Against the backdrop of the 16th Finance Commission recommendations and prolonged delays in municipal elections across major Indian cities, the debate on local governance has gained a renewed urgency. Since the 1970s, there has been an increased devolutionary trend that has swept across nations. This global trend towards decentralisation has brought with it a heightened role of local and regional governments in stimulating economic development. As nations went about adopting varying forms and levels of decentralisation, the rationale behind advocating the process shifted from the identity discourse — from cultural and linguistic factors towards an economic discourse of “achieving greater economic and social change”.India’s local governance experiment is not only one of the most important constitutional reforms of the post-Independence era but also one of its most unfulfilled reforms. The 73rd and 74th amendments promised to make panchayats and municipalities real units of self-government, bringing democracy closer to citizens and development closer to local needs. The real question is why India has still not fully trusted local institutions with the powers they were designed to exercise. Local bodies exist, elections are held, and constitutional language is in place. But the real powers of government best represented by the 3Fs — funds, function, and functionaries — are often retained at higher levels. The result is, therefore, a system that is decentralised on paper but centralised in spirit.This is why decentralisation remains one of India’s most important unfinished reforms. The case for it is not rooted in idealism. Local governments are closer to the everyday problems people face. They are better placed to identify bottlenecks, prioritise spending, and adapt policy to specific social and ecological conditions. A panchayat or municipality may not have the glamour of a Union Ministry, but it is the institution that determines whether or not water reaches a neighbourhood, a road is repaired, and waste is collected. In that sense, local government is not a decorative layer of democracy; it is where governance becomes visible. Decentralised governments are better equipped to provide services that reflect diverse local needs. Moreover, in a decentralised system, the process of better matching public goods and services provisioning with individual preferences ensures that welfare, both collective and individual, is maximised.State-citizen synergyThe democratic argument for decentralisation is just as strong. Decentralisation shortens the distance between the citizen and the state. It thus become easier to question power and ensure accountability. A resident can more readily confront a ward councillor or sarpanch than a Minister or senior bureaucrat. That does not automatically guarantee good governance, but it does make accountability more tangible. In a country where many people view the state as remote and impersonal, decentralised governance matters in bridging the gap between citizens and the state.The developmental argument is equally important. Local bodies can do more than deliver services; they can shape local economic growth. Roads, drainage, markets, sanitation, and other basic infrastructure are often the most basic form of social investments, but in the long run, they determine whether or not a local economy grows or stagnates. This is why decentralisation can be a practical strategy for sustainable development, not just a democratic ideal. When local institutions have real authority, they can adapt public spending to local geography, livelihoods, and environmental stress.Some of the strongest evidence for this comes from the States that have taken decentralisation seriously. Kerala is often cited as a leading example. Studies of gram panchayats in the State show that fiscal success depends not just on transfers, but on administrative preparedness, planning capacity, and institutional support. As highlighted by researchers Parvathy Sailesh and Padmini Ram (2022), Kerala’s experience suggests that decentralisation works best when local bodies are treated as genuine governing institutions rather than as delivery arms for higher tiers of government. The lesson is not that Kerala is perfect. It is that decentralisation can work when the State commits to it in practice, not just in principle.Services to benefitThe health sector provides a different but equally telling example. A 2013 comparative study of Odisha and Gujarat by Raut and Sekher found notable differences in the decentralisation of health systems, with Gujarat performing better on decentralisation measures. That matters because public health is the kind of sector where local responsiveness, coordination, and problem-solving can make a real difference. The comparison underlines a broader point: decentralisation is not an abstract constitutional ideal. It shapes how services are organised, who has authority, and how quickly public institutions can respond to local needs.And yet, the weaknesses of India’s decentralisation framework remain striking. The biggest problem is the familiar one: too often, responsibility has been devolved without genuine power. Local bodies are asked to deliver, but not always given the funds, functions, or functionaries needed to do so. This is the recurring weakness of decentralisation. On paper, the system exists. In practice, many local governments remain constrained by limited budgets, inadequate staff, and overlapping control from higher levels of government. Furthermore, modern urban schemes increasingly rely on special purpose vehicles run by bureaucrats which actively bypass elected municipal bodies and further erode the 74th amendment.Fiscal dependence is a crucial part of the problem. Local bodies in many States rely heavily on transfers from above, often with limited discretion and little predictability. That makes long-term planning difficult and weakens local accountability. A decentralised system cannot function properly if local institutions are dependent on irregular or tightly controlled funding. The point of decentralisation is not just to shift responsibility downward. It is to let local governments decide, plan, and adapt.Capacity is another major constraint. Local representatives may be elected and accountable, but they often work without adequate technical support or training. Budgeting, procurement, record-keeping, and project monitoring require skills that many local bodies do not possess. This is compounded by social hurdles such as the power wielded by the spouses of elected woman representatives. Similarly, studies of urban governance show that real financial power in urban centres is often concentrated in the hands of unelected municipal commissioners rather than the elected Mayors. Without addressing these, decentralisation risks becoming a formal exercise rather than a functional one.The way forward is, therefore, clear. India needs a second generation of decentralisation reforms that move beyond symbolism to substance.First, the 3Fs must be genuinely devolved. Local governments should have clearly assigned responsibilities, finances, and the administrative staff required to carry out their mandates. Second, State Finance Commissions must become more effective and more consequential, so that transfers are transparent, regular, and aligned with local needs. Third, local planning must become real rather than ceremonial. District and local plans should guide actual spending decisions, not merely record them. Fourth, capacity building should be treated as core infrastructure for governance. Training in budgeting, procurement, planning, and social audit should be routine. Fifth, accountability must be strengthened through transparent reporting, public dashboards, social audits, and stronger citizen participation at the ward and village level.India does not need to invent decentralisation. It needs to complete it. The constitutional framework exists. The democratic case is established. The developmental logic is strong. What is missing is the political will to trust local institutions with genuine power.That is why decentralisation should be seen not as a nostalgic idea from the 1990s, but as a central requirement for India’s future. If the country wants more accountable governance, more resilient public services, and more sustainable local development, it must stop treating local government as an afterthought. The unfinished promise of the 73rd and 74th amendments, therefore, needs to be delivered on the ground. The 16th Finance Commission has a crucial window to act by explicitly tying state grants to the genuine empowerment of these local bodies.Arijit Dash is a Ph.D. scholar at the University of Cambridge. Amrendra Pratap Singh is doing an MA in political science at the University of Delhi