Need propels action and hence there is no question of wastage of resources when they are spent responding to the felt needs of the people. Even if we talk of competence, surely the Gaon Sabha can do a better job selecting beneficiaries of government schemes than the government agencies. Illiteracy in rural India is also used an argument against the efficiency of panchayati raj. Despite the low level of literacy, the Indian voter has time and again shown a lot of maturity and understanding of the working of democracy. The same would hold true at the panchayat level.
Political empowerment makes up for the shortage of literacy.
However, this in no way takes away the importance of literacy and education. It only means that we do not have to wait till the entire populace becomes literate to talk of panchayati raj. In fact, only when schools and schemes of the education department are in the hands of the panchayat will literacy and education spread. The bureaucrats resent the panchayat model because it amounts to shedding their powers and authority. They fear their own marginalisation and loss of perks, privileges and status enjoyed so far.