Cooperative Movement in India  Introduction 

• The cooperative movement in India, dating back to the early 20th century, was introduced to democratize credit, uplift rural populations, and reduce dependence on exploitative intermediaries. 
• Over the decades, cooperatives have emerged as a crucial pillar in agricultural credit, dairy production, and rural marketing. 
• In recent times, the government has placed immense importance on cooperative-driven development to enhance rural livelihoods and economic resilience.

Present Status of the Cooperative Sector in India

• According to the Economic Survey 2022-23, India has over 8.5 lakh cooperative societies, encompassing approximately 30 crore members. 
• Primary Agricultural Credit Societies (PACS) serve as the backbone of rural credit, with over 65,000 functional PACS across the country. 
• The government has ambitious plans to establish two lakh PACS and has implemented several measures to achieve this goal. 

Key Government Initiatives

• Phased Expansion of PACS:
  • Phase 1: Establishment of 32,750 agricultural cooperatives with NABARD, 46,000 dairy cooperatives with NDDB, and 5,500 fishery cooperatives with NFDB.
  • Phase 2: Expansion to an additional 15,000 villages.
• Inclusivity Focus: Special emphasis is being placed on involving women, Dalits, and tribal communities in cooperatives to promote social and economic equity.
• Integration into Global Supply Chains: PACS are being leveraged for forward and backward linkages to enhance market access and competitiveness.
• New Model Bylaws: The introduction of new model bylaws allows PACS to diversify beyond their traditional activities, fostering modernization and expansion into new sectors.
• Digital Modernization: Initiatives like micro-ATMs and RuPay Kisan Credit Cards are being deployed to integrate PACS into digital financial systems.
• Budgetary Support: The Union Budget 2023-24 allocated Rs. 900 crore under the Cooperative Development Fund to strengthen PACS.
• Revival of Defunct PACS: The government has introduced SOPs to replace non-functional PACS, unlocking economic opportunities in rural areas.

Significance of the Cooperative Sector in India

• Empowering Rural India: Cooperatives empower farmers by democratizing access to credit and essential resources, reducing reliance on middlemen. In India, approximately 98% of rural households are covered by cooperatives, enabling marginalized communities to access resources and secure livelihoods.
• Boosting Rural Development: Integrating cooperatives into global supply chains enhances farmers’ income and market competitiveness. For instance, the dairy cooperative movement, led by organizations like Amul, has empowered millions of small dairy farmers, making India the largest milk producer globally.
• Enhancing Financial Inclusion: PACS serve as the primary credit source for small and marginal farmers. They contribute to 41% of all Kisan Credit Card (KCC) loans, with 95% of these loans directed towards small and marginal farmers. As of March 31, 2003, there were 112,309 PACS with about 120 million members, providing vital financial services at the grassroots level.
• Promoting Social Equity: Increased participation from marginalized communities fosters inclusivity and economic balance. The government has mandated the reservation of two seats for women in the boards of Multi-State Cooperative Societies, promoting gender equality in decision-making. 
• Enhancing Agricultural Productivity: PACS improve agricultural output by facilitating credit access and value-added services like storage and marketing support. A study conducted in the Panchmahal District of Gujarat revealed that borrower farmers associated with PACS had a higher total cropped area compared to non-borrowers. The cropping intensity was notably higher among borrowers—246.77% for marginal farmers and 243.83% for small farmers—compared to 191.38% and 208.27% respectively for non-borrowers. This suggests that access to credit through PACS enables farmers to cultivate more land and increase the number of crops grown annually

Challenges in the Cooperative Sector

• Financial Sustainability Issues: PACS often struggle with high levels of NPAs, affecting their financial health. The same study in Tamil Nadu reported a declining trend in NPAs over the study period, yet some societies still faced challenges due to inadequate credit management. 
• Technological Lag: The absence of digital infrastructure, such as computerized accounting systems and reliable internet connectivity, hampers the operational efficiency of PACS. This technological lag limits their ability to streamline operations and undermines public trust in these institutions.  
• Limited Inclusivity: Historically, marginalized communities, including women, Dalits, and tribal groups, have had limited roles in the decision-making processes of cooperatives. This lack of inclusivity restricts the potential of cooperatives to serve as instruments of social and economic equity. 
• Sectoral Fragmentation: Many cooperatives operate in isolation, failing to integrate into broader value chains, which limits their market reach and economic impact. This fragmentation prevents cooperatives from achieving economies of scale and accessing larger markets. 
• Political Interference: Union Home Minister Amit Shah recently acknowledged that political interference in the past has adversely affected the growth of the cooperative sector. He noted that such interference hurt the sector’s development, but recent governmental efforts aim to revitalize it. 
• Inefficient Management: Studies have highlighted that many cooperatives suffer from poor governance and lack of professionalism, leading to financial mismanagement. For instance, a study on Primary Agricultural Credit Societies (PACS) in Villupuram District, Tamil Nadu, observed that despite a declining trend in Non-Performing Assets (NPAs), certain societies exhibited poor credit management systems, indicating inefficient management practices. 

Way Forward

• Data-Driven Decision-Making: Conducting comprehensive surveys to identify gaps and optimize resource allocation for PACS.
• Grassroots Participation: Encouraging local community involvement in governance to enhance accountability and effectiveness.
• Public-Private Partnerships: Collaborating with private players for better access to technology, funding, and global markets.
• Policy Stability: Ensuring consistent implementation of cooperative policies across states through improved central-state coordination.
• Value Addition in Agriculture: Expanding PACS functions to include food processing, cold storage, and export facilitation.
• Professionalization of Management: Introducing capacity-building programs to improve financial literacy and equip cooperative members with modern management skills.