Decentralisation initiative in India is often considered to be a process purposefully adopted as a result of its need arising out of various local, political and economic factors.
Some others consider decentralisation as a follow up of the process of globalisation and liberalisation world over. Much of the literature on decentralisation is based on industrialised countries and assumes the existence of institutions that are usually very weak in developing countries.
The opening up of Indian economy after the advent of globalisation has led to the creation of ‘global cities’, for example in 1991 of the 20 largest cities in the world 3 were from India and by 2001, 6 largest cities out of 20 were from India. In 1991 there were 23 million plus cities in India and their number increased to 40 in 2001 and are expected to go up to 70 in 2021. In 1991 26% of population was living in urban areas and has increased to 33% in 2001 and is expected to go up to 40% by 2021.
These cities became the hub of industrial and economic activities and attractive destinations for foreign direct investment. It has become a major challenge for civil agencies especially in larger cities to provide internationally competitive infrastructural facilities to attract FDI flows. As Indian markets are being opened to international markets, decentralisation became inevitable to make the local bodies more accountable to the stake holders. Larger cities became the hub of economic activities because they were able to provide basic infrastructure required for overall development.
It has resulted in the need to devolve power and authority to the lower tier of the government i.e. municipal bodies to provide infrastructural facilities within city limits.
Decentralisation implies that the sub national units of government have the discretion available to them to engage in effective decision making affecting their area.
It is a behavioural concept that can be affected by structural characteristics i.e. local government. Having high degree of discretion can be considered decentralized despite lying in a highly centralized system.