This article examines the fiscal relationship between receipts and payments (expenditure) of Gram Panchayats India’s village-tier local self-governments across states and union territories over the period FY 2020-21 to FY 2025-26, using panel data compiled from the eGramSwaraj portal of the Ministry of Panchayat Raj. Employing pooled ordinary least squares, one-way and two-way fixed-effects estimators, and sigma- and beta-convergence tests, the study estimates the elasticity of village-level public expenditure with respect to receipts and evaluates whether fiscal capacity is converging or diverging across Indian states. The pooled log-log regression yields an expenditure-receipt elasticity of approximately 0.75, rising to approximately 0.87–0.88 once unobserved, time-invariant state heterogeneity is netted out through the within (fixed-effects) estimator, indicating that a large share of the pooled elasticity understates the true within-state responsiveness of spending to resource inflows once cross-state composition effects are removed. The fiscal absorption (utilization) ratio payments as a share of receipts averages only 28 to 32 per cent across the panel, pointing to substantial unspent balances at the village tier, consistent with earlier evidence on the weak own-revenue base and slow fund utilization of Panchayat Raj Institutions (PRIs) documented by the Reserve Bank of India and academic researchers. Sigma-convergence tests show that the cross-state dispersion of log receipts has risen rather than fallen over the study period, while beta-convergence regressions find no statistically significant convergence in receipts, but strong and significant convergence in payments (β ≈ -0.157, p < 0.001). These results are interpreted against the theoretical literature on fiscal federalism and decentralization (Tiebout, 1956; Oates, 1972, 2005) and the empirical literature on Indian sub-national and local government finance. The article closes with a discussion of data limitations most importantly, an identified data-duplication artefact across three reporting years in the source file and draws policy implications for the design of the next generation of State and Central Finance Commission transfers to the third tier of government.