PM VGSY: Rs 7,395.55 crore to make panchayats plan

The Cabinet approved a five-year Centrally Sponsored Scheme to build Gram Panchayat planning, audit and digital capacity, timed to the Sixteenth Finance Commission's Rs 4.35 lakh crore for rural local bodies - a capacity scheme, not a new fund for village works.

What happened

• The Union Cabinet approved the Pradhan Mantri Viksit Gram Swaraj Yojana (PM VGSY) as a Centrally Sponsored Scheme for 2026-27 to 2030-31, co-terminus with the Sixteenth Finance Commission period, with an outlay of Rs 7,395.55 crore (Centre Rs 4,869.48 crore, States Rs 2,526.07 crore).
• Direct beneficiaries: about 32 lakh elected representatives, with Panchayat functionaries and other stakeholders, in more than 2.55 lakh Panchayats and Traditional Local Bodies; each awareness-generation exercise is to reach at least 1 crore citizens.
• Annual targets: 2.55 lakh holistic GPDPs on the eGramSwaraj portal, at least 2.55 lakh online audit plans with audits completed through AuditOnline, and capacity building for all 32 lakh representatives, alongside online accounting, public disclosure and Own Source Revenue mobilisation.
• Central and State departments' planning is to move onto one common digital platform showing schemes, beneficiaries, assets and resources for each Panchayat; PANCHAM (Panchayat Assistance and Messaging Chatbot), a WhatsApp-based tool launched in January 2026, works in 17 languages; training runs through iGOT; no permanent posts are created.
• States and UTs will submit Annual Action Plans for appraisal by a Central Empowered Committee; coverage extends to non-Part IX areas where Panchayats do not exist, and the Cabinet ties the scheme to the Sixteenth Finance Commission's Rs 4.35 lakh crore for Rural Local Bodies.

For Prelims

• Constitutional base: 'Local government' is a State List subject (Entry 5, List II). The 73rd Amendment, 1992, in force from 24 April 1993, added Part IX (Articles 243 to 243-O) and the Eleventh Schedule of 29 subjects; Article 243G lets States empower Panchayats to prepare and implement plans for economic development and social justice.
• Where Part IX does not apply: Article 243M excludes the Fifth Schedule Scheduled Areas and Sixth Schedule tribal areas, and the States of Nagaland, Meghalaya and Mizoram and Manipur's hill areas with District Councils. Parliament extended Part IX to Fifth Schedule areas through PESA, 1996; PM VGSY reaches the remaining traditional local bodies as well.
• Finance Commission link: Article 280(3)(bb) asks the Union Finance Commission to recommend measures to augment a State's Consolidated Fund to supplement Panchayat resources, on the basis of the State Finance Commission (Article 243-I). The 16th FC (chair Arvind Panagariya), tabled on 1 February 2026, recommended Rs 4,35,236 crore for Rural Local Bodies - 80 per cent basic, 20 per cent performance.
• Centrally Sponsored vs Central Sector: a CSS is implemented by States with costs shared between the Centre and States; a Central Sector scheme is fully funded and run by the Union. PM VGSY's aggregate split - Rs 4,869.48 crore to Rs 2,526.07 crore - works out to about 66:34; the release does not give the ratio by category of State.
• GPDP: the Gram Panchayat Development Plan is each Panchayat's annual plan, discussed in the Gram Sabha. PM VGSY's change is to bring the planning of every concerned Central Ministry and State department onto the same platform, so that one plan shows all the interventions reaching a village and the gaps between them.
• Digital spine: eGramSwaraj, launched on National Panchayati Raj Day (24 April 2020), covers planning, budgeting, accounting, asset management and online payments, linked to PFMS, GeM, BHASHINI and IMD; AuditOnline (2020) audits Panchayat accounts and is configurable to each State's Audit Act. The scheme's 2.55 lakh plans and audit plans are counted on these systems.
• Predecessor scheme: the revamped Rashtriya Gram Swaraj Abhiyan (RGSA), approved by the CCEA on 13 April 2022 for 2022-23 to 2025-26 (co-terminus with the 15th Finance Commission), had an outlay of Rs 5,911 crore (Centre Rs 3,700 crore, States Rs 2,211 crore) for capacity building of rural local bodies. Its approved period ended on 31 March 2026.
• Own Source Revenue (OSR): taxes, fees and charges a Panchayat raises itself under State law - property tax, user charges, fees. Article 243H lets the State legislature authorise Panchayats to levy and collect them; PM VGSY pairs OSR with online accounting and public disclosure as the route to financially self-reliant Panchayats.

For Mains

Syllabus: GS2.2 · GS2.15 · Linkage L1