Because of its size and its relatively ambitious efforts to decentralise government, India provides an important context for understanding the ways in which decentralisation can improve the performance and accountability of local government institutions. In 1993, the Government of India passed a series of constitutional reforms, designed to democratise and empower local political bodies - the Panchayats. Since this time, the experience has been highly variable, ranging from ambitious attempts at Gram Swaraj (or village self-rule) in Madhya Pradesh to political re-centralisation in Karnataka. A central aim of this paper is to review the literature on Indian decentralisation, and to assess the extent to which the Indian States of Andhra Pradesh (AP) and Madhya Pradesh (MP) have devolved political, administrative and fiscal authority to local Panchayats. In so doing, it aims to inform ODI's 'Livelihood Options' study of livelihood diversification and democratic decentralisation in South Asia (www.livelihoodoptions.info). The principal focus is on the 73rd Amendment, which deals with district, sub-district and village level institutions in rural areas.