International Labour Organization (ILO) defines a cooperative as a group of people or organizations who work together to achieve their common economic, social, and cultural goals and objectives through a democratically governed company/enterprise.

International Cooperative Alliance (ICA) defines a cooperative as "an autonomous group of persons united voluntarily to achieve their common economic, social, and cultural needs and ambitions through a jointly-owned and democratically-controlled company. The UPSC Indian Polity and Governance Syllabus includes Cooperatives in India which is described in this article.

Cooperatives In India - Historical Background

• The development of Cooperatives can be traced to the 19th century when a large part of the population in India was dependent on the agriculture sector.
• The agriculture sector at that time was confronted with the problems of poverty, indebtedness of farmers, famine, social unrest and lack of institutional arrangements for agricultural financing.
• In order to overcome these problems, the British government enacted the Cooperative Societies Act in 1904. However, this Act was based on European ideas and aimed at fulfilling British colonial aspirations.
• It was during the Swadeshi Movement that amidst the swadeshi education and swadeshi industries, swadeshi cooperatives emerged in various parts of the country. Agricultural Credit Cooperative Society, Karnataka was the first cooperative Society.
• During the pre-independence period, the Cooperative movement went through several stages of development such as the establishment of the Indian Famine Commission (1901), the formation of Cooperative Credit Societies (1904) which classified Rural and Urban Societies, Swadeshi movement(1905) which promoted the village Industries and further passage Cooperative Societies Act(1912) which allowed for registration of credit society or banks.
• The cooperative movement gained additional momentum through Montague- Chelmsford Reforms(1919) which made Cooperation a provincial subject thereby increasing the membership of the Cooperative societies considerably.
• Thus till the advent of independence, the period marked the new age of cooperatives and their role in economic development.
• Cooperation came to be regarded as a tool for planned economic development.

Cooperative Movement After Independence

• Component of a Mixed Economy: Following independence, the country pursued a strategy of planned economic development in order to construct a mixed economy comprising three sectors: public, private, and cooperative. Cooperatives were envisioned as a balance force between the public and private sectors.
• Component of Five year Plan: It was made an integral part of Five-Year Plans after independence and regarded as one of the three pillars of democracy after Panchayat and the schools.
• National Cooperative Policy: The Government of India announced a National Policy on Cooperatives in 2002 based on the recommendation of the National Development Council (NDC).
• Formation of NCDC: The National Cooperative Development Corporation (NCDC) was established as a statutory corporation under the National Cooperative Development Corporation Act of 1962.
• Cooperative Committees: In 1954, the Rural Credit Survey Committee proposed state participation in cooperatives at all levels and the Government of India appointed the S.T. Raja Committee to suggest measures for improving the Cooperative Law.

Cooperatives In India - Constitutional Provisions

• The Constitution (97th Amendment) Act of 2011 created a new Part IXB (Cooperatives) following Part IXA (Municipalities) regarding cooperatives in India.
• In Part III of the Constitution, Article 19(1)(c), the word "cooperatives" was added after "unions and associations” which enabled citizens the right to form cooperative societies as their Fundamental Right.
• The Act protected cooperatives by inserting Article 43 B and Part IX B related to them.
• The Directive Principles of State Policy (Part IV) now include a new Article 43B on the "development of cooperative societies."
• Supreme Court's Ruling: The Supreme Court ruled down certain portions of the 97th Amendment Act, 2011, in July 2021 and concluded that states have the sole authority to legislate on matters reserved exclusively to them as cooperatives are a part of State list.

Features Of Cooperative Societies

• It is a non-capitalist association of people.
• It is a business, not a charitable organization.
• Members not only share the profit, but they also share the risk.
• It is a non-profit organization with democratic management.
• The primary goal is not profit, but rather service to the members.
• All cooperative organizations are involved in the socio-economic movement.
• It supports the weaker section of the community.
• It abolishes all sorts of exploitation.
• It generates employment.
• It educates people the values of equality, mutuality, and cooperation.

Types Of Cooperative Society

Retail Cooperatives Society

Retail cooperatives are a form of "consumer cooperative" that assists in the creation of retail businesses for the benefit of consumers. Retail cooperatives are commonly found in small towns.

Examples: Hardware, food, agriculture products, and even movie theatres.

Worker Cooperatives Society

Members of worker cooperatives are both employees of the firm and cooperative owners. It can be formed by new business start-ups or by converting existing enterprises.

Examples: Bakeries, retail establishments, software development teams, and aquaculture.

Producer Cooperatives Society

Producer cooperatives are founded and run by producers

Examples: Agricultural items, lumber, carpentry, and crafts.

Service Cooperatives Society

They are set up in order to give members more control over the services they provide. Examples: Child care, health care clinics, and burial services.

Housing Cooperatives Society

They provide homeowners with the chance to share the costs of property ownership (or building). Examples: Rentals, single-family homes.

Challenges

• Capital is scarce in India. Cooperatives do not have access to capital and rely only on its shareholders.
• The current socio-economic scenario has caused state cooperative legislation to be out of date. Certain sections of them need to be improved or rewritten.
• People are not adequately informed on the Cooperative Movement's goals, as well as the norms and regulations that govern cooperative institutions.
• The Co-operative Movement has also been hampered by a lack of trained employees.
• India is the world's largest milk producer, accounting for 22% of global milk production, although the dairy sector's growth is highly variable. Only Western India dominates the sector. Central, North, and North-East India make insignificant contributions to the dairy sector.
• The current cooperative bank model has developed some 50 years ago; a few relaxations have occurred over time, but they are neither adequate nor standard and do not allow financial institutions enough freedom to promote rural enterprises.

Measures to be Taken

• In India, agricultural produce processing is limited to a few items. Starting a food processing business will enhance the shelf life of agricultural produce, thereby benefiting farmers. The expansion of the food processing business has the potential to treble farmers' income.
• Cooperative banks require a new business model to function due to the fall in agricultural income in the rural sector. These banks demand business strategies that give them more flexibility and regularity.
• If adequately systematized, the dairy sector can deliver maximum revenue to the rural community. There is a need for policy to promote auxiliary services for the dairy industry, such as accessible veterinary services and large-scale animal feed manufacturing and distribution at a reasonable cost.
• Providing cooperative banks with access to finance for their cooperatives' development needs.
• Other cooperatives, such as weavers and craftsmen cooperatives, can be run in addition to milk cooperatives. Farmers' income and the rural economy can both benefit greatly as a result of this.
• EODB norms are applied to a wide range of commercial, manufacturing, and service activities. All cooperatives should receive the same level of assistance so that they can operate freely.

Conclusion

Recently the Government of India created a new Ministry of Cooperation with an aim to strengthen the cooperative movement in the country. India's economy cannot rely only on urbanization and industrialization. The rural sector will continue to play a significant role, and cooperative organizations will play an essential part in facilitating it. As a result, it is critical to recognize and support this industry. Cooperatives have irregularities, which must be addressed through rules and tougher execution.

FAQs

MCQs

1. What is a key feature of cooperatives in India?

A) Limited membership
B) One member, one vote
C) Profit maximization
D) Centralized control

2. Which sector is significantly impacted by cooperatives in India?

A) Information Technology
B) Textile Industry
C) Agriculture and Dairy
D) Construction

3. What challenge do cooperatives face in India?

A) Excessive funding
B) Political independence
C) Lack of awareness
D) Strong competition from cooperatives

4. What role does the government play in the cooperative sector?

A) Promoting private enterprises
B) Facilitating legal frameworks for cooperatives
C) Eliminating cooperatives
D) Managing cooperative enterprises directly

5. What is one of the objectives of cooperatives in India?

A) Individual profit maximization
B) Community empowerment
C) Centralized control of resources
D) Limiting market access

GS Mains Questions and Model Answers

Q1: Analyze the role of cooperatives in promoting rural development in India.

Answer: Cooperatives play a pivotal role in promoting rural development in India by enhancing the socio-economic status of rural communities. They provide essential services such as credit, marketing, and input supply to farmers and small producers, which helps improve agricultural productivity and income levels. By pooling resources and efforts, cooperatives empower rural populations to negotiate better prices for their products and access markets more effectively. Additionally, cooperatives often engage in activities that promote social welfare, such as education, healthcare, and skill development, further contributing to rural empowerment. Through their inclusive and participatory model, cooperatives facilitate community engagement and foster self-reliance, leading to sustainable rural development.

Q2: Discuss the challenges faced by the cooperative movement in India and suggest potential solutions.

Answer: The cooperative movement in India faces several challenges, including inadequate infrastructure, lack of awareness, and political interference. Insufficient funding and resources can hinder the establishment and functioning of cooperatives, while political involvement can lead to mismanagement. To address these challenges, it is essential to enhance investor education and awareness regarding the benefits of cooperatives. Strengthening the financial support system for cooperatives through government initiatives and grants can also aid their growth. Additionally, promoting transparency and accountability in cooperative management can mitigate issues of political interference and enhance efficiency. By addressing these challenges through targeted policies and community engagement, the cooperative movement can thrive and contribute significantly to the Indian economy.

Q3: Evaluate the significance of cooperatives in the context of India's economy.

Answer: Cooperatives hold significant importance in India's economy by fostering economic self-reliance and empowering marginalized communities. They contribute to the agricultural sector by ensuring fair pricing and better market access for farmers, thus enhancing their income and livelihoods. Furthermore, cooperatives play a vital role in promoting small-scale industries and rural entrepreneurship, driving local economic development. The cooperative model encourages community participation and democratic governance, aligning with India's goals of inclusive growth and social equity. By addressing market failures and providing essential services to underserved populations, cooperatives enhance overall economic resilience and stability, making them a crucial component of India's socio-economic landscape.

Previous Year Questions on Cooperatives in India

1. UPSC CSE Prelims 2021:

Question: What is a defining feature of cooperatives?

A) Profit maximization
B) One member, one vote
C) Centralized control
D) Limited membership

Answer: (B)

Explanation: A defining feature of cooperatives is the principle of "one member, one vote," which ensures democratic control over decision-making.

2. UPSC CSE Mains 2019 (GS Paper 1):

Question: "Discuss the significance of cooperatives in India's rural economy." Analyze their impact on socio-economic development.

Answer: Cooperatives are significant to India's rural economy as they empower farmers and small producers, enhance productivity, and ensure fair pricing for agricultural products. By providing essential services like credit and marketing, cooperatives help reduce dependency on exploitative intermediaries. Their community-based model fosters social cohesion and encourages collective action, leading to sustainable livelihoods and improved living standards. Moreover, cooperatives promote skill development and entrepreneurship, further contributing to rural development. Overall, their impact on socio-economic development is profound, making them a vital instrument for poverty alleviation and rural empowerment in India.