Ans. Panchayati Raj has been included in the State list subject in the constitution so it is the responsibility of the state to look into the proper development of the institution. After independence the need was realised to establish a system that would cater to the need of people at the ground level and strengthen the democracy at the grass root level. So the state government is expected to follow the constitutional directives and develop the institution to its fullest.
The State Government provides grants and loans to panchayati raj bodies. It can dissolve the institution at any time it feels that it is not working in accordance with the constitutional directives. It is the state government that has the sole responsibility for formulating policies related to the functioning of the Panchayati Raj System at large.