee on Own Source Revenue of Rural Local Bodies and subsequent analyses (including those by the National Institute of Public Finance and Policy) consistently identify stronger determinants. These include the existence and quality of State-level OSR rules; the actual devolution of taxation powers (how many taxes GPs are empowered to levy and whether they exercise those powers); administrative capacity and digital infrastructure (for example, adoption of the SAMARTH portal); political willingness to tax local residents and businesses; the level of local economic development and commercial activity; and citizen compliance along with effective enforcement mechanisms.
Even after accounting for population size and commercial activity, southern and western States generally outperform others because of stronger institutional frameworks. Some States with reasonably large GPs still underperform when rules are weak or political will is absent; conversely, a few States with smaller average GP sizes achieve better results when systems and political commitment are stronger. The Ministry of Panchayati Raj’s own mapping (presented at the November 2024 Finance Commission Conclave) further shows that several States and UTs still lack OSR rules altogether including Arunachal Pradesh, Bihar, Jharkhand, Manipur, Nagaland, Sikkim, Uttar Pradesh and certain Union Territories which is a more binding constraint than population size alone.
A uniform national approach will therefore not work. High-performing States need support to scale innovations (digital demand generation and collection, better valuation linked to SVAMITVA property records and professionalisation of revenue functions). Low-performing and large populous States require foundational interventions: notification or updating of clear OSR rules, basic capacity building for elected representatives and staff, simplified assessment procedures, political messaging that links local taxes to visible local services and stronger performance-linked incentives under the 16th Finance Commission grants. Peri-urban Gram Panchayats, with higher commercial potential, warrant specialised attention including land-use linked revenue instruments and technical support for asset monetisation under the Atma Nirbhar Panchayat framework.
Model OSR rules (already drafted for publication), IIM-Ahmedabad training modules, and the SAMARTH portal provide useful building blocks, but their impact will depend on State-specific adaptation and sustained political commitment.
A Coherent Path Forward
The ground realities point to a clear set of institutional priorities:
These are not new ideas. They flow directly from the constitutional architecture of the 73rd and 74th Constitutional Amendments, repeated expert and ministerial recommendations and the practical lessons of States that have moved further on merger and functional DPCs. The current policy moment- Atma Nirbhar Panchayat, performance grants and renewed attention to peri-urban growth offers an opportunity to close the gap between intent and institutional reality.
Strengthening Gram Panchayats as effective, financially capable units of local governance ultimately depends on restoring the centrality of the constitutional institutions designed for that purpose. Functional DPCs, freed from the legacy of parallel structures and supported by realistic, state-differentiated OSR strategies are the indispensable hinge.
Note: OSR figures primarily drawn from the Expert Committee on Own Source Revenue of Rural Local Bodies (Ministry of Panchayati Raj). Average population per GP and States with/without OSR rules referenced from the Ministry of Panchayati Raj presentation “Finance Commission Conclave – Devolution to Development” (14 November 2024).
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