In the past, Panchayats used to be the seat of justice. Local disputes and other problems were referred to Panchayats and their decisions used to be respected by one and all.

National leaders like Mahatma Gandhi had a firm faith in this system. The Constitution makers also considered this system to be very important and made provisions for it in the Directive Principles of State Policy. The Constitution states that the State shall take steps to organize Village Panchayats and empower them with such powers and authorities as may be necessary to enable them to function as units of local self government.

The present day Panchayats began functioning under the Community Development Programme introduced during the first Five year Plan.

To make the system more effective, a Committee was formed under the Chairmanship of Balwant Rai Mehta that went into its details. The Balwant Rai Mehta Committee in its report submitted in 1957 recommended the establishment of a three-tier Panchayati Raj System: Gram Panchayats at the village level, the Panchayat Samitis at the block level or intermediate level and the Zila Parishad at the district level.

In 1958, the National Development Council also recommended a similar structure of local government where village was at the bottom of the system and district at the top.

However, it is the 73rd Constitutional Amendment 1992 that provided the present shape to the Panchayati Raj System. Now the Panchayati Raj Institutions in most of the States have been set up at three levels, village, intermediate and district levels. But in smaller States having a population of less than 20 lakh, there are only two tiers, the village level and the district level.