Cooperative in India

Why in News?

Alongside support from the Government of India, state governments also provide financial assistance—such as grants and subsidies—to cooperatives through their own schemes, in line with state-specific rules and regulations.

What are Cooperatives?

• Cooperative – It is an autonomous association of persons, united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically member-controlled enterprise.
• Principle – Founded on principles of self-help & mutual assistance,
• Aim – To serve the interests of disadvantaged sections of society rather than to generate profits.
• Coverage – They plays a major role in India’s economy, with 98% coverage in rural India, cooperatives are the mainstay of rural economy ensuring sustainable livelihoods and income for people.
• Diverse Sectors – Cooperative societies in India operate across various sectors such as Agriculture, Credit and Banking, Housing, and Women’s Welfare.

Cooperatives is a State subject under the Constitution of India.

What is the historical evolution of cooperatives in India?

• Pre-Independence Era
  • 1904: Cooperative Credit Societies Act – first legal framework.
  • 1912: Expanded scope to marketing and artisan societies.
  • 1914: Maclagan Committee proposed a 3-tier cooperative banking system.
  • 1925: Bombay Cooperative Society Act – provincial legislation.
  • 1942: Multi-Unit Cooperative Societies Act for cross-province cooperatives.
• Post-Independence Era
  • Cooperatives integrated into Five-Year Plans for rural development.
  • 1963: National Cooperative Development Corporation (NCDC) established.
  • 1982: NABARD created to support rural credit.
  • 1984: Multi-State Cooperative Organisations Act streamlined governance.
  • 2002: National Policy on Cooperatives harmonized legal frameworks.
  • 2023: MSCS Amendment Act strengthened transparency and governance.
  • 2025: National Cooperation Policy

What are the constitutional & legal framework for cooperative societies in India?

• Seventh schedule
  • Entry 44 of the List I - Union List for objects not confined to one State.
  • Entry 32 of the List II - State List for objects confined to one State.
• Fundamental Rights – Article 19(1)(c) deals with the right to form cooperative societies.
• Directive Principles of State Policy – Article 43B mentions about state policy for promotion of cooperatives.
• Part IX B – Introduced Articles 243ZH to 243ZT for incorporation, regulation, and winding up of cooperatives.

Article 19(1) (c), Article 43B, part IX B were added in Constitution by 97th constitutional amendment act, 2011.

• Cooperative Societies Act, 1912 – The first comprehensive law for cooperative societies in India.
• State Cooperatives – Societies operating within one state are regulated by state-specific Cooperative Societies Acts, overseen by State Registrars.
• Multi-State Cooperatives – Societies operating in more than one state are governed by the Multi-State Co-operative Societies Act, 2002, overseen by the Central Registrar.
• Cooperative Banks – While registered under state or central laws, they are regulated by the RBI under the Banking Regulation Act, 1949, with supervision from NABARD.
• Nodal Ministry – The central Ministry of Cooperation, established in 2021, provides policy oversight.

What is the Structure of Cooperatives in India?

Credit vs Non-Credit Cooperatives 

• Cooperative Credit Society – It provides financial assistance to members by accepting deposits and granting loans at reasonable interest rates.
  • Examples include Village Service Cooperative Society and Urban Cooperative Banks.
• Non-Credit Cooperatives – It provides goods/services like farming inputs, housing, etc. Examples includes
  • Consumers’ Cooperative Society - Formed to provide consumer goods at reasonable prices, eliminating middlemen by purchasing directly from producers. Eg. Kendriya Bhandar & Apna Bazar.
  • Producers’ Cooperative Society - Supports small producers by providing necessary production items such as raw materials and equipment. Eg. APPCO & Haryana Handloom.
  • Cooperative Marketing Society - Assists small producers in marketing their products by collectively selling on their behalf. Eg. Gujarat Cooperative Milk Marketing Federation (AMUL).
  • Cooperative Farming Society - Small farmers form these societies to gain benefits of large-scale farming. Eg. Lift-irrigation cooperatives & pani-panchayats.
  • Housing Cooperative Society - Offers affordable residential options by purchasing and developing land for members. Eg. Employees’ Housing Societies and Metropolitan Housing Cooperative Society.

What are the significance of Cooperatives in India?

• Scale & Reach – India is home to over 8.44 lakh cooperatives, including 2 lakh credit cooperatives & 6 lakh non-credit cooperatives across housing, dairy, fisheries, and more.

India has more than one-fourth of the world's cooperatives.

• Housing cooperatives – Approximately, 1.92 lakh societies, expanding in both rural and urban areas.
• AMUL – The benchmark success story, inspiring replication across sectors.
• Grain Storage Plan – India aiming for the world’s largest cooperative grain storage infrastructure, with warehouses at PACS and society level.
• "Sahkar se Samriddhi" (Prosperity through Cooperation) Model – The government is fostering these institutions to turn small, disjointed farmers into empowered economic units through modernized, digitally enhanced cooperatives (like the focus on enhancing 100,000 PACS).
• Empowerment of Women & Small Producers – Cooperatives allow small producers to combine resources, enhancing bargaining power.
• They act as a key to empowering women through local, self-reliant economic organizations.

What are the challenges faced by cooperatives in India?

• Governance issues – Lack of professional expertise leads to inefficiency, weak financial oversight, and occasional fraud or corruption.
• Political Interference – Excessive state control in elections and decision‑making undermines autonomy and democratic functioning.
• Financial Limitations – Rural cooperatives often suffer from inadequate capital and restricted access to funds, limiting growth and diversification.
• Member Participation & Awareness – Low awareness of cooperative benefits results in poor participation and weak representation of marginalized groups.
• Infrastructure & Technology Gaps – The outdated facilities and slow adoption of modern technology reduce efficiency and outreach.
• Regulatory & Legal Complexities – The Urban cooperative banks face dual regulation (Registrar & RBI), while constitutional debates around the 97th Amendment create uncertainty over Union vs. State powers.
• Financial Distress – Having high levels of NPAs in urban cooperative banks erode trust and threaten long‑term sustainability.

What are the recent initiatives taken by the government to improve the cooperatives in India?

• National Cooperative policy, 2025 – Recently formulated by the Government, which marks a strategic roadmap for revitalizing India’s cooperative sector to meet the nation’s goal of becoming “Viksit” by 2047.
• UN International Year of Cooperatives – The year 2025 was declared as the International Year of Cooperatives.
• Union Budget 2025–26 – Ministry of Cooperation has allocated with Rs.1,186.29 crore, to emphasis on digitization, training, institutional support.
• MSCS Amendment Act, 2023 – To strengthen governance, enhance transparency, increase accountability and reform electoral process, etc. in the Multi State Cooperative Societies.
• Tax benefits to cooperative societies – Benefit from reduced surcharge rates and concessional tax regimes, enhancing cooperative’s income and supporting rural and farming communities.
• Digital & Infrastructure Initiatives
  • Computerization of PACS - Over 15,000 societies onboarded (aims to computerize 63,000 PACS).
  • PACS as Common Service Centers (CSCs) – An MoU with MeitY and NABARD enables 30,647 PACS to offer 300+ e-services to rural citizens.
  • Diversification – PACS running petrol/diesel outlets, PM Jan Aushadhi Kendras, and PMKSK fertilizer services.

What lies ahead?

• Revitalizing cooperatives demands a comprehensive strategy that strengthens both their operational capacity and structural framework.
• Such an approach aligns with the goals of inclusive development and has the potential to uplift marginalized communities in India, echoing Gandhian ideals of self‑reliance and self‑governance.
• Building a large and robust cooperative ecosystem can firmly establish the belief that cooperation can be a vital instrument for the country’s development for future generations.
• The role of the cooperative sector can be strengthened in achieving the goal of 'Viksit Bharat 2047.

References

1. PIB | Grants To Cooperative Institutions
2. PIB | National Cooperation Policy 2025