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Mainstream, VOL LX No 30, New Delhi, July 16, 2022

New Cooperative Ministry in India: An Analysis of the Implied Strategy of Development for the Consideration of Policy Makers | A. M. Jose & Jos Chathukulam

Friday 15 July 2022, by A. M. Jose, Jos Chathukulam


by A. M. Jose & Jos Chathukulam *


A controversy has erupted in India over the formation of a new Ministry of Co-operation by the Union government. There has been widespread criticism that the Union government is weakening the ‘cooperative federalism’ by encroaching into an area of state government’s prerogative. This article looks into the merit of this controversy by examining the role of Cooperatives in an economy and what role the governments should play in making the Cooperative movements more vibrant and dynamic in India. It has been observed that Cooperatives emerged as an organizational innovation, based on certain values and principles which essentially differentiate them from free-market business firms. The Cooperative form of business takes care of distributional issues in the economic processes; therefore, it has become an organization suitable for protecting the interests of marginalized sections of people in any economy. It is found that, despite the significant success of Cooperatives around the world especially in the developed capitalistic world, India lags in embarking on such wonderful institutions that work on the philosophy of economic democracy and aim at democratizing development within an inclusive framework. The top-down approach that is followed by a ‘state sponsored’ Cooperative movement failed to get roots, particularly in eastern India. Therefore, we argue that in the current Indian context, which is characterized by worsening inequalities, particularly a development process that bypassed millions of rural people dependent on agriculture for a livelihood, the Cooperative form organization is the only panacea for development. It is underlined that strengthening grassroots level democratic institutions wherein the Panchayati Raj Institutions and Cooperatives are part of a wider concept of ‘Social Solidarity Economy’. Therefore, we argue that whoever wanted to strengthen the Cooperative movement in India, without compromising the principles of Cooperation, should be welcomed and expect that the development process in India is democratized and energized. 


The Government of India formed a ‘Ministry of Co-operation’ on July 6, 2021, as part of strengthening the government’s business It was created for realizing the vision of ‘Sahkar se Samriddhi’ (progress through Co-operation). This Ministry aims to provide a separate administrative, legal and policy framework for strengthening the Cooperative movement in the country (Press Information Bureau (PIB), 2021). The Union government is of the opinion that a separate ‘Ministry of Co-operation’ envisages to deepen Cooperatives as a true people-based movement reaching up to the grassroots. The Ministry also aims to streamline processes for ease of doing businesses for Cooperatives and enable the development of Multi-State Cooperatives (MSCS). The Union government has signalled its deep commitment to community-based developmental partnership with the creation of a separate Ministry for Co-operation and this in a way also fulfils the budget announcement made by Union Finance Minister Nirmala Sitharaman, in the 2021 -22 Union Budget (PIB, 2021). It is further stated that, in our country, a Cooperative based economic development model is very relevant where each member works with a spirit of responsibility.

Many opposition leaders belonging to different political parties from divergent states in India, especially from the Cooperatively vibrant state of Kerala, criticized the move of the Union government stating that it was a political strategy to get hold of the Cooperative sector through which they can win the coming Lok Sabha elections. It is pertinent in this context to examine this controversy and make a comment on the initiative of the Government of India. The apt questions that may emerge are: What are Cooperatives? What role Cooperatives are supposed to play in an economy? How can Cooperatives contribute to the development of a nation? Will the formation of a new ministry benefit the Cooperative sector in India in any way?  Are Cooperatives a tool for politicians to use in getting votes? What are the policy priorities before the Government of India to make the movement vibrant and dynamic to the task of achieving distributional justice as well as growth? This paper intends to answer the questions in the current context of the political economy in India.

What are Cooperatives?

Cooperatives emerged as an organizational innovation in Europe during the middle of the 19th century to fight against the exploitative nature of capitalism that was emerging as an economic system as part of the industrial revolution. The first Cooperative Society was formed in the year 1844 at a place called Rochdalein England by the mill workers who wanted to get their consumer goods through a store which was supposed to follow the Cooperative principles (ICA,1937) as presented in Table No.1. The Rochdale Society was the basis of modern Cooperatives and later on, the Rochdale Cooperative principles were reformulated by ICA (International Cooperative Alliance) in tune with the changing environment around the world and it has become an organizational form for the “weak” in an economy by collectivizing their resources for the common benefit of the community in which it operates. In 1995, the ICA adopted the revised Statement on the Cooperative Identity which contains the definition of a Cooperative, the values of Cooperatives, and the seven Cooperative principles (See Table No. 1).

Table No. 1: Cooperative Principles: A Comparison of Principles of Rochdale Pioneers Vs. ICA

Sl No Cooperative principles By Rochdale Pioneers (1844) Cooperative principles by ICA (1995)
i Open Membership Voluntary and Open Membership
ii Democratic Control Democratic Member Control
iii Dividend on Purchase Member Economic Participation
iv Limited Interest on Capital Autonomy and Independence
v Political and Religious Neutrality Education, Training and Information
vi Cash Trading Co-operation among Cooperatives
vii Promotion of Education. Concern for Community

Source: Computed and compiled from different sources

It can be seen that the principle of ‘Political and Religious Neutrality’ of Rochdale Pioneers is no more a principle of Cooperative formation as per the ICA statement. According to ICA, a Cooperative 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-controlled enterprise”. It is to be noted that the “Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity’’ and “Cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others” (ICA, 2015). The first four ICA principles are considered to be the most important principles that make a Cooperative organisation distinct from other forms of business organisation. The last three principles underline the Cooperative’s role as a development organisation by ‘democratising development’ through strengthening its commitment to serve the community where it exists. Further, it is to be understood that Cooperatives are value-based organisations which ultimately aspire for human beings’ ultimate welfare (as against the ‘growth of income’ in a cutthroat competition ridden capitalistic world). In essence, the Cooperatives are organisations, at least in principle, completely opposed to the functioning of firms in a capitalistic economy. However, the application of Cooperative principles to reality has always been a matter of priorities and compromises.

There are many stakeholders in a Cooperative economic framework as seen in Table-2 who are working or acting together for a common purpose or benefit. It is to be noted that Governments are among the stakeholders of a Cooperative system wherein their roles are related to fiscal &legal matters and overseeing the working of the Cooperatives in the economy. Further, it is to be understood that there are many factors affecting the success or development of the Cooperative movement in a country like economic and political system, international economy, State/Government legislation, social & economic policies, technology & know-how, living conditions, demographic structures, cultural values, other organisations, people’s movements, trade unions etc.

Table No. 2: Various Cooperative Stakeholders and their Rational Concerns

Publics Area of Concern
Farmer/Members (i) Good price, (ii) Equity price, (iii) Reduction of risks, (iv) Access to the market, (v) Continuity of farming
Customers (i) Food safety, (ii) Wholesomeness, (iii) Product price, (iv) Marketing efficiency
Employees (i) Financial benefits, (ii) Recognition/Pride, (iii) Working environment
Suppliers (i) Price, (ii) Stability, (iii) Continuity
Government (state/local) (i) Taxes, (ii) Prevention of oversupply, (iii) Law enforcement,(iv) Competition (i.e., no subsidies)
Society (i) Sustainable growth, (ii) Preventing the outflow of resources,(iii) Education and services, (iv) Civil rights, (v) Pollution abatement, (vi) Employment provision
Landowners (i) Good rent on land (ii) Appreciation of land value

Source: Van Bekkum O.F and Van Dijk G. (Eds.) (1997) — Agricultural Cooperatives in the European Union, Trends and Issues on the Eve of the 21st Century, Van Gorcum:
The Netherlands.

There are conflicting interests also in a Cooperative system: suppliers like farmer-owned Cooperative look for the maximum price, while consumers in a consumer Cooperative look for the minimum price. Same way labour in a worker Cooperative tries to maximise wages/salary. Therefore ‘ A Cooperative must be organised around a homogenous interest’ to perform well. Table 2 illustrates how interests can vary within the Cooperative.

While India is harping upon an economic philosophy of ‘liberalised capitalistic market economy’ since 1990-91, the current central government’s decision to give importance to Cooperatives by establishing a ministry has to be understood from the point of view of the capability of Cooperatives as a countervailing force in protecting the interests of the disadvantaged sections of the community in the country. Data on Indian inequality shows that the Gini-index [1] has worsened after the country ventured into a private enterprise driven economic growth path wherein the rich are getting richer while the poor people’s condition is not getting better, (World Inequality Lab, 2018) but even worse, especially, during the current crisis due to pandemic.

What role Cooperatives are supposed to play in an economy?

The vital point that one has to understand about the necessity of Cooperatives in an economy. The Rochdale Pioneers started the Cooperative store because Cooperatives are viewed as the remedy for the familiar ‘market failures’ and ‘government failures’. The workers were unable to get their daily necessities because of the ‘failures’ by both public and private sector actors in the economy. The institutional strength of the Cooperatives derives from their distinct character as organizations blending values— economic with social and environmental — to create positive outcomes for members’ wellbeing (not just income) and community development through a democratic structure and management. The DNA of a Cooperative is constituted by the three “Cs”: cooperation, community spirit, and collective action (Dash, 2013). The Cooperatives pursue an “arranged marriage” between capitalism (income growth, entrepreneurship, enterprise development as players in the products and services market) and democracy (participation, inclusion, ownership, and control), and change the intent and content of peoples/members economic life. Thus, the Cooperatives are driven by “other rationalities” beyond profit and competition.

The approach in Cooperative is different from the usual capitalistic firm: Labour-as-toil (typical of the employee) is equivalent to labour-as-action (typical of the co-op member-worker). The Cooperative is an economic agent combining, inseparably, two distinct dimensions (Stefano Zamagni, 2010): (i) Associationism, in which different people come together freely for purposes that each individual could not attain, and (ii) Entrepreneurship, which establishes that the method, the way to attain those aims, is the creation of an enterprise, a stable organization of productive activity directed to the market. Thus, the Cooperatives combine two distinct if not conflicting dimensions: The social dimension of an institution that produces positive externalities for other agents and the entire community, and the economic dimension of an enterprise that operates within the market and accepts its logic.

The standard model of capitalism is about the accumulation and concentration of wealth among owners and investors, while Cooperative economics is about the fair distribution of wealth among all producers and consumers. Thus, the Cooperative paradigm is about the fair distribution of wealth. The fact is that the poor are willing to help themselves if they are only given a chance. More generally, Cooperatives are seen as a vital way in which people can help themselves- development for the people and by the people through Cooperatives.

The existing theory and practice show that the only economic institution, that can organise the unorganised, and make them participants as well as beneficiaries of the production process (inclusive growth), is a Cooperative. Table No. 3 provides a brief picture of the difference between Cooperatives and other private firms and why countries prefer to have Cooperative forms of business for attaining inclusive growth and development.

Table No. 3. Difference between Cooperatives and other Private Firms

Advantages Cooperatives Private Firms
Ability to reach the poorest  MEDIUM-high if aimed  Low- Profit-driven 
Ability to create wealth  HIGH — the main aim  HIGH 
Ability to scale up  HIGH — can grow rapidly  Low - except for the expansion
Organizational flexibility  MEDIUM- depending on the type  High —search for profit
Democratic accountability  HIGH — membership base, some governance problems  Low - Few Owners
Civil society /SSE strengthening  HIGH Medium
Surplus -distributing  YES — a co-op principle  No- Retained profit
Market-driven  YES YES
Duration of interaction with poor  LONG Variable

Source: Computed and compiled from different sources

How can Cooperatives contribute to the development of a nation?

Cooperatives do play a vital role in all walks of life in most countries in the world. For instance, a report on the UK’s Cooperative sector states that more than a fifth of the UK population — over 14 million— own and control the UK’s Cooperatives. That’s millions of people who each have a say in how these Cooperative businesses are run. Members can be customers, workers, suppliers or a combination of all three (Co-operatives UK Limited, 2020).

A study by a UN consultant showed that the combined global Cooperative economy is larger than France’s economy and places right behind Germany’s economy as the 5th largest economic unit if it were a united country (Dave Grace & Associates, 2014). As per their study, they found that one in every six people on average in the world has a membership or is a client of a Cooperative. The most interesting finding of their study is that two-thirds of the countries listed in the top ten most Cooperative economies (using Cooperative Economy Index-CEI) also make up eight of the top 12 spots on the Social Progress Index (SPI) [2] and came to the conclusion that there does appear to be a high level of correlation among the CEI and SPI. It is also noted that Cooperatives promote economic and financial stability during periods of financial crises (Čihák, 2007) or during periods like the Covid-19 pandemic. A recent study by Tharamangalam has shown how Cuba launched reforms that were aimed at making its socialist system more sustainable. He argued that these Cooperatives have a fair chance of success due to their design: self-managed and democratically controlled solidarity economies that are independent of state control (Tharamangalam, 2019).

The role played by Cooperatives in the world is summarized by ICA in its recent publication Cooperative monitor - ‘At least 12 % of people on earth is a Co-operator of any of the three million Cooperatives on earth. Cooperatives provide job or work opportunities to 10 % of the employed population and the 300 largest Cooperatives generate 2180 billion USD (based on 2019 financial data) in turnover while providing the services and infrastructure society needs to thrive’. These organisations operate in various economic sectors, with insurance sectors (102 enterprises) and the agricultural (98 enterprises) being the ones leading the list. The wholesale and retail trade sector represents the third biggest economic sector (55 enterprises) (ICA, 2021). From India, there are only three Cooperatives (IFFCO, AMUL, and KRIBHCO) that could get a place in the ICA list of top 300 Cooperatives (Turnover in USD) in the world (see Table 4).

 A keen observation one can make from the World Cooperative Monitor is that most of the big Cooperatives in the world are located in the so-called capitalistic market economies of the developed countries. A pertinent question is why Cooperatives are stronger in the developed capitalistic countries than in the less developed countries of the world? A possible answer is that Cooperatives function as a countervailing force in the exploitative capitalistic market economies. As seen in Table No. 4, in the capitalistic world if the small producers want to survive the heat of money power of big corporations, they have to come together by assimilating their strengths and uniting to achieve a better living in all walks of life. As a third sector, the Cooperatives around the world joined under the banner of ICA (founded in 1895, ICA groups 318 organisations of Cooperatives in 112 countries all over the world), which is one of the oldest non-governmental organisations and one of the largest ones measured by the number of people represented: one billion Cooperative members on the planet.

Table No. 4. Geographical Distribution and Type of Top 300 Cooperatives in the world

Geographical Distribution of Top 300 Cooperatives
Americas No. of Coop eratives Europe No. of Coop eratives Asia -Pacific No. of Coop eratives
USA 75 France 35 Japan  26
Canada 9 Germany 31 New Zealand 5
Brazil 7 Netherlands 17 Australia 4
Argentina 3 Italy  13 Republic of Korea 4
Columbia 1 Finland  10 India 3
Total 95 Denmark 9 Singapore 2
Spain 9 Malaysia 1
Norway 7 Saudi Arabia 1
Sweden 7 Total  46
UK 5
Switzerland 5
Austria 4
Belgium 4
Ireland 2
Poland 1
Total 159
Type of Cooperatives
Type Number Per
Type Number Per
Producer 120 40.00 Worker  4 1.33
Mutual  86 28.67 Multi-stakeholder 2 0.67
Consumer/User 76 25.33 Producer+ Consumer/User 1 0.33
Non-Coop- Controlled by Coops 11 3.67

 Source: From the figure in the Page-46 & 47 of ICA. (2021). World Cooperative Monitor: Exploring the Cooperative Economy Report 2021. Geneva: International Cooperative Alliance. Retrieved from

Cooperatives contribute to sustainable economic growth and stable quality employment, providing jobs or work opportunities to 280 million people across the globe, in other words, 10 per cent of the world’s employed population. Hence, Cooperatives do play an important role in the development scenario of most nations in the world. Evidence from several countries shows that a favourable political climate and targeted lobbying efforts helped the Cooperative movement to enhance its successful performance (Chloupková, 2002). Efficiency on the Cooperative level is defined as providing greater benefits to its members despite the potential externalities for the greater society — either positive or negative. During the last decades Cooperatives in the European countries seem to have shared only one single characteristic: an increase in the number of members per enterprise (Schröter, 2012) as it is a member-owned business.

Will the formation of a new ministry benefit India in any way? 

India is having one of the largest Cooperative movements in the world. The movement originated in 1904 at the initiative of the British government, which enacted a law on Cooperative credit societies that was extended to all Cooperatives in 1912. In 1922 there were already over 50,000 Cooperatives in India, with two million members, and in 1929 the National Cooperative Union of India was formed (Williams, 2007). The first Indian governments embraced the idea of a thoroughly ‘Cooperativised’ state, making the Cooperatives little more than an appendage to state economic planning. In India, based on 2018 data, there are 854,355 Cooperatives with 290.06 million members (NCUI, 2018) with a working capital of Rs.125, 36,174 million (USD 183.247 billion). There are 407 centre/level federations and 2705 district level federations.

As seen from Table No.5 the percentage share of Cooperatives in the national economy is still, save few areas, very low: 35 per cent in fertilizer distribution, 30.6 per cent in sugar, 13.4 per cent in agricultural credit, and 17.5 per cent under milk procured., just to give some examples. The question is whether these achievements are good enough to make an impact on the lives of the vast majority of people who thrive on the meagre income from sources that are informal and are in poverty or on the brink of poverty and deprivation. The most agreeable answer would be that the Cooperatives in India are underachievers in many respects, especially in tackling poverty and unemployment among the rural community. For instance, the pathetic condition of Indian farmers may be reflected in the data from the National Crime Records Bureau of India (NCRB), which reported that a total of 296,438 Indian farmers had committed suicide since 1995(Roy, 2021).If Cooperatives would have addressed such farmer issues, especially in agricultural marketing, then such calamities might have been avoided, and their living conditions would have been better through an assured income for their livelihood.

Table No.5. Total Share of Cooperatives in (percentage) in National Economy

  Cooperatives Percentage (%)
1 Rural Network Covered by Cooperatives 98.0
2 Rural Network (Villages Covered by PACS)  90.8
3 Total Agricultural Credit Disbursed by Cooperatives (2016-2017)  13.4
4 Kisan Credit Cards Issued by Cooperatives (as at end - March, 2017)  50.2
5 Fertiliser Distributed (2016-2017) Estimated  35.0
6 Fertilizer Production (51.62 Million Tonnes for the year 2016-17)  28.8
7 Sugar Produced (5.654 Million Tonnes as on 31.3.2017)  30.6
8 Milk Procurement to Marketable Surplus (2016-17)  17.5
9 PACS having Storage Facility (at village level) (2016-17)  55.5
10 Fishermen in Cooperatives (active)  20.5
11 Wheat Procurement (4.4 Million Tonnes during 2017-18) 13.3
12 Paddy Procurement (7.5 Million Tonnes during 2016-17) 20.4
13 Retail Fair Price Shops (Rural + Urban)  20.3
14 Spindleadge in Cooperatives (3.56 Million - As on 31.3.2018)  29.3
15 Direct Employment Generated by Cooperatives 13.3
16 Self-Employment Generated for Persons  10.9

Source: NCUI. (2018). Indian cooperative movement: a statistical profile-2018. New Delhi: National Cooperative Union of India. Retrieved from, p. 47 |

Now let us look into the formation of the new ministry. Any evaluation of the right and wrong of the setting up of the new Ministry of Co-operation by the Central government cannot be done without understanding the major Strengths, Weaknesses, Opportunities and Threats (SWOT) [3] of the Indian Cooperative movement. Table No.6 presents the SWOT analysis of the Indian Cooperative movement in which it is deduced that Cooperative sector in India is ridden with frailties and that there are plenty of opportunities for further expansion and for making them more vibrant in addressing the socio-economic transformation of Indian economy and society. More generally, the prospect for the expansion of the Cooperatives in size, the consolidation of the network of societies and the development of professional management to make Cooperative enterprises competitive are huge. Legislative uncertainties, undercapitalization, regulatory risks, combining the economic, social, and environmental goals into a coherent business plan, poor governance, and management systems, entrepreneurial and techno-managerial skills, structural constraints on growth and expansion, poor market access, low participation of women [4] etc. are some of the key issues the Indian Cooperatives are confronted with (Roelants, 2013). One can conclude that there are many areas inwhich Cooperatives need to correct their weaknesses and harp upon the opportunities that exist in facilitating better life for millions of Indians eking out a bare subsistence living.

Table No. 6. SWOT analysis of Cooperative movement in India

Strengths Weaknesses Opportunities Threat
Strong values in tune with Indian ethos Unsystematic functioning. Top-down rather than a bottom-up orientation With strong values, Co-ops can act as a vehicle for socio-economic change Systemic and operational weaknesses 
Co-ops do have a dominant share in few segments Non-adherence to Co-op principles The Co-op economic democracy would make Indian democracy stronger Lack of efficient & committed leadership
Existence of a wide network of NGOs for support Weak structure and poor resources in certain areas, lack of consolidation of the network of societies Co-ops can motivate the adoption of Science &Technology Legacy of corruption and conflict
Governmental support Member apathy. Not encouraging membership responsibility. Low participation of women Co-ops can manage natural resources for sustainable development Phobia about the success of Co-ops
  Absence of professionalism Co-ops can demonstrate concern for the environment  Inroads into Co-op autonomy by the governments
  Lack of innovation and enterprising in approach  Co-ops can break subsistence agricultural practices& eradicate poverty in the rural areas  A top-down approach to Co-operativisation
  Absence of horizontal and vertical linkages Co-ops can generate subsidiary employment generation  MNCs and an open economy framework
  Weak Co-op support/apex organisations and regional imbalances in Co-op development  Persons with limited means can seek support from Co-ops& plenty of prospects for the expansion of the Co-ops in size  Weakening of democratic values and autocratic tendencies in the Indian society
  Use of obsolete technology and lack of value addition Fair distribution of economic power& consumer protection  The emergence of communalism and related divisions in the society
   State direction and bureaucratic interventions Co-ops can influence market forces   
   Poor capitalization of Co-ops In many areas Co-ops can function better by developing co-op entrepreneurship
   Lack of autonomy andpoliticisation of Co-ops International business opportunities & cooperation and support  

Source: Constructed by the authors

Political Economy of Cooperatives in India.

The political economy of the Cooperatives in India can be understood by studying how Cooperatives are managed or governed, taking into account both political and economic factors. A review of a few relevant studies is presented here to get an idea of the pertinent issue that matters for policymaking concerning the development of Cooperatives in India. Baviskar and Attwood (Baviskar and Attwood,1996) among the pioneers in this area of research in India, observed that the performance of Cooperatives can only be understood within the regional political and social context. The political economy of regions like the broad middle stratum of peasant proprietors, numerically large middle-status castes, commercialisation and relatively greater autonomy from the state are expected to encourage the success of cooperatives. Rath is for institutional changes to promote cooperatives (Rath, 2016). He is of the view that membership of a cooperative should be confined to only those who choose to use the society for the purpose for which it is designed and the voting share of every member should be his share in the total patronage of the members. This is in tune with the principle of ‘member economic participation’. The Shivajirao G. Patil committee (Government of India, 2009) believed that the root cause of the poor performance of Cooperatives in India appears to converge upon the common problem of governance, which in turn is to a major extent determined by the laws that govern Cooperatives. The committee recommended among other things necessary amendment to the constitution wherein it will be possible to ensure that the State cooperative laws provide for enabling the autonomous functioning of the cooperatives so that the cooperatives’ ability not only to help the survival of the people but also of indirectly forcing the market to behave. Another important committee headed by Vaidyanathan which looked into cooperative credit also opined that “the actual reasons for the cooperative societies and banks making losses are poor management and governance, and unless these are improved, the entire capitalization amount would get wasted as the real functioning of cooperatives would not change” (NABARD, 2005). The study by the National Council of Applied Economic Research (NCAER) on cooperative agro-processing and identification of institutional financial lacunae in the cooperative movement found that the cooperative model in the country is facing numerous policy hurdles. The major one that has been brought up was how to resolve the administration of cooperatives in the country. Traditionally cooperatives come under the purview of the respective State governments which leads to political repercussions as the establishment of a Union Ministry revives the national debate on collaborative federalism (Bandyopadhyay, 2021). Similarly, many researchers have underscored the issues of governance of Cooperatives in India.

Why, after India got Independence, do these issues of governance of Cooperatives persist in the country for the last 75 years? The possible answer may be direct to the kind of government interventions that were carried out by the State Governments in India, which are constitutionally given the responsibility of facilitating the development of Cooperatives in the respective states. It is evident that whatever the efforts of the state government so far, it is not sufficient enough to make our Cooperatives more vibrant and dynamic. Therefore, any positive steps on the part of the Union government should be welcomed by the Co-operators who are genuinely interested in a Cooperative dominant economy devoid of severe inequalities in every respect. The nature of the interventions, of course, matters, as the government is the manager of the economy which has to manage the development of cooperatives in the best interest of all stakeholders of the Cooperative enterprise. Here comes the importance of a National Policy on Cooperatives in India. It is understood that the current government at the Centre is in the process of making a policy document for the development of Cooperatives in India.

 It is felt that the following areas need urgent policy intervention to promote a ‘Cooperative economy’ wherein millions of disadvantaged sections and groups share the benefit of development. The policies to be prioritized by the Government of India to make the movement vibrant and dynamic to the task of achieving distributional justice as well as growth

(i) Cooperatives as a countervailing force

Economics is concerned with the production, distribution, and consumption of goods and services. This implies that cooperatives should be able to have a network in the country so that producers and consumers are equally benefitted as well as Cooperatives should address distributional issues that emanate from the capitalistic mode of a growth path that currently India follows. Promotion of Cooperatives as a countervailing force in India is the challenge before the policymakers so that the ‘cooperative way of doing business’ will benefit millions of disadvantaged groups and sections in India, especially the small and marginal farmers who are the worst affected by the neoclassical growth model that is followed by countries like India. One of the principles of co-operation used by the Rockdale pioneers was ‘Political and Religious Neutrality’. However, this principle is not appearing in the 1995 ICA statement on Cooperative Identity. Now, what is the role of political parties in the cooperative movement in those countries that have marked a huge success in the cooperative business? It is essentially a political economy question. Political economy is the integration of political and economic factors in the analysis of modern society. Policymakers in democratic societies must always pay attention to the next election-otherwise they are likely to cease being policymakers (Frieden, 2020). Politics affects the economy, and the economy affects politics. Politicians use Cooperatives to get votes in India. Cooperatives have become central to government policy on rural credit, and from then on it has become an institution for dolling out political patronage, financial help, and political support (Vaidyanathan, 2013). The issue here is whether it is after compromising efficiency and effectiveness with which the Cooperatives are supposed to perform while they do business.

The Cooperative model developed by the British within India was not fundamentally altered after independence with the state retaining a large degree of control over the Cooperative sector. In India, the Cooperative regime in the majority of the states remains characterised by high levels of government control and intervention. The principle of Autonomy and Independence was in vain in India as the central challenge for Cooperative governance remains how to balance the principle of democratic control and retain the role of professional management. The role of political influence in Cooperatives has also hindered the development of a member focus in Cooperatives. The politicisation of Cooperative leadership in India leads to factions on the board, conflicts in governance and management and a lack of consensus in decision-making. Political leadership on party lines use Cooperatives as a stepping stone in their political career. Now, cooperatively developed states in India are controlled by leading political parties (Gujarat- BJP, Maharashtra- NCP, and Kerala —CPM); with the support of strong bureaucratic machinery. The result is that ordinary citizens view Cooperatives as another government department or wing devoid of any kind of effective ‘Democratic Member Control’ or ‘Member Economic Participation’ as envisaged by the cooperative principles. The excessive government intervention and poor management have led to the growth of many poorly functioning Cooperatives (Vaswani, 2013).

In Europe, America and Japan Cooperatives were developed from the bottom up. While in India, the colonial rulers tried, rather unsuccessfully, to employ a top-down approach. The present government is following the same top-down approach to spread the ideology of cooperation for development without strengthening the democratic institutions at the grass-root level. It is observed by many that ignoring the SSE (Social Solidarity Economy) approach will not fetch the results.

(ii) Cooperative development in the backward states of India:

The finance minister’s budget speech underlined the development of multi-state Cooperatives and further streamline the ease of doing business for Cooperatives. The Union government do have space for working with Cooperatives as there are many states in India where the Cooperative movement is very weak, especially in the eastern India where the incidence of poverty is the highest in the country. Replication of the successful Amul model around the country is quite challenging and no state government can take the lead on its own. It cannot be interpreted as interference in the state’s Cooperative sector.

(iii) Linking Cooperatives with Panchayati Raj Institutions 

Panchayati Raj Institutions (PRIs) are the key to the decentralization of political power in India. However, Cooperatives, the organizational structure for the weak in the community, is key in rejuvenating the rural economy and triggering the movement at the grassroots level. Like PRIs created self-governance at the local level, the Cooperatives would create an inclusive society at the local level through democratizing development by sparking off Cooperative entrepreneurship. The concept of SSE is emerging wherein rethinking the way we do business will be crucial to ensure a “people- centered and planet-sensitive” recovery.

(iv) Diversification of Cooperative activities

Cooperative societies are now coming up in many different areas in the country, not just in the agricultural sector alone. However, the agricultural ministry has been unresponsive to the needs of Cooperatives in areas other than agriculture such as housing, labour etc. Getting these Cooperatives, once created, to compete globally, is a big challenge. To participate effectively in markets Cooperatives can be used by scaling up the operations which will in a way put healthy competition between the private companies who are the dominant players in farm produce marketing.

v) Cooperative and Competitive Federalism with the support of SSE

Criticism is raised against the Union government stating that it is trying to "hijack the Cooperative movement" from the State’s shoulders. Cooperatives are a state subject. Each state has a registrar of Cooperatives that oversees the sector. In addition, the Reserve Bank of India (RBI) keeps an eye on Cooperative banks. The political parties in the state of Kerala objected to the move of the Union government stating that it is the centralisation of political power by taking control of a subject under State lists [5] and weakening the concept of ‘Cooperative federalism’ pronounced a few years back by the Union government when it enacted GST reforms. It is to be noted that the governments (Union and State levels) in India should imbibe the spirit of Cooperative and Competitive Federalism. This means that each state government should see that development takes place with the support of Cooperatives as they are democratically managed organisations taking into account the felt needs of local people, especially of the marginalised sections of the society.


We have seen the various dimensions of the role that Cooperatives have in the development and well-being of disadvantaged sections of the society in the world. The important point that emerges from the discussion is that it is unequivocally proven that Cooperatives do wonderful things around the world, and they do play a significant role in shaping the destiny of millions. In India too Cooperatives play a remarkable role in certain sectors and areas that matter to human life. The importance of Cooperatives arises in the current juncture as most of the economies tryst with free-market economies wherein the private sector has been given an upper hand in the process of economic activities. Studies have shown that capitalism breeds inequality and the life situations of millions around the world and especially in India are getting worsened over the years. The condition of India’s poor has become much more pathetic due to the occurrence of the Covid19 pandemic and lags in handling its impacts. It is observed that communities having strong solidarity among themselves could overcome or minimise the adverse effects of the pandemic. It is seen that in the advanced countries the Cooperatives do play a significant role in maximising welfare. Therefore, it is better now than late in rejuvenating the Cooperative ideology in the true sense in India. Whoever comes forward to taking the lead in that direction — whether it is the Union government or State government or corporate or any individual leaders for that matter- should be wholeheartedly welcomed. Anyway, one has to appreciate the efforts to strengthen the Cooperative movement in the country, without backtracking the Cooperative principles upon which the movement built elsewhere in the world. It should not become another arena for politicians to spoil the concert by looking into the vote banks. The enlightened Indians should see the opportunities emerging from the new initiatives by the Union government in building up the social solidarity economy in which the development approach becomes people-centred and bottom-up. India’s leadership should be participatory, and it is time for a determined campaign to build a cadre of young Cooperative leaders knowing the Cooperatives principles and work for the betterment of humanity. It is another hope for democratising development in India.

* (Authors: A.M. Jose (amjose[at] ) is a Professor, Amity School of Economics, Amity University Haryana, Gurugram, and a Former Professor, Kerala Agricultural University, Thrissur, Kerala; Jos Chathukulam (chathukulam[at] is Director, Centre for Rural Management (CRM), Kottayam, Kerala, and former Professor, Sri. Ramakrishna Hegde Chair on Decentralization, Institute for Social &Economic Change (ISEC), Bengaluru.)


[1The Gini Index is a summary measure of income inequality. In other words, it is a measure of the distribution of income across a population. A higher Gini index indicates greater inequality in the distribution of income.

[2The Social Progress Index (SPI) measures the extent to which countries provide for the social and environmental needs of their citizens.

[3The authors of this paper have conducted the SWOT Analysis in an online focus group discussion (FGD) at national level held on July 10, 2021.

[4It is argued that women have a special affinity with Rochdale principles and women are in the forefront of many initiatives as means of coping with pressures from loss of jobs, marginalization and social exclusion (Nisha and Moolakkattu, 2015). Others also share those cooperatives to a considerable extent can address individual entrepreneurship for very poor women (Mayoux, 1995 and Valoufaris et. al, 2007).

[5The Seventh Schedule of the Constitution of India defines and specifies allocation of powers and functions between Union and States and they are Union list, State list and Concurrent list. While prior to the formation of Ministry of Cooperation, Cooperatives were listed under State list and they were within the exclusive remit of concerned state legislatures and Parliament can make law in the case of multi-state Cooperatives. However, following the formation of the new Ministry, there were allegations that the Union government was encroaching upon the State list and the Union government also planned to move Cooperatives under Concurrent List (Mishra, 2021). The real problem that needs to be discussed here is not about under which list the Cooperatives will now fall under but to acknowledge the fact that be it in the Union, State or Concurrent List , governments at all levels and respective stakeholders should come together in a cooperative spirit without aggrandizing one’s power and status over each other.

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