- taxes devolved to PRI are inelastic in nature
- reluctance on part of PRI to impose taxes
- PRI generate only 5% of their finances through own sources and are highly dependent on state for their functioning
- possess limited borrowing powers
- states reluctant to implement recommendation of the SFC
States like Kerala, AP, Karnataka have done well when it comes to finances and thus the PRI are more autonomous and function in a more effective manner.
Recommendations
- broadening and deepening of revenue base for PRI
- state govt should release timely funds to the PRI and should be released in two installments
- center also needs to financially incentivize states to encourage effective devolution to panchayats in functions, finances and functionaries