A major step towards decentralization was taken in 1992. The Constitution was amended to make the third-tier of democracy more powerful and effective. Now it is constitutionally mandated to hold regular elections to local government bodies. Seats are reserved in the elected bodies and the executive heads of these institutions for the Scheduled Castes, Scheduled Tribes and Other Backward Classes.

At least one-third of all positions are reserved for women. An independent institution called the State Election Commission has been created in each State to conduct panchayat and municipal elections. The State governments are required to share some powers and revenue with local government bodies. The nature of sharing varies from State to State.