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Cooperatives can deliver $ one trillion economic expansion; provide work opportunities to millions and fuel boom in grassroots firms


Fourth pillar of Indian economy is on the resurrection mode. From state-owned public undertakings, private and foreign companies, cooperative enterprises considered as fourth engine of economic growth are in for a big makeover.

Taking cooperatives seriously as grassroots enterprises to spur rural economy, create jobs and add rural wealth to India’s growth heft was something long overdue.


And, this government seems to have got its heart and soul at the right place to revive the cooperative enterprises and help achieving double digit growth and take Indian rural people global.

A year-long drive to rejuvenate these enterprises with huge potential across a dozen sectors in the spirit of ‘antyodaya’ as envisaged by Maharshi Arbindo and Vinoba bhave of ‘Godan’ fame is timely.

Narendra Modi government’s two decisions in cooperatives sector last one year stand out especially the the rural enterprises that are mostly agricultural primary credit societies.

As per government’s own data, over 36,000 such societies have turned dysfunctional with many of these enterprises unviable. Its decision to shut down cooperatives that are untenable is a good beginning to reform the sector that can boast of only half a dozen large multi-state enterprises that are really successful.

But, 13-crore members’ network across 99,000 primary credit societies has every chance to add economic muscle to the Indian growth and bring about fundamental change in rural hamlets across the country. Revival of the primary credit societies also will have cumulative effect with balance sheets of 352 district central cooperative banks improving and 34 state cooperative banks getting healthier. These banks have had refinanced or recapitalized thousands of primary credit societies with Nabard’s funding support. Many of these banks were also in doldrums owing to losses or unrealized funds lent to the societies.

Integration of these credit societies with focus on core agricultural lending with dairy cooperatives with 1.5 crore membership in two lakh cooperative enterprises would help diversify the risk and open up new business opportunities.

Bringing in over 25,000 fisheries cooperatives with 38 lakh members would culminate into the grass roots enterprises taking up multi-modal business activities.  

This week’s decision to set up two lakh such multi-modal primary credit societies in agriculture, fisheries and dairy sectors over next five years would be an ice-breaker given that they can be carved out into sustainable companies and help reach out to last man standing.

These new enterprises would help spread the cooperatives to 1.6 lakh panchayats without primary agriculture credit societies and two lakh villages or clusters without dairy linkages.

Multi-ministerial coordination, phasing out overlap of infrastructure and judicious utilization of meagre resources making the new age cooperatives as enterprises for different products and services marks shift in economic pendulum.


Harvard bred economists like Dr Manmohan Singh, Montek Singh Ahluwalia or Palaniappan Chidambaram had never believed that cooperatives and rural economic activity could be a game changer. These market and corporate protagonists may actually be irked by the policy shift relating to cooperatives. But, there’s no point in making them believe that cooperatives can deliver big time at grassroots.

In fact these ‘highly respected western educated minds’ made fun of the Atal Bihari Vajpayee’s ‘Antyodaya’ anna yojana to feed the perpetually hungry poor people in India’s hinterlands. Their tribe had scoffed at the very thought of taking economic activity to villages in the spirit of anthyodaya as propagated by philosophers – thinkers, Dattopanth Thengdi and Deendayal Upadhyaya.

Most significant in the entire strategy to revitalize cooperatives was to rope in successful companies like National Dairy Development Board and National Fisheries Development Board (NFDB) in bringing about sustainable change in the way cooperatives operate on ground zero. Their experience, expertise and reach would only help evolving sustainable grassroots enterprises in cooperatives in the new age.

The new policy envisages bringing over 25 business activities under the roof of new age cooperatives. From cooking gas to petroleum products, food grains, fertilizers to seeds, fair price shops to community irrigation have been enlisted as business activities of these cooperatives hitherto segregated under either dairy development or spread of credit.

While the new cooperatives policy is yet to take complete shape, setting up a dedicated multi-state enterprise to push grass roots products and services into export markets is yet another milestone in the policy shift heralded by the government.

Several countries in Europe like France, Germany; Australia, Canada and Japan have sustainable cooperative models especially catering these countries exports basket. From banking, finance, insurance, pension funds, dairy to agricultural products and services, cooperatives have been the vehicles in these countries exports and domestic consumption.

As per World Cooperatives Monitor of 2020, just the top 300 enterprises in this sector account for a whopping US $ 2.146 trillion economic activity. Cooperatives globally provide work opportunities to about 10 per cent of total employed personnel. If one were to go by figures of International Cooperatives Alliance, three million enterprises have over 12 per cent humanity as their stakeholders. A billion members of these cooperatives is what translates to large chunk of economic activity and trade is many countries.

In the transformative shift that cooperatives are expected to undergo, a few riders are what matter the most. Hand holding and facilitation by creating conducive environment is what government’s role should be limited to. Allowing them to make most of the opportunities in rural India is what the bureaucracy will have to do. Strangling these new age enterprises with politicians or bureaucrats may not work.

Past experiences cannot be forgotten in a hurry. Let’s not ignore what happened to IFFCO. There were several attempts by different governments to effectively make it a state-run enterprise by default. Resistance put up by then Fertilizers minister Ram Vilas Paswan to cut IFFCO’s umbilical cord with the government when the cooperative enterprise made desperate attempt to return the government’s paid up capital cannot be set aside.

While IFFCO managed to retain its core cooperative character, its off-shoot Kribhco in fertilizers sector continues to on the beck and call of the government babus as well as politicians.

Political leaders in states have had a field day by controlling cooperative banks, enterprises and credit societies. Unless they are allowed to run as grass roots enterprises managed by independent managements, the very spirit of ‘Antyodaya’ will be lost.

There’s no denying that some cooperatives have had grown too huge to fail. But, there are several others also mired in charges of corruption, obfuscation and opaque dealings.

Cooperatives culture has to change and they have the wherewithal to deliver a whopping $ one trillion expansion to India’s economy, create millions of micro enterprises, provide equivalent number of jobs and democratise the stakes for hoi polloi.

(author is Director & Chief Executive of non-partisan think tank, Centre for Integrated and Holistic Studies based in New Delhi)

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