Local Bodies & 73rd/74th Amendments — Why India’s...

CURRENT AFFAIRS | 20 MAY 2026

India’s third tier of government — Panchayats and Municipalities — is the most decentralised on paper but among the most anaemic in practice. The numbers are stark: own-tax revenue at the local level is just 0.3% of GDP, compared to roughly 7% in China and 5% in the OECD average. Only ~10% of all government employees work at the local level in India, against 60-65% in the United States and China. Three decades after the 73rd and 74th Constitutional Amendments (1992), the question is no longer whether decentralisation exists in statute — it does — but whether India has built the fiscal-and-administrative scaffolding to make the third tier functional.

Background — The 1992 Reforms

The 73rd Amendment created the rural three-tier (Gram Sabha → Panchayat Samiti → Zila Parishad), added the 11th Schedule with 29 subjects, made elections mandatory every 5 years, and reserved seats for SC/ST/women. The 74th Amendment mirrored it for cities — Nagar Panchayats, Municipal Councils, Municipal Corporations — added the 12th Schedule with 18 subjects, and created the District Planning Committee. Articles 243-G (rural) and 243-W (urban) permit State legislatures to devolve powers — but the verb is “may”, not “shall”, and most States have used the discretion to retain control. K M Munshi’s vision of “the village as the unit of administration” remains half-built.

Why It Matters for CLAT

CLAT consistently tests Indian polity through current-affairs lenses — and decentralisation is a perennial favourite. Expect questions on: 11th vs 12th Schedule subject distinctions, the role of State Finance Commissions (Art 243-I / 243-Y), the difference between devolution and deconcentration, the reservation arithmetic for women in PRIs (33% statutory floor, many States have moved to 50%), and the position of cities like Bengaluru/Mumbai where state-controlled parastatals (BBMP, BMC) handle what should be municipal functions. The fiscal-federalism angle — vertical imbalance, 0.3% own-tax — is a strong essay/legal-reasoning passage.

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Key Facts Table

Indicator	India	Comparator
Local own-tax (% GDP)	~0.3%	China 7% · OECD ~5%
Local govt employees (% all)	~10%	US/China 60-65%
Panchayat subjects	29 (11th Sch.)	Municipal: 18 (12th Sch.)
Key Articles	243-G, 243-W, 243-I, 243-Y	SFC every 5 years
Major urban schemes	JNNURM (2005) → AMRUT (2015) → Smart Cities (2015) → PMAY-U	Centrally-sponsored

Mnemonic — “G-W-IY”

G for Panchayats (Art 243-G), W for Municipalities (Art 243-W); I-Panchayat SFC (Art 243-I), Y-Municipal SFC (Art 243-Y). “G-Will-IY” — Government Will Increase Yield (the third tier’s promise still unfulfilled).