Local Governance in India is a concept and an institution that constitutes the third tier of government, below the Union and State levels, managing local affairs through bodies elected by the local people. Its constitutional foundation was laid by the 73rd and 74th Constitutional Amendment Acts of 1992, which sought to institutionalize grassroots democracy and decentralize power. Before these amendments, local bodies lacked constitutional backing, financial autonomy, and regular elections, which had made them largely ineffective. The 73rd Amendment came into force on April 24, 1993, establishing Panchayati Raj Institutions (PRIs) for rural areas, while the 74th Amendment became operational on June 1, 1993, for Urban Local Bodies (ULBs) or Municipalities.
The mechanism works through a mandatory three-tier structure for both rural and urban areas. The 73rd Amendment added Part IX (Articles 243 to 243-O) and the Eleventh Schedule (listing 29 functional items) to the Constitution, while the 74th Amendment added Part IXA (Articles 243P to 243ZG) and the Twelfth Schedule (listing 18 subjects). Key provisions mandate elections every five years and reserve seats for Scheduled Castes (SC), Scheduled Tribes (ST), and a minimum of one-third of seats for women at all levels.
This system connects to the State Election Commission (SEC), which conducts local elections, and the State Finance Commission (SFC), which is set up every five years to review the financial position of the local bodies. The Gram Sabha is a related concept, serving as the foundation of direct democracy at the village level. While the core structure established in 1992 remains, a parliamentary standing committee noted in 2025 that the devolution of functions, finances, and functionaries remains incomplete. However, the 16th Finance Commission has recently increased grants for urban local bodies for the 2026-31 period, addressing a key financial constraint.