Cooperative Societies in India

India’s cooperative sector has expanded rapidly in recent years, becoming one of the world’s largest organised economic networks.

What are Cooperatives?
- Cooperatives are voluntary, democratic, and autonomous organisations controlled by their members.
- Multi-state co-operative societies (MSCS) operate in more than one state in various sectors such as agriculture, textile, poultry, and marketing.
- States regulate state cooperative societies’ incorporation, regulation, and winding up.
- Parliament can legislate on matters related to the incorporation, regulation, and winding up of MSCS.
- The MSCS Act 2002 provides for the functioning of MSCS under the Ministry of Cooperation.

Governance of Cooperatives in India

Fundamental Right: The 97^th Constitutional Amendment Act, 2011, granted citizens the fundamental right to form cooperatives under Article 19(1)(c).
Part IXB: The amendment inserted Part IXB to provide a uniform framework for cooperative incorporation and management.
- Judicial Limitation: The Supreme Court (2021) upheld the validity of Part IXB only for Multi-State Cooperative Societies.
State Cooperatives: State-level cooperatives are governed by the respective State Cooperative Societies Acts under Entry 32 of the State List.
Multi-State Cooperatives: Multi-State Cooperative Societies are governed by the MSCS Act, 2002, under Entry 44 of the Union List.
Regulatory Authorities: State cooperatives are regulated by State Registrars of Cooperative Societies, whereas multi-state cooperatives are regulated by the Central Registrar.
Banking Regulation: Cooperative banks are registered under cooperative laws, but regulated by the RBI under the Banking Regulation Act, 1949.
- Rural Oversight: The NABARD supervises and regulates rural cooperative banks.
Union Ministry: The Ministry of Cooperation was established in 2021 to provide policy oversight.

Status of Cooperative Societies in India

Total Count: The National Cooperative Database records over 8.5 lakh registered cooperative societies, accounting for nearly 27% of all cooperative societies worldwide.
Operational Share: About 6.6 lakh, roughly three-fourths of registered societies, are fully functional.
Membership Base: Cooperative membership is close to 32 crores, spanning 30 sectors and covering 98% of rural India.
Women’s Inclusion: About 10 crore women are integrated into cooperatives, largely through self-help groups (SHGs).
State Leader: Maharashtra leads with over 2.21 lakh cooperatives and around 5.8 crore members.

National Cooperative Database (NCD), managed by the Ministry of Cooperation, is a digital repository that provides a single access point to cooperative society data across India.

Significance of Cooperative Societies in India

Financial Inclusion: Primary Agricultural Credit Societies (PACS) provide last-mile credit, accounting for about 15% of agricultural lending.
Input Security: National cooperatives like IFFCO and KRIBHCO supply one-third of India’s fertilisers.
Value Addition: Cooperatives process over 30% of India’s sugar and market a major share of India’s milk output.
Price Realisation: The cooperative model reduces the number of intermediaries, allowing producers to retain a higher share of consumer prices.
Job Creation: The sector generates significant non-farm livelihoods, accounting for over 13% of direct employment.
Inclusive Growth: Cooperatives democratise rural economic participation by integrating women and marginal farmers into formal finance.

Government Initiatives for Cooperatives in India

Ministry of Cooperation (2021): Created to provide focused policy support, streamline governance, and strengthen the “cooperative–based economic development model.”
National Cooperative Database (NCD): A digital platform mapping 8.5+ lakh cooperatives to improve transparency, planning, and evidence-based policymaking.
PACS Computerisation Scheme (₹2,516 crore): Digitisation of 63,000+ Primary Agricultural Credit Societies for online accounting, DBT integration, and financial transparency.
Multi-State Cooperative Societies (Amendment) Act, 2023: Strengthens democratic functioning, accountability, and grievance redressal in multi-state cooperatives.
“Sahkar se Samriddhi” Vision: A national roadmap to make cooperatives instruments of grassroots entrepreneurship, employment, and inclusive growth.

Challenges Facing Cooperatives in India

Governance Deficit: Weak transparency and elite capture undermine democratic functioning, with internal disputes affecting nearly 30% of cooperatives.
Financial Fragility: Capital shortages and poor credit access limit growth, as about 35% of rural cooperatives face severe funding constraints.
Social Exclusion: Caste hierarchies and low awareness restrict inclusive participation and equitable representation of members.
Infrastructure Gaps: Inadequate storage, processing, and logistics, especially in states like UP and Bihar, constrain outreach and scale.
Skill Deficit: Lack of modern management and digital capacity reduces efficiency, with only ~45% members having basic digital literacy.

Way Forward

Governance Reforms: Implement model by-laws, regular audits, and democratic elections under the 97^th Constitutional Amendment and Ministry of Cooperation (2021) to ensure autonomy and accountability.
Digital Enablement: Scale up ₹2,516-crore PACS computerisation covering 63,000+ PACS to enable online accounting, DBT integration, and transparent operations.
Skill Development: Strengthen training through NCDC, and, as only ~45% members are digitally literate, constraining productivity.
Credit Access: Establish cooperative development funds with flexible collateral norms to address capital shortages faced by ~35% rural cooperatives.
Social Inclusion: Enhance participation of women, SCs, and STs via Women-led PACS and DAY-NRLM SHG-cooperative linkages, promoting equitable growth.

India’s cooperatives are the backbone of inclusive growth and rural empowerment; as Mahatma Gandhi said, ‘The future depends on what you do today.’ Strengthening governance, digitalisation, and inclusion can transform them into resilient and globally competitive networks.

Reference: The New Indian Express

PMF IAS Pathfinder for Mains – Question 515

Q. India hosts one of the world’s largest cooperative networks. Examine the drivers behind its expansion and critically assess the structural and governance constraints limiting its socio-economic role. Suggest reforms to enhance its effectiveness. (250 Words) (15 Marks)

Approach

Introduction: Write a brief introduction about the Cooperative Sector in India.
Body: Write drivers behind cooperative sector expansion, also mention structural and governance constraints and suggest reforms to enhance its effectiveness.
Conclusion: Emphasis on Sahkar se Samriddhi reforms to strengthen the cooperative sector.