A report by the Reserve Bank of India (RBI) on the Finances of Panchayati Raj Institutions on January 24 said panchayats should cut the dependence on grants and raise resources by deploying the tax and non-tax instruments available to them.
This will help the Panchayats to improve the quality of their services in rural areas and strengthen the rural economy, the report added.
From 2020-21 to 2022-23, the revenues of Panchayats are through grants from higher levels of government, underscoring their heavy reliance on the Central and State governments for financial resources, according to the report.
Grants to the Panchayati raj Institutions are disbursed by the Central Government, based on the recommendations of the Central Finance Commissions and by the State Governments, based on the recommendations of the State Finance Commissions.
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They are also allocated through centrally sponsored schemes. The grants come in various forms such as untied grants, tied grants, performance based grants and special category grants.
At the Panchayat level, grants are the principal revenue source, with a share of over 95 percent on average across states, the report said.
In a few States such as Andhra Pradesh, Haryana, Himachal Pradesh, Maharashtra, Tamil Nadu, and Telangana, Panchayats have managed to generate relatively higher own revenues, report added.
Receipts
The revenue receipts of the Panchayats are dominated by grants-in-aid, with a share of more than 95 percent of the total receipts.
The average revenue per Panchayat from all sources - taxes, non-taxes and grants - was Rs 21.2 lakh in 2020-21, Rs 23.2 lakh in 2021-22 and Rs 21.23 lakh in 2022-23.
Revenues of Panchayats has declined in 2022-23 due to lower grants from the state and central governments, the report said.
The ratio of revenue receipts of the Panchayats to States’ own revenues ranges from 0.1 percent in Andhra Pradesh to 2.5 percent in Uttar Pradesh, indicating that their revenues are moderate relative to those of the States.
Further, the report said the average revenue per Panchayat varied from Rs 2.7 lakh in Andhra Pradesh to Rs 64 lakh in West Bengal.
Expenditure
The average expenditure per Panchayat decreased from Rs 17.3 lakh in 2020-21 to Rs 12.5 lakh in 2022-23 due to higher than-normal spending in the pandemic year 2020-21.
Goa, Karnataka, Odisha, Sikkim, Kerala, and Tamil Nadu recorded the highest average expenditure at the Panchayat level.
As per report, the ratio of revenue expenditure of Panchayats to nominal GSDP is less than 0.6 percent for all the States, ranging from 0.001 percent in Bihar to 0.56 percent in Odisha.
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