Panchayati Raj provided a system of self-governance at the village level. But it is not given a constitutional status. ‘Panchayat’ literally means assembly of five wise and respected elders chosen and accepted by the village community. Basically, these assemblies settled disputes between individuals and villages.
The Panchayati Raj system was adopted by state governments during the 1950s and 60s as laws were passed to establish Panchayats in various states.
The panchayats receive funds from three sources i.e. local body grants, as recommended by the Central Finance Commission, funds for implementation of centrally-sponsored schemes, and funds released by the state governments on the recommendations of the State Finance Commissions.
Panchayati Raj is a system of governance in which gram panchayats are the basic units of administration. The block-level institution is called the panchayat samiti. The district-level institution is called the zilla parishad.