Despite three decades of the 73rd Amendment, Panchayats remain fiscally dependent. How far can schemes like PM Viksit Gram Swaraj Yojana make PRIs financially self-reliant?

Three decades after the 73rd Amendment, about 95% of Panchayat revenue comes as grants from higher governments. Own tax revenue is only about 1.1% [1][2]. PM-VGSY (2026-31, ₹7,395.55 crore) [3] can make PRIs self-reliant only partly. It builds skills and systems, but the power to tax lies with the States.

How PM-VGSY can help

• OSR capacity: it brings Own Source Revenue into one framework with planning and training for about 32 lakh representatives and functionaries [3]. It builds on RGSA's OSR module developed with IIM-Ahmedabad [5].
• Better use of grants: integrated GPDP helps Panchayats plan how to spend the roughly ₹4.35 lakh crore of XVI Finance Commission grants for Rural Local Bodies [3].
• Credible accounts: eGramSwaraj (integrated with PFMS and GeM) and AuditOnline make accounts transparent [3]. Citizens are more likely to accept local taxes when they can see how the money is spent.

Where it falls short

• No taxing power: under Article 243H, Panchayats can levy only the taxes that State law allows. A Central scheme cannot change that.
• Small scale: the outlay is about 1.7% of the FC grants to Rural Local Bodies [3]. It can steer that money but cannot replace it.
• Devolution gaps: functions and staff are State choices (Article 243G). The Devolution Index score for functionaries is only 50.9% [4], and PM-VGSY funds only contractual staff [3].
• Release delays: under the revamped RGSA, only ₹2,496.20 crore of the ₹3,700 crore Central share had been released by 31.07.2025 [5]. PM-VGSY keeps the same Annual Action Plan route [3].

Way forward

• States should widen tax assignments under Article 243H, especially property tax, and act on State Finance Commission (Article 243I) recommendations.
• The Central Empowered Committee could link approval of Action Plans to State progress on the Devolution Index [3][4].
• States should build permanent Panchayat staff, and releases and spending should be published State-wise every year.

PM-VGSY closes the gap in skills and systems, but not the legal and fiscal gap behind Panchayats' dependence. Combined with State taxing powers, permanent staff and timely funds, it can turn Panchayats from agencies that spend grants into the institutions of self-government Part IX envisages, in line with SDG 16's call for accountable institutions.