Cooperatives: The Economic Backbone of India

General Studies Paper-3

Context

The Union Cooperation Minister laid the foundation stone for India’s first national-level cooperative university, ‘Tribhuvan Sahkari University’ (TSU), in Anand, Gujarat.

He also said that cooperative societies have an important contribution in the economic development of the country.

What are Cooperatives?

• A cooperative (or co-op) is an organization or business that is owned and operated by a group of individuals who share a common interest, goal, or need.
• These individuals, known as members, participate in the cooperative’s activities and decision-making process, typically on a one-member, one-vote basis, regardless of the amount of capital or resources each member contributes.
• The main purpose of a cooperative is to meet the economic, social, or cultural needs of its members, rather than to maximize profits for external shareholders.

Types of Cooperatives in India:

• Agricultural Cooperatives:
  • Dairy Cooperatives: Focus on the collective production, processing, and marketing of dairy products (e.g., Amul).
  • Farmers’ Cooperatives: Provide services like access to seeds, fertilizers, and agricultural equipment, and help with marketing and processing crops.
  • Fishermen Cooperatives: Support fishermen in managing resources and marketing their catch collectively.
  • Consumer Cooperatives: These cooperatives are formed to provide goods and services to members at reasonable prices, reducing reliance on middlemen. Examples include consumer stores and fair-price shops.
  • Worker Cooperatives: In these cooperatives, workers own and manage the business, sharing profits and decision-making. Examples include small-scale manufacturing cooperatives or artisan co-ops.
  • Credit Cooperatives: Cooperative Banks and Credit Societies offer financial services, such as savings accounts, loans, and credit, to members, particularly in rural and underserved areas.
  • Housing Cooperatives: These cooperatives help members collectively build or manage housing projects, providing affordable living spaces, especially in urban areas.

Cooperatives as India’s Economic Backbone

• Cooperatives empower small farmers, artisans, fishermen, women, and labourers by giving them collective bargaining power.
  • Example: Amul has uplifted millions of dairy farmers, many of whom are landless or marginal farmers.
• Strengthening Rural Economy: Over 65% of India’s population lives in rural areas. Cooperatives provide credit, inputs, marketing, and infrastructure support.
  • PACS (Primary Agricultural Credit Societies) are the first point of credit delivery in rural India.
• Promoting Self-Reliance: Cooperatives reduce dependence on middlemen and large corporations by pooling local resources for production, processing, and marketing.

Legal Framework and Support for Cooperatives

• In India, cooperatives are governed by the Cooperative Societies Act, which is implemented at both the state and national levels.
• The Multi-State Cooperative Societies Act (2002): This law regulates cooperatives that operate in more than one state.
• The National Cooperative Policy (2002): Aimed at creating an enabling environment for the cooperative movement, it focuses on improving governance, member participation, and financial sustainability.
• The Ministry of Cooperation: Established in 2021, this ministry focuses on supporting the growth of cooperatives in India, including reforming their governance and providing financial support.

Success Stories of Cooperatives in India

• Amul (Gujarat): Amul, a dairy cooperative, has been one of India’s most successful cooperatives, transforming the dairy sector by empowering millions of small farmers and bringing India to the forefront of the global dairy market.
• Irrigation Cooperatives in Maharashtra: Water-user associations and cooperatives in Maharashtra have successfully managed water resources for irrigation purposes, helping farmers achieve better yields.
• Kerala’s Co-operative Movement: Kerala has one of the most successful cooperative movements in India, with strong cooperatives in sectors like banking, farming, consumer goods, and housing.

Challenges Faced

• Weak Governance: They are issues of poor management, corruption, and political interference, leading to inefficiency and lack of transparency.
• Limited Access to Credit: Many cooperatives struggle with access to financing, which hinders their ability to expand or improve their operations.
• Competition from Private Sector: Cooperatives often face stiff competition from large private enterprises and multinational corporations, especially in sectors like retail and agriculture.
• Technological Gaps: Many cooperatives, especially in rural areas, lack access to modern technology or are slow to adopt new systems that could improve efficiency.

Concluding remarks

• Cooperatives are not just economic institutions but are central to India’s vision of inclusive and participatory development.
• Strengthening this third economic pillar — alongside the public and private sectors — is vital for building an Atmanirbhar Bharat.