Explanation:

 The Panchayti Raj is based on the principle of Decentralization. Decentralization is transfer of planning,decision making or administrative authority from central government to local administrative bodies. It can be fiscal( in which case funds are not only transferred from central govt to local govt but also power of raising funds is also given) , administrative(transfer of administrative power and functions) or political decentralization( in which the local bodies have power to make policies of themselves.
Decentralisation have no constitutional basis, where as in case of federalism both the central govt and local govt/ state govt have constitutional basis of division of powers and responsibilities.