Rural Development: Administration and Planning

KHU-701

Unit-3
Syllabus
Panchayati Raj & Rural Administration: Administrative Structure: bureaucracy, structure of
administration; Panchayati Raj Institutions Emergence and Growth of Panchayati Raj Institutions in
India; People and Panchayati Raj; Financial Organizations in Panchayati Raj Institutions, Structure of
rural finance, Government & Non-Government Organizations / Community Based Organizations,
Concept of Self help group.

Objectives of Panchayati Raj & Rural Administration:

1. Decentralization: Transfer power and decision-making to local self-government institutions,

enhancing local governance.
2. Local Development: Address local needs and priorities through community-based planning and
implementation of development projects.
3. Empowerment: Empower rural communities, especially marginalized groups, to participate in
governance and development.
4. Efficient Resource Utilization: Optimize the use of local resources and ensure targeted delivery of
services and programs.
5. Transparency and Accountability: Foster greater transparency and accountability in the
administration of rural areas.

Importance of Panchayati Raj & Rural Administration:

1. Enhanced Governance: Brings decision-making closer to the people, making governance more
responsive and effective.
2. Community Participation: Encourages active participation of local residents in the development
process, leading to more relevant and effective solutions.
3. Local Development: Facilitates the implementation of tailored development initiatives that address
specific local needs and priorities.
4. Resource Management: Improves the management and allocation of resources by aligning them
with local requirements and conditions.

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 5. Democratic Empowerment: Strengthens democratic practices at the grassroots level, promoting
inclusivity and political engagement in rural areas.

Relevance of Panchayati Raj & Rural Administration:

1. Decentralized Governance: Empowers local self-government, making decision-making more

accessible and responsive to the needs of rural communities.
2. Local Representation: Ensures that rural populations have a voice in governance and development,
leading to more equitable and inclusive decision-making.
3. Tailored Development: Allows for development projects and policies that are specifically designed
to address local issues and priorities.
4. Enhanced Accountability: Promotes transparency and accountability in the administration of rural
areas by involving local representatives in governance.
5. Empowerment: Strengthens the role of local leaders and communities in managing their own
affairs, fostering grassroots democracy.

Application of Panchayati Raj & Rural Administration:

1. Local Planning: Panchayats develop and implement community-based plans for infrastructure,
education, healthcare, and other essential services.
2. Resource Management: Oversee and allocate resources for local projects, ensuring that funds are
used effectively to meet community needs.
3. Service Delivery: Manage and deliver services such as clean water, sanitation, and road
maintenance at the local level.
4. Community Engagement: Facilitate community participation in decision-making processes,
ensuring that development initiatives reflect the needs and preferences of local residents.
5. Monitoring and Evaluation: Monitor the implementation of development projects and evaluate
their impact, making adjustments as necessary to improve outcomes.

By focusing on these areas, Panchayati Raj and Rural Administration play a crucial role in fostering
sustainable and inclusive development in rural areas.

Advantages of Panchayati Raj & Rural Administration:

1. Decentralization of Power: Empowers local governments to make decisions based on local needs
and priorities, enhancing the relevance and effectiveness of governance.
2. Increased Participation: Encourages greater community involvement in decision-making
processes, leading to more inclusive and representative governance.

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 3. Improved Service Delivery: Facilitates the delivery of essential services like healthcare, education,
and infrastructure at the local level, improving accessibility and efficiency.
4. Enhanced Accountability: Local officials are more directly accountable to their communities,
which can lead to better governance and reduced corruption.
5. Local Development: Promotes tailored development initiatives that address specific local issues and
utilize local resources effectively.
6. Strengthened Democracy: Fosters grassroots democracy by involving citizens in local governance,
which can enhance civic engagement and political awareness.

Disadvantages of Panchayati Raj & Rural Administration:

1. Limited Resources: Local bodies often have limited financial and administrative resources, which
can constrain their ability to implement and manage development projects effectively.
2. Capacity Constraints: Rural administrations may lack the technical expertise and training needed
for efficient governance and project management.
3. Political Instability: Local political conflicts and power struggles can hinder effective governance
and development efforts.
4. Inequality: There can be disparities in the effectiveness of Panchayati Raj institutions, with some
areas benefiting more than others due to varying levels of local leadership and resources.
5. Bureaucratic Inefficiencies: Administrative delays and inefficiencies at the local level can affect
the timely implementation of projects and services.
6. Corruption Risks: Local governance can be susceptible to corruption and nepotism if not
adequately monitored and regulated.

Overall, while Panchayati Raj and Rural Administration offer numerous benefits by decentralizing
governance and empowering local communities, they also face challenges related to resource constraints,
capacity, and governance issues. Addressing these challenges is crucial for maximizing the effectiveness of
Panchayati Raj and Rural Administration.

COURSE OUTCOME: After completion of the course student will be able to:

Students will have a clear idea about the area development programmes and its impact.

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 Notes

Evolution of Panchayati Raj System

The foundation of the present local self-government in India was laid by the Panchayati Raj System (1992).
But the history of Panchayati Raj starts from the self-sufficient and self-governing village communities. In
the time of the Rig-Veda (1700 BC), evidence suggests that self-governing village bodies called ‘sabhas’
existed. With the passage of time, these bodies became panchayats (council of five persons). Panchayats
were functional institutions of grassroots governance in almost every village. They endured the rise and fall
of empires in the past, to the current highly structured system.The village panchayat, as a system of
administration, began in the British days, as their offer to satisfy the demands for local autonomy. They
opened up the governance of the lowest levels to the citizens. The Government of India act, 1935 also
authorizes the provinces to enact legislations. Even though such minor forms of local governance was
evident in India, the framers of the constitutions, unsatisfied with the existing provisions, included Article 40
among the Directive Principles, whereby:
“The state shall take steps to organize village panchayats and endow them with such powers and
authority as may be necessary to enable them to function as units of self-government.”
Later, the conceptualisation of the system of local self-government in India took place through the formation
and effort of four important committees from the year 1957 to 1986.
(a) Balwant Rai Mehta Committee (1957)
Originally appointed by the Government of India to examine the working of two of its earlier programs, the
committee submitted its report in November 1957, in which the term ‘democratic decentralization’ first
appears. The important recommendations are:
 Establishment of a three-tier Panchayati Raj system – gram panchayat at village level (direct
election), panchayat Samiti at the block level and Zila Parishad at the district level (indirect election).
 District Collector to be the chairman of Zila Parishad.
 Transfer of resources and power to these bodies to be ensured.
The existent National Development Council accepted the recommendations. However, it did not insist on a
single, definite pattern to be followed in the establishment of these institutions. Rather, it allowed the states
to devise their own patterns, while the broad fundamentals were to be the same throughout the
country.Rajasthan (1959) adopted the system first, followed by Andhra Pradesh in the same year. Some
states even went ahead to create four-tier systems and Nyaya panchayats, which served as judicial bodies.

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(b) Ashok Mehta Committee (1977-1978)
The committee was constituted by the Janata government of the time to study Panchayati Raj institutions.
Out of a total of 132 recommendations made by it, the most important ones are:
 Three-tier system to be replaced by a two-tier system.
 Political parties should participate at all levels in the elections.
 Compulsory powers of taxation to be given to these institutions.
 Zila Parishad to be made responsible for planning at the state level.
 A minister for Panchayati Raj to be appointed by the state council of ministers.
 Constitutional recognition to be given to Panchayati Raj institutions.
Unfortunately, the Janata government collapsed before action could be taken on these recommendations.
(c) G V K Rao Committee (1985)
Appointed by the Planning Commission, the committee concluded that the developmental procedures were
gradually being taken away from the local self-government institutions, resulting in a system comparable to
‘grass without roots’.
 Zila Parishad to be given prime importance and all developmental programs at that level to be
handed to it.
 Post of DDC (District Development Commissioner) to be created acting as the chief executive
officer of the Zila Parishad.
 Regular elections to be held
(d) L M SinghviCommitee (1986)
Constituted by the Rajiv Gandhi government on ‘Revitalisation of Panchayati Raj institutions for
Democracy and Development’, its important recommendations are:
 Constitutional recognition for PRI institutions.
 Nyaya Panchayats to be established for clusters of villages
Though the 64th Constitutional Amendment bill was introduced in the Lok Sabha in 1989 itself, Rajya
Sabha opposed it. It was only during the Narasimha Rao government’s term that the idea finally became a
reality in the form of the 73rd and 74th Constitutional Amendment acts, 1992.

Panchayati Raj System under 73rd and 74th Constitutional Amendment acts, 1992
The acts of 1992 added two new parts IX and IX-A to the constitution. It also added two new schedules–11
and 12 which contains the lists of functional items of Panchayats and Municipalities. It provides for a three-
tier system of Panchayati Raj in every state – at the village, intermediate and district levels. Panchayat and
Municipality are the generic terms for the governing body at the local level. Both exist as three tier systems
– at the lower, intermediate and upper levels.

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The 73rd Constitutional Amendment act provides for a Gram Sabha as the foundation of the Panchayati Raj
system. It is essentially a village assembly consisting of all the registered voters in the area of the panchayat.
The state has the power to determine what kind of powers it can exercise, and what functions it has to
perform at the village level. The 74th Constitutional Amendment act provides for three types of
Municipalities:
 Nagar Panchayat for a transitional area between a rural and urban area.
 Municipal Council for a small urban area.
 Municipal Corporation for a large urban area.
Municipalities represent urban local self-government. Most of the provisions of the two acts are parallel,
differing only in the fact that they are being applied to either a Panchayat or a Municipality respectively.
Each Gram sabha is the meeting of a particular constituency called ward. Each ward has a representative
chosen from among the people themselves by direct election.The chairperson of the Panchayat or
Municipality at the intermediate and district level are elected from among these representatives at the
immediately lower level by indirect election.

Three-tier structure of Panchayati Raj

(a) Gram Panchayat (village level)
Gram Panchayats are at the lowest level of Panchayat Raj institutions (PRIs), whose legal authority is the
73rd Constitutional Amendment of 1992, which is concerned with rural local governments. The Gram
Panchayat is divided into wards and each ward is represented by a Ward Member or Commissioner, also
referred to as a Panch or Panchayat Member, who is directly elected by the villagers. The Panchayat is
chaired by the president of the village, known as a Sarpanch. The term of the elected representatives is five
years. The Secretary of the Panchayat is a non-elected representative, appointed by the state government, to
oversee Panchayat activities. A Gram panchyat's term of office is five years. Every five years elections take
place in the village. All people over the age of 18 who are residents of the territory of that village's Gram
panchayat can vote. For women's empowerment and to encourage participation of women in the democratic
process, the government of India has set some restrictions on Gram panchayat elections, reserving one-third
of the seats for women, as well as reserving seats for scheduled castes and tribes.

Functions of Panchayat
All Panchayati Raj Institutions perform such functions as are specified in state laws relating to panchayati
raj. Some States distinguish between obligatory (compulsory) and optional functions of Gram Panchayats
while other States do not make this distinction.
 The civic functions relating to sanitation, cleaning of public roads, minor irrigation, public toilets and
lavatories, primary health care, vaccination, the supply of drinking water, constructing public wells,

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 rural electrification, social health and primary and adult education, etc. are obligatory functions of
village panchayats.
 The optional functions depend on the resources of the panchayats. They may or may not perform
such functions as tree plantation on roadsides, setting up of breeding centers for cattle, organizing
child and maternity welfare, promotion of agriculture, etc.
 After the 73rd Amendment, the scope of functions of Gram Panchayat was widened. Such important
functions like preparation of annual development plan of panchayat area, annual budget, relief in
natural calamities, removal of encroachment on public lands and implementation and monitoring of
poverty alleviation programmes are now expected to be performed by panchayats.
 Selection of beneficiaries through Gram Sabhas, public distribution system, non-conventional energy
source, improved Chullahs, biogas plants have also been given to Gram Panchayats in some states.

(b) Mandal Parishad or Block Samiti or Panchayat Samiti (block level)

The second or middle tier of the Panchayati Raj is Panchayat Samiti, which provides a link between Gram
Panchayat and a Zila Parishad. The strength of a Panchayat Samiti also depends on the population in a
Samiti area. In Panchayat Samiti, some members are directly elected.Sarpanchs of Gram Panchayats.
Sarpanchs of Gram Panchayats are ex-officio members of Panchayat Samitis. However, all the Sarpanchs of
Gram Panchayats are not members of Panchayat Samitis at the same time.The number varies from State to
State and is rotated annually. It means that only chairpersons of some Gram Panchayats in a Samiti area are
members of Panchayat Samiti at a time.In some panchayats, members of Legislative Assemblies and
Legislative Councils, as well as members of Parliament who belong to the Samiti area, are co-opted as its
members. Chairpersons of Panchayat Samitis are, elected indirectly- by and from amongst the elected
members thereof.

Functions of Panchayat Samiti

 Panchayat Samitis are at the hub of developmental activities.
 They are headed by Block Development Officers (B.D.Os).
 Some functions are entrusted to them like agriculture, land improvement, watershed development,
social and farm forestry, technical and vocational education, etc.
 The second type of functions relates to the implementation of some specific plans, schemes or
programmes to which funds are earmarked. It means that a Panchayat Samiti has to spend money
only on that specific project. The choice of location or beneficiaries is, however, available to the
Panchayat Samiti.

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(c) Zila Parishad (district level)
Zila Parishad or district Panchayat is the uppermost tier of the Panchayati Raj system. This institution has
some directly elected members whose number differs from State to State as it is also based on population.
Chairpersons of Panchayat Samitis are ex-officio members of Zila Parishads. Members of Parliament,
Legislative Assemblies and Councils belonging to the districts are also nominated members of Zila
Parishads. The chairperson of a Zila Parishad, called Adhyaksha or President is elected indirectly-by and
from amongst the elected members thereof. The vice-chairperson is also elected similarly. Zila Parishad
meetings are conducted once a month. Special meetings can also be convened to discuss special matters.
Subject committees are also formed. Zila Parishad meetings are conducted once a month. Special meetings
can also be convened to discuss special matters. Subject committees are also formed.
Functions of Zila Parishad
 Zila Parishad links Panchayat Samitis within the district.
 It coordinates their activities and supervises their functioning.
 It prepares district plans and integrates Samiti plans into district plans for submission to the State
Government.
 Zila Parishad looks after development works in the entire district.
 It undertakes schemes to improve agricultural production, exploit ground water resources, extend
rural electrification and distribution and initiate employment generating activities, construct roads
and other public works.
 It also performs welfare functions like relief during natural calamities and scarcity, the establishment
of orphanages and poor homes, night shelters, the welfare of women and children, etc.
 In addition, Zila Parishads perform functions entrusted to them under the Central and State
Government sponsored programmes. For example, Jawahar Rozgar Yojna is a big centrally
sponsored scheme for which money is directly given to the districts to undertake employment-
generating activities.

Structural transformation of rural finance in India

In 1947, with the help of survey, Reserve Bank of India (RBI) recorded that moneylenders and other
informal lenders met more than 90% of the rural credit needs. The share of banks was only about 1 % of the
total rural household debt.The increasing amount of institutionalization of rural finance led to the structural
transformation. The major emphasis was given during the Fourth Five-Year Plan (1969–1974) following
bank nationalization and by setting up of NABARD (National Bank for Agriculture and Rural
Development), the formation of Self-Help Group (SHG)—bank linkage and the setting up of Micro Finance
Institutions (MFIs).
The entire phase of rural credit provisioning in independent India can be classified into three phases.

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  First from the 1950s up to the mid-1960s when cooperatives were the main institutional setups.
 Second, the 1970s and 1980s when commercial banks and RRBs (Regional Rural Banks) played the
dominating role in institutional credit disbursement.
 The final phase starting from the reform period in the early 1990s to the present which observes the
restructuring of the banking system, the emergence of SHGs, and a growing number of MFIs.
The entire structural transformation process can be divided into four phases:
(a) Increasing dominance of cooperatives
 The introduction of cooperatives is the earliest attempt at institutionalization of rural finance.
 The cooperative credit movement in India started with the passing of the Cooperative Societies Act
in 1904. It came into force following the Fourth Five-year Plan (1969–1974).
 The aim of cooperatives is to fulfil the short, medium and the long-term credit needs of the rural
households.
(b) Bank nationalization and dominance of commercial banks
 The share of scheduled commercial banks (SCBs) in total institutional credit has gradually increased
since the nationalization of banks in 1969.
 After bank nationalization, RBI made it mandatory for commercial banks to cover the unbanked
rural and semi urban areas. Each bank would have to open at least three branches in unbanked rural
or semi urban areas.
(c) Establishment of NABARD and Bank—Self-Help Groups (SHGs) Linkage
 With this establishment of NABARD (National Bank for Agriculture and Rural Development) in
July 1982 the government has widened its role in rural credit from ‘‘agricultural development’’ to
‘‘rural development.’’
 NABARD approves short, medium, and long-term credits and facilitate the development of bank–
SHGs linkage.
 NABARD provides refinance support to banks at very low interest rates for financing SHGs. As most
of the SHGs comprise women members so empowerment of rural women was achieved.
 The government has introduced Rural Infrastructure Development Fund (RIDF) in 1995–1996 in
NABARD. The fund is created to finance various rural infrastructure projects such as irrigation,
road, bridges, watershed, cold storage, fisheries, inland waterways development, etc.
(d) Introduction and commercialization of Micro Finance
 The most recent innovation toward institutionalization of the rural credit system is the introduction of
microfinance.
 MFIs in India have non-profit motivation on one hand and profit maximization for long-term on the
other hand.

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  It has evolved as an attractive and cost-effective mechanism to reach financial services to the rural
poor.
 MFIs has eliminated the basic problems of incorrect client identification and mitigate repayment
risks to a great extent.
 MFIs are more aggressive and innovative to reach the rural poor than the formal banking system.
They not only provide loan for productive purposes but also for consumption purposes.

Self-help groups
Self-Help Groups (SHGs) are the people who choose to come together to find ways to improve their living
conditions.It can be defined as self-governed group of people with similar socio-economic background and
having a desire to collectively perform common purpose.Villages face numerous problems related to
poverty, illiteracy, lack of skills, lack of formal credit etc. These problems cannot be tackled at an individual
level and need collective efforts.Thus SHG can become a vehicle of change for the poor and marginalized.
SHG rely on the idea of “Self Help” to encourage self-employment and to reduce poverty.
Functions
 It looks to build the functional capacity of the poor and the marginalized in the field of employment
and in the income generating activities.
 It resolves conflicts through collective leadership and mutual discussion.
 It provides collateral free loan with terms decided by the group at the market driven rates. The poor
collect their savings and save it in banks. In return they receive easy access to loans with a small rate
of interest to start their micro unit enterprise.
 Consequently, Self-Help Groups have emerged as the most effective mechanism for delivery of
microfinance services to the poor.
Need for SHGs
 One of the reasons for rural poverty in our country is low access to credit and financial services.
 A Committee constituted under the chairmanship of Dr. C. Rangarajan to prepare a comprehensive
report on Financial Inclusion in the Country identified some major reasons for lack of financial
inclusion:
o Inability to provide collateral security
o Inadequate reach of the institutions
 The existence of sound community networks in villages is increasingly being recognised as one of
the most important elements of credit linkage in the rural areas.
 SHGs help in accessing credit to the poor and thus, play a critical role in poverty reduction.
 SHGs help to build social capital among the poor, especially women. This empowers women and
gives them greater voice in the society.

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Benefits of SHGs
(i) Social integrity: SHGs take action to stop practices like dowry, alcoholism etc.
(ii) Gender Equity: SHGs empowers women and develop leadership skill among them. Empowered women
participate more actively in gram sabha and elections. Self-Help Groups formation has a multiplier effect in
improving women’s status in society as well as in the family leading to improvement in their socio-
economic condition and also enhances their self-esteem.
(iii) Voice to marginalized section: Most of the beneficiaries of government schemes have been from
weaker and marginalized communities and hence their participation through SHGs ensures social justice.
(iv) Financial Inclusion: The SHG-Bank linkage programme pioneered by NABARD has made access to
credit easier and reduced the dependence on traditional money lenders and other non-institutional sources.
(v) Improving efficiency of government schemes and reducing corruption through social audits.
(vi) Alternate source of employment: It eases dependency on agriculture by providing support in setting
up micro-enterprises like tailoring, grocery, and tool repair shops.
(vii) Financial independence: Financial independence through self-employment has many externalities
such as improved literacy levels, better health care and even better family planning.
(viii) Changes in consumption pattern: It has enabled the participating households to spend more on
education, food and health than non-client households.
(ix) Impact on housing & health: The financial inclusion attained through SHGs has led to reduced child
mortality, improved maternal health and the ability of the poor to take action to prevent disease through
better nutrition, housing and health–especially among women and children.

Need for increased funding to Panchayats

The panchayats gained prominence as crucial nodal points during the COVID-19 as they ran isolation
centres, medical camps, and contact tracing. However, they faced a lot of challenges during the lockdown
period as for most panchayats it was difficult to provide food at short notice. Hence, the Panchayati Raj
Ministry has proposed to set up community kitchens in each panchayat that will be operated by the local
self-help groups (SHGs).
 The utilisation rate for Finance Commission grants between 2015 and 2019 stands at 78% and the
allocations had tripled between the 13th and 14th Commissions.
 The role of panchayats becomes more important post lockdown period because now the newly
returned migrant workers will also depend on them to generate employment under the Garib Kalyan
Rojgar Abhiyan.
 The 2.63 lakh panchayats across the country have 29 functions under their ambit, according to the
11th Schedule of the Constitution. Road construction, its maintenance and drinking water supply are
the major projects carried out by panchayats using FC grants.

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Sources of funds for the various levels of Panchayati Raj System
(a) Gram Panchayat (village level)
The income of the gram panchayat comes from:
 Collection of taxes on houses, market places etc.
 Government scheme funds received through various departments of the government– through the
Janpad and Zila Panchayats.
 Donations for community works etc
(b) Mandal Parishad or Block Samiti or Panchayat Samiti (block level)
The income of the panchayat samiti comes from:
 Land and water use taxes, professional taxes, liquor taxes and others
 Income-generating programmes
 Grants-in-aid and loans from the state government and the local zila parishad
 Voluntary contributions
(c) Zila Parishad (district level)
The income of the zila parishad comes from:
 Income from taxes levied by Zila Parishad, license fees and market fees
 A share is given to Zila Parishad from the collected land revenue
 Income from various properties of Zila Praishad
 Grants from the State and Central governments
 Funds allotted by the State for developmental activities.

Role of bureaucracy in India

Ans: Grass roots bureaucracy are the officials consisting at the district and its below level. The officials in
these institutions are directly responsible for implementing the welfare schemes for the people. There are
three pillars that form the basic structures of these institutions i.e state government departments responsible
for planning, collector responsible for coordinating and act as a executive officer at the district level and at
last is the democratically elected local government. Even though the schemes are well planned, the
implementation has the major shortcomings. It is due to centralization of power, lack of coordination, lack
of skilled field officers, rigid mode of working etc. Scrutinizing the implementation failure is the need of the
hour which prevents the wastage of resources which is planned for effective implementation.
Problems
(a) Centralization of powers
Though, at the district level collector is the chief executive officer of various government welfare schemes,
state departments hold the district offices tightly. Collector has huge authority over the police and revenue
department but comparatively less over personnel in district level offices which makes coordination more

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difficult at the district level. Offices at different geographical units and the non-acceptance of single
authority as a coordinating body makes the things even worse. Local Government who are well aware of the
needs and problems of the local people are helpless as they are disempowered to do so. Local government
are responsible for implementing the socio economic development schemes but they are disempowered by
state government as the financial autonomy is under voluntary provision despite of 73rd CAA. Because of
this disempowerment, local government got caught in between the public demands and lack of actual
authority.
(b) Lack of skilled officers
We have doctors, engineers and other professionals but we lack of nutritionists, health administrators who
are all needed to implement the schemes at grass root level. There is shortage of personnel as number of
people per official is too huge which is unavoidable in our country. Because of this official carry huge
workload and often they tend to concentrate on the works where the superior pressure in intense.
(c) Mode of working
Officials define their terms based on the implementation programmes rather than the goals that are set by
implementation programmes. It is because of their that they are confined only to implement the plan and not
caring about the future results.These problems faced by officials subsumes the great amount work involved
every year for planning and also the government initiatives.
Reforms
The reforms are the need of the hour as it severely affects the quality of the programmes initiated by the
government. The less effectiveness involves the wastage of resources in the country which are limited. So
for effective implementation and optimum use of resources and for the benefit of the people and in a view
that benefit should go to the people effectively, the reforms must be undertaken.
(i) Technology must be used at the max level to ensure the sync between state and district officials rather
than officials and the local community.
(ii) Decentralization and devolution of powers should be done.
(iii) Corruption has to be reduced by encouraging social audits, RTI etc.
(iv) Unproductive working process should be weaned away and management principles has to be applied for
the effective working of the institutions at the low cost.
The optimum level of bureaucracy at the grass root level is the need of the hour as they are the real
executive bodies who has a direct contact with the people. Reduction of corruption, prevention of excessive
centralization, coordination among the state and district level institutions, empowering of redressal
mechanism, giving financial and administrative powers to the local governmental bodies need to be done in
order to realize the Gandhian principles.

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Empowering Communities Through Self-Help Groups

Background:

In the rural village of Samudrapur, poverty and lack of financial resources have long been significant
challenges. The villagers, primarily engaged in agriculture, often face difficulties accessing credit and other
financial services. Traditional banking systems are distant, and the villagers have limited financial literacy.

The Initiative:

In 2018, a local NGO, "Rural Prosperity Foundation," initiated a program to establish Self-Help Groups
(SHGs) in Samudrapur. The goal was to empower villagers by providing them with a platform for collective
savings and credit.

Formation of SHGs:

The NGO organized a series of meetings to explain the concept of SHGs. A Self-Help Group is essentially a
small, informal association of people who come together to achieve common goals. Each member
contributes a fixed amount regularly to a common fund, which is then used to provide small loans to
members at low interest rates. The group also collectively decides on how to utilize the funds and ensures
repayment.

Implementation:

In Samudrapur, SHGs were formed with 10-15 members each, primarily consisting of women. The members
began by pooling their savings into a shared fund. To foster trust and cooperation, the NGO facilitated
workshops on financial literacy, group management, and basic accounting.

Impact:

1. Financial Inclusion:
o Members who previously had no access to credit were now able to secure small loans for
personal or agricultural needs. This access to finance helped them invest in better seeds,
tools, and other inputs, leading to improved crop yields.
2. Empowerment and Skill Development:
o Women in the SHGs developed leadership and management skills as they took on roles such
as group treasurer or chairperson. They also gained confidence in managing finances and
making collective decisions.

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 3. Community Building:
o The SHGs fostered a sense of community and mutual support. Members helped each other
with business ideas and shared best practices, leading to a collaborative spirit within the
village.
4. Economic Improvement:
o The improved financial stability and access to resources led to a noticeable rise in the
villagers' income levels. This, in turn, contributed to better living conditions and reduced
poverty.

Challenges:

While the initiative was largely successful, it faced challenges such as:

 Initial Resistance: Some villagers were skeptical about the concept and hesitant to participate
initially.
 Group Dynamics: Managing group dynamics and ensuring that all members adhered to the rules
required ongoing effort and mediation.
 Sustainability: Ensuring the long-term sustainability of the SHGs required continuous support and
training from the NGO.

Conclusion:

The self-help groups in Samudrapur demonstrated the power of collective action in addressing financial and
social challenges. By pooling resources and working together, the villagers not only improved their
economic conditions but also strengthened their community bonds. The success of this initiative highlights
the potential of self-help groups as a model for sustainable development and empowerment in rural areas.

In the small town of Shanthinagar, many low-income families faced economic instability due to irregular
employment and limited access to financial resources. Traditional financial institutions were either
inaccessible or unwilling to offer small loans to these families, exacerbating their financial struggles.

The Initiative:

In early 2022, a local development organization named "Hope for All" launched a project to introduce Self-
Help Groups (SHGs) in Shanthinagar. The primary aim was to empower residents by creating a community-
based system for savings and credit.

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Formation of SHGs:

Hope for All organized several community meetings to introduce the concept of SHGs. Each SHG was to be
a small group of 12-15 people from the same neighborhood or social circle, coming together to pool their
savings. Members would contribute a fixed amount periodically, and the collected funds would be used to
provide low-interest loans to members in need.

Implementation:

1. Group Formation:
o 15 SHGs were established with diverse membership, including both men and women. Each
group selected its own leaders and set rules for savings and loan repayments.
2. Training and Support:
o The organization provided training on financial management, record-keeping, and group
dynamics. Regular workshops helped members understand their roles and responsibilities.
3. Loan Disbursement and Impact:
o Loans were issued to members for various purposes, including starting small businesses,
improving agricultural practices, and addressing emergency needs. As a result, members
experienced increased financial stability and were able to improve their livelihoods.

Impact:

1. Enhanced Financial Access:

o SHG members gained access to financial resources that were previously unavailable to them.
This led to improved economic opportunities and stability.
2. Skill Development:
o Members acquired skills in financial management, leadership, and teamwork, contributing to
their personal and professional growth.
3. Community Solidarity:
o The SHGs fostered a sense of community and mutual support, with members helping each
other beyond financial transactions.
4. Economic Improvement:
o The availability of loans and financial education led to enhanced income-generating activities
and overall economic improvement within the town.

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Challenges:

1. Resistance to Change:
o Some residents were initially reluctant to join the SHGs due to skepticism about the system's
efficacy.
2. Management Issues:
o Ensuring consistent participation and adherence to group rules required ongoing effort and
support from Hope for All.
3. Sustainability Concerns:
o The long-term sustainability of the SHGs depended on continued member engagement and
effective management practices.

Questions:

1. What are the primary benefits of Self-Help Groups (SHGs) as demonstrated in the caselet?
2. How did the introduction of SHGs impact the economic stability of the Shanthinagar
residents?
3. What were some of the challenges faced by the SHGs in Shanthinagar, and how might they be
addressed?
4. How did the training provided by Hope for All contribute to the success of the SHGs?
5. In what ways did the SHGs foster community solidarity in Shanthinagar?
6. What role did leadership play in the management and effectiveness of the SHGs?
7. How can the concept of SHGs be adapted for other communities facing similar financial
challenges?
8. What strategies could be implemented to overcome resistance to SHGs in new areas?

Question Bank
1. What is Self Help Group? Describe the role and functions of SHG.
2. Describe the role & functions of Community Based Organizations.
3. Describe the major source of rural finance in India.
4. Critically evaluate the Bureaucratic Organizational Structure.
5. Discuss the History of Panchayati Raj Institution from Pre-independence till date.
6. Explain the three tiers of Panchayati Raj Institutions with reference to their composition and
functions.
7. Explain the role of NABARD in Rural Financing for Rural Development.

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