This is a one of the departments of State and Central government under the Ministry of Rural and Urban Development. Functions of Panchayats and Urban bodies are controlled and governed by this ministry.
Panchayat system is introduced in India from unknown period. This is a base of governance. From revenue to distribution every governance of the ruler is practiced through Panchayat. For big cities there are urban bodies same as are worldwide.



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Note added at 13 hrs (2010-08-10 23:41:53 GMT)
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(Panchayati raj)


Explanation:
The Ministry of Panchayati Raj is a branch of the Government of India looking after the ongoing process of decentralization and local governance in the States.

In a federation the powers and functions of the government are divided among two governments. In India it is the Union Government and the various State Governments. However with the passage of 73rd and 74th amendment act of the Constitution of India, in 1993 the division of powers and functions have been further tickled down to Local Self Governments(Panchayat at Village levels and Municipalities and Municipal Corporations in towns&large cities). As such India now has not two but three tier of Governments in its federal setup.

Ministry of Panchayati Raj looks into all matters relating of Panchayati Raj and Panchayati Raj Institutions. It was created in May 2004.
(http://en.wikipedia.org/wiki/Ministry_of_Panchayati_Raj)

The Panchayat Raj system has a three-tier structure as:
(i) the Village Panchayats
(ii) the Panchayat Samitis and
(iii) the Zila Parishad

(i) The Village Panchayat or Gram Panchayat : The village panchayat or the gram Panchayat functions at the Village level.
(ii) Panchayat Samiti : The panchayat samiti is the main executive body which operates at the Block level.
(iii) Zila Parishad : The Zila Parishad functions at the districts level and is responsible for making executing and coordinating the programmes of rural development.

http://www.indiansocialstudy.com/2009/03/panchayat-raj-syste...

The panchayat raj is a South Asian political system mainly in India, Pakistan, and Nepal. "Panchayat" literally means assembly (yat) of five (panch) wise and respected elders chosen and accepted by the village community. Traditionally, these assemblies settled disputes between individuals and villages. Modern Indian government has decentralised several administrative functions to the village level, empowering elected gram panchayats. Gram panchayats are not to be confused with the unelected khap panchayats (or caste panchayats) found in some parts of India.
(http://en.wikipedia.org/wiki/Panchayati_raj)




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Note added at 2 hrs (2010-08-10 13:00:05 GMT)
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Ministry of Panchayati Raj, Government of India
http://panchayat.nic.in/viewPortalPageAction.do


Ministry of Urban Development, Government of India
http://www.urbanindia.nic.in/