Panchayats Should Augment Tax & Non-tax Revenue Resources: RBI
Panchayats need to enhance their efforts to generate their own tax and non-tax revenue resources, said a report by the Reserve Bank of India (RBI). They also need to improve their governance, the central bank highlighted in the report. The finances of Panchayati Raj Institutions (PRIs) face limitations as they have limited revenue from property taxes, fees, and fines. Almost all of their revenue comes from grants from higher levels of government.
This highlights their high dependence on state and central governments. Thus, for sustainable growth, panchayats need to focus on expanding their tax and non-tax revenue resources and improving their governance.
The report emphasises the importance of promptly establishing State Finance Commissions (SFCs) without any significant delays. These SFCs have the same roles as the Central Finance Commission (CFC) and are responsible for presenting their action-taken reports in state legislatures. They can help strengthen the financial position of PRIs (Panchayati Raj Institutions) and aid them in carrying out their duties of developing the rural economy.
The report also highlights that PRIs can utilise their limited resources more effectively through a few measures such as fiscal discipline, transparent budgeting and engaging the local community to prioritise staff training, development needs and implementing robust monitoring and evaluation processes.
The RBI report highlights the crucial role played by PRIs in rural development and local governance in India. To empower local leaders and officials, the report recommends providing them with diverse promoting decentralisation, funding sources, implementing capacity-building programs and upgrading infrastructure.
The report also stresses the need to raise awareness among citizens about the functions and significance of PRIs. This can be achieved by encouraging their participation in local governance processes, and by enhancing people-centric administration and communication.
The report draws upon data from 2.58 lakh panchayats for the years 2020-21 to 2022-23, providing an assessment of their finances and their contribution to India's socio-economic development.
The report noted that an assessment of the fiscal health of PRIs is challenging due to the uneven availability of data on their expenditures and revenues, driving home the point that the provision of these data in standardised formats would enhance accountability and fiscal transparency and also contribute to their empowerment.
