Both (A) and (R) are true and (R) is the correct explanation of (A).

When power is taken away from central and state governments and given to local government, it is called decentralisation. Decentralisation of powers is the sharing of powers among local self-governing bodies. It helps in proper functioning of government and through this, help by government can be reached to even remote parts of the country. On basis of decentralisation three tier Panchayat Raj system has been introduced.
The basic idea behind decentralisation is that there are a large number of problems and issues which are best settled at the local level. People have better knowledge of problems in their localities. They also have better ideas on where to spend money and how to manage things more efficiently. Besides, at the local level it is possible for the people to directly participate in decision making. This helps to inculcate a habit of democratic participation. Local government is the best way to realise one important principle of democracy, namely local self-government.