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Abstract
The 73rd Constitutional Amendment Act (CAA) to the Indian Constitution (1992) clearly intended that Panchayats should be institutions of self–government through which the people would participate in the process of planning for economic and social development, as also in the implementation of schemes and programmes for these purposes. The structures designed to facilitate these processes are Panchayati Raj Institutions (PRIs) at three (or in some cases two) levels. The test of any development programme of decentralization is arguably the actual powers and function that are devolved to the institution of local government and the autonomy they enjoy in the exercise of these. Are the Panchayats actually utilizing their power to perform the developmental goals? Each state has their own Panchayat acts and according to that act, in many states, governments can omit, add, or amend any power by an executive order. In most states, Panchayats do not have an exclusive functional domain, as line departments continue to carry out developmental functions and are funded accordingly. There are so many facets to the issue of grassroots governance and decentralization in India and it is very important because of more than 65 percent of India’s population is rural and its fate and future are decided by PRIs. The purpose of this paper is to highlight the significance of PRIs in India, particularly of Maharashtra state, and its role in rural development. The paper mainly aims to discuss the challenges and problems faced by the PRIs in its performance of and suggestions for their improvement.