Module 34. Local Governments and Cooperatives

Local governments and co-operatives form the grassroots pillars of India’s democratic and economic system. They embody the spirit of decentralisation, empowering citizens to participate directly in decision-making and community development. These institutions, enshrined in the Constitution through the 73rd and 74th Amendments (1992) and reinforced by the 97th Amendment (2011), represent India’s commitment to self-governance, participatory democracy, and inclusive growth.

Evolution and Constitutional Background

The idea of local self-government in India has deep historical roots. Ancient Indian villages functioned as autonomous units, managing local affairs through panchayats. During the British period, Lord Ripon’s Resolution on Local Self-Government (1882) is considered the landmark step towards decentralised administration.
After Independence, the Constitution of India (1950) included the directive in Article 40—a Directive Principle of State Policy—urging states to organise village panchayats and endow them with necessary powers. However, the system remained weak until the constitutional amendments of 1992 institutionalised local governance.
Similarly, co-operatives in India began as community-based economic movements in the early 20th century, with the Co-operative Credit Societies Act of 1904 laying their foundation. Their constitutional recognition came with the 97th Amendment Act, 2011, which added Part IXB to the Constitution.

The 73rd Constitutional Amendment and Panchayati Raj

The 73rd Amendment Act (1992) gave constitutional status to the Panchayati Raj Institutions (PRIs), introducing Part IX (Articles 243–243O) and the Eleventh Schedule. It applies to rural areas across India except in Nagaland, Meghalaya, Mizoram, and certain Scheduled and Tribal Areas.
Salient Features of the 73rd Amendment:

• Three-tier Structure:
  1. Gram Panchayat – at the village level.
  2. Panchayat Samiti – at the intermediate/block level.
  3. Zila Parishad – at the district level.
• Direct Elections: Members of all three tiers are directly elected by the people.
• Reservation of Seats: Seats are reserved for Scheduled Castes (SCs), Scheduled Tribes (STs), and women (not less than one-third) of the total seats.
• Five-year Tenure: Every Panchayat has a fixed tenure of five years; elections are to be held within six months of its dissolution.
• State Election Commission: Each state must constitute a commission to conduct Panchayat elections.
• State Finance Commission: Established every five years to review the financial position of Panchayats and recommend resource allocation.
• Eleventh Schedule: Lists 29 subjects such as agriculture, education, health, and rural development, under Panchayat jurisdiction.

The Panchayati Raj system thus institutionalises direct participation of people in governance at the village level, enhancing transparency, accountability, and local decision-making.

The 74th Constitutional Amendment and Urban Local Bodies

The 74th Amendment Act (1992) created a constitutional framework for urban local self-government, adding Part IXA (Articles 243P–243ZG) and the Twelfth Schedule to the Constitution. It aims to strengthen democratic processes in urban areas facing challenges of rapid urbanisation.
Key Provisions of the 74th Amendment:

• Types of Urban Local Bodies:
  • Municipal Corporation – for large urban areas.
  • Municipal Council – for smaller urban areas.
  • Nagar Panchayat – for areas in transition from rural to urban.
• Composition: Members are directly elected by the citizens, with reservation for SCs, STs, and women.
• Ward Committees: Established in larger municipalities to promote local participation.
• Tenure: Fixed at five years, with timely elections mandated.
• Finance Commission and Election Commission: Parallel to rural local bodies, ensuring accountability and transparency.
• Twelfth Schedule: Contains 18 functional items, including urban planning, slum improvement, water supply, public health, sanitation, and fire services.

Urban local bodies play a crucial role in managing infrastructure, housing, environmental protection, and public welfare in growing towns and cities.

Significance of Local Governments

Local governments are considered the third tier of Indian democracy, complementing the Union and State governments. Their significance lies in:

• Democratic Decentralisation: Brings government closer to the people.
• Efficient Service Delivery: Enables tailored solutions for local problems.
• Participation and Empowerment: Encourages public involvement in decision-making.
• Social Justice: Promotes inclusion of weaker sections through reservation.
• Accountability: Directly answerable to local communities.

However, issues such as inadequate financial autonomy, interference by state governments, and lack of administrative capacity often hinder their effectiveness.

Co-operative Societies and the 97th Constitutional Amendment

The co-operative movement in India is built on the principle of mutual aid and voluntary association. Co-operatives serve as instruments of social and economic progress, especially in rural and agricultural sectors.
The 97th Constitutional Amendment Act (2011) sought to strengthen the co-operative sector by granting it constitutional status and inserting Part IXB (Articles 243ZH–243ZT). The amendment also modified Article 19(1)(c) to include the right to form co-operative societies as a fundamental right and added Article 43B to the Directive Principles, directing the state to promote autonomous and democratic co-operatives.
Key Provisions of Part IXB:

• Autonomous Functioning: Co-operatives must operate as self-governing democratic institutions.
• Elected Management: A board of directors elected for a five-year term manages operations.
• Regular Elections: Mandatory and time-bound elections under an independent authority.
• Professional Management: Emphasis on professional and efficient functioning.
• Accountability and Transparency: Periodic audits and access to information are required.
• State Co-operative Election Authority: Ensures fair conduct of elections.

Co-operatives span multiple sectors such as agriculture, dairy, housing, fisheries, and credit. Notable examples include Amul, IFFCO, and Kribhco, which have become models of successful co-operative enterprise.

Relationship between Local Governments and Co-operatives

Local governments and co-operatives often function complementarily, sharing the goal of community development and citizen empowerment. Panchayats collaborate with co-operative societies in fields like agriculture, irrigation, rural credit, and marketing. Co-operatives support local economic activities, while local bodies provide infrastructural and institutional backing. Together, they promote inclusive rural development, employment generation, and financial inclusion.