Cooperative Sector in India

India’s cooperative movement is one of the most under-appreciated forces in the country. It has made a significant contribution to financial inclusion, jobs, and community-based enterprises. The government has taken initiatives to modernize this sector through digitization, social inclusion, and more. As of 31 March 2025, data of around 8.3 lakh primary cooperative societies had been uploaded on the National Cooperative Database, with more than 32 crore members. The National Cooperation Policy 2025 states that India has more than 8 lakh cooperative societies and around 30 crore total members.

What Are Cooperatives?

A cooperative is an independent association of persons who voluntarily join together on the basis of membership, to satisfy their common economic, social, and cultural needs and wants, and to strengthen their material and spiritual well-being.

Cooperatives are guided by the following seven principles:

• Voluntary and Open Membership: Cooperatives have open doors for everyone interested in using their services and willing to accept responsibilities.
• Democratic Member Control: In cooperatives, each member has an equal vote, ensuring that the principle of “those who use, decide” prevails.
• Member Economic Participation: Members contribute in-kind or otherwise to the capital of their cooperative and vote on matters affecting the distribution of income and surpluses.
• Autonomy and Independence: While cooperating, they remain independent in their management and administration, even when dealing with government agencies.
• Education, Training, and Information: They provide education and training to their members, elected representatives, and employees to promote their well-being and effective management of their activities.
• Cooperation among Cooperatives: Cooperatives deal with each other on terms of partnership and not as employers and employees.
• Concern for Community: Cooperatives promote the well-being of the community, not just their members and their business interests.

Constitutional and Administrative Framework

Since Indian states differ in their needs and problems, this sector falls mainly under the State List, Entry 32 of the Constitution.

The 97th Constitutional Amendment Act, 2011, added Article 43B to the DPSP (Directive Principles of State Policy) and inserted Part IX-B relating to cooperative societies.

However, the Supreme Court held in 2021 that Part IX-B is operative only insofar as it concerns Multi-State Cooperative Societies and cooperative societies in the Union Territories, as the amendment required ratification by the states to the extent that it affected state cooperative societies.

In practice, two kinds of cooperative societies exist in India:

1. Those registered under the respective Cooperative Societies Acts of the various states.
2. Multi-State Cooperative Societies (MSCS) registered under the Multi-State Cooperative Societies Act 2002, as amended.

Significance of the Cooperative Sector in India

Cooperatives make India’s agrarian economy more resilient and give financial power to ordinary people.

Economic Significance

Financial Inclusion

Marginal farmers and small agri-businesses are often unable to get loans from the formal banking sector. The Primary Agricultural Credit Societies (PACS), however, provide a financial lifeline to these people by meeting their credit needs right at their doorstep.

Rural Development

Besides providing credit, cooperatives serve as important agencies of rural development. They help in cultivating community spirit and mobilizing people for various developmental activities. For instance, cooperatives undertake the distribution of seeds and agricultural inputs, crop insurance activities, and the implementation of government welfare schemes.

Employment and Livelihood Generation

The cooperative sector can potentially generate vast employment opportunities, particularly for the poor. For example, the Uralungal Labour Contract Cooperative Society (ULCCS) in Kerala provides employment to over 18,000 workers engaged in large-scale construction projects.

Better Price Realisation and Market Stability

Marketing cooperatives enable small-time growers to obtain a better price realisation for their produce. By collectively dealing with the middlemen and large-scale buyers, the growers ensure that they receive a reasonable share of the price paid by the ultimate consumers. Sugar cooperatives in Maharashtra and cotton cooperatives in Gujarat are classic examples of such entities.

Innovation and Self-Reliance

The cooperative model has led to a number of innovative ideas in recent years. For instance, farmers in Gujarat’s Dhondi village have formed a Solar Energy Producer Cooperative Society that helps them generate clean electricity to sell to the state grid.

Social Significance

Empowerment of Vulnerable Groups

Cooperatives give economically vulnerable groups and marginalized sections of society an opportunity to stand on their own feet. The spontaneous formation of these societies often provides a bargaining platform by pooling the resources of small-time growers and others.

Grassroots Democracy

The strict adherence to the principle of one member, one vote ensures that the powers reserved for Gram Panchayats are actually put to use. It promotes democracy at the grassroots level in a big way.

Building Social Capital

Since the resources and efforts of members are combined on the basis of mutual benefit, cooperatives promote general well-being, civic mindedness, and social capital.

Political and Governance Significance

By promoting a decentralized approach and creating value for the money spent, cooperatives help in political empowerment. They provide an alternate to concentrated economic power by ensuring that the primary producers are able to derive maximum benefits from their produce.

These societies also act as effective instruments for the disbursement of government loans, credit, and other facilities to the people.

Lijjat Papad: An Example of Cooperative Success

The Lijjat Papad story is one of the success stories of the cooperative sector in India. In 1959, seven women from a Mumbai chawl had pooled together 80 rupees to start making and selling papads from their rooftop.

Instead of taking the road of franchising, the group decided to form a women’s cooperative society that follows the principles of self-reliance and mutual help to carry on with their enterprise.

The organisation today has over 45,000 women members and has created a brand name for itself with its range of papads.

Major Challenges Faced by Cooperative Societies in India

Political and Bureaucratic Control

Local political leaders often control these societies, and many an aspiring leader takes to “development” by setting up a cooperative. Additionally, zealous registrars of cooperative societies control the management without any regard to the autonomy of these bodies.

Lack of Ownership by Members

Many societies suffer from a lack of ownership by members. They were formed through government directions for a specific purpose. Consequently, members behave as if the society was a government department and do not take any decision themselves. They view the society as the agent of the government, and not as an instrument of the members.

Lack of Capital

Equity capital and working capital are also crucial for the proper functioning of any business enterprise. Most societies suffer with a lack of these.

Problems in Holding Proper Elections

Elections to the governing body are held irregularly, and internal audits are also performed inadequately.

Elite Capture

Elite capture takes place because of the capture of credit and subsidy resources by the rich and powerful. The small farmers and landless laborers are often kept away from the power structure.

Lack of Professional Management

There is often a lack of professionally managed boards of directors in societies. Boards do not realize the value of employing expert professionals and consultants in areas like finance, supplies, and computerization.

Regional Imbalances

There exists a wide regional imbalance. While some states have cooperative traditions and societies in several sectors, others have few or none.

Government Initiatives to Promote the Cooperative Sector

National Cooperation Policy 2025

The National Cooperation Policy 2025 aims to transform traditional societies into modern commercial enterprises. It promotes a vision of “Sahkar-Se-Samriddhi” and focuses on building core competencies in areas like organic farming and the use of technology. The policy places farmers, women and rural development at the centre of the cooperative movement.

Ministry of Cooperation

The Ministry of Cooperation was created in 2021 to provide adequate administrative, legal, and policy support to cooperative societies.

Multi-State Cooperative Societies Act 2002

It provides a legal framework for multi-state societies. The Act was subsequently amended in 2023 to strengthen the governance of Multi-State Cooperative Societies and address issues arising from the constitutional framework.

The National Cooperative Database

The National Cooperative Database aims to provide a single point access to authentic and updated information on cooperative societies across the country. The database captures information relating to location, number of members, economic activities, and backward and forward linkages of cooperatives.

Computerisation of PACS

A Centrally Sponsored Project for Computerisation of Primary Agricultural Credit Societies was approved on 29 June 2022 for a period of five years from 2022-23 to 2026-27.

The original project targeted 63,000 PACS, with a total budget outlay of ₹2,516 crore, and aimed to bring functional PACS onto a common ERP-based software platform.

The project has since expanded. As of 20 January 2026, 79,630 PACS had been sanctioned under the computerisation project, of which 61,478 PACS had been onboarded on common ERP software and 44,860 PACS had completed on-system audit. The total financial outlay had also increased to ₹2,925.39 crore.

National Apex Multi-State Cooperatives

The Union government has created three new national-level multi-state cooperative societies. These are:

• National Cooperative Export Limited (NCEL): Facilitating exports of goods and services from cooperative members.
• National Cooperative Organics Limited (NCOL): Aimed at harnessing organic produce, branding, and selling it in domestic and international markets.
• Bharatiya Beej Sahakari Samiti Limited (BBSSL): To undertake research and development in the field of seeds at a grassroots level and distribute their produce to member societies and farmers.

As of 20 January 2026, NCEL had enrolled 16,002 cooperative societies, NCOL had enrolled 13,441 cooperatives, and BBSSL had enrolled 37,206 cooperative societies.

International Year of Cooperatives 2025

The United Nations declared 2025 as the International Year of Cooperatives under the theme “Cooperatives Build a Better World.”

The official launch took place in New Delhi in November 2024 during the International Cooperative Alliance Global Cooperative Conference and General Assembly, which brought together more than 3,000 delegates from 107 countries.

Bharat Taxi

Bharat Taxi is a cooperative-led digital mobility platform operated by Sahakar Taxi Cooperative Limited (STCL), a multi-state cooperative society.

As of 4 August 2026, the platform had 8.48 lakh registered Sarathis (drivers) and 44.27 lakh registered customers. It had been officially launched in Delhi-NCR, Gujarat, Maharashtra and Rajasthan.

Bharat Taxi has adopted a cooperative-led operating framework, including a zero-commission model for drivers, transparent fare structures, subscription-based participation, and social-security linkages.

Tribhuvan Sahkari University

Based in Anand, Gujarat, this university has been formed based on the experience of the Institute of Rural Management Anand (IRMA).

The Tribhuvan Sahkari University Bill, 2025 was passed by the Lok Sabha on 26 March 2025. The university educates students about cooperative management and aims to churn out managers, accountants, and other professionals in this field.

Way Forward – Cooperative Sector

• Strengthen Cooperative Autonomy: Regulation should be used to promote member interests while leaving day-to-day decision-making to societies.
• Promote Professional Management: The board should focus on policy issues, management, and the needs of the members, leaving day-to-day operations and professional expertise to others.
• Avoid Excessive Bureaucratic Control: State Registrars should reduce their role as “overseers” and become facilitators and monitors.
• Promote Value Addition: Cooperatives should strive to add value to their products instead of selling commodities in the open market. For instance, milk should not be sold in the raw form but processed and packaged with a brand name and tagline, like AMUL.
• Give Attention to Underserved States: The eastern and northern states need hand-holding and support to create successful cooperative models.
• Strengthen Centre-State Cooperation: Since cooperation is a state subject, it is necessary to involve the states in the decision-making process and design policies that would address the grassroots issues.
• Modernize the Policy Framework: Policy reforms should focus on ease of doing business, digitization, simplified auditing procedures, and easier access to formal credit and capital markets.

Conclusion

India’s cooperative movement is an example of how businesses do not need to adopt exploitative practices to succeed. It has helped create economic value for millions of Indians by combining the advantages of a market economy and a self-help group.

Unlocking the full potential of cooperatives in India requires addressing the challenges mentioned in this paper. By focusing on cooperative autonomy, professional management, digitization of records, and transparent elections, member-owned societies can create numerous opportunities for average Indians.

FAQs on the Cooperative Sector in India

What is a cooperative society?

A cooperative society is an autonomous association of persons who join together voluntarily on the basis of membership to satisfy their common economic needs and wants.

What are the seven principles of cooperatives?

These are voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education, training, and information, cooperation among cooperatives, and concern for the community.

Is cooperation a State or Union subject?

Cooperation is mainly a State subject under the Constitution. Multi-State Cooperative Societies are governed under the Union framework.

What is the 97th Constitutional Amendment?

The 97th Constitutional Amendment Act, 2011 added Article 43B to the DPSP and inserted Part IX-B relating to cooperative societies. The Supreme Court subsequently held that Part IX-B is operative only insofar as it concerns Multi-State Cooperative Societies and societies in Union Territories.

When was the Ministry of Cooperation established?

The Union Government established the Ministry of Cooperation in 2021 to provide support to the cooperative sector.

What is the National Cooperative Database?

The National Cooperative Database is a comprehensive database intended to provide authentic and updated information on cooperative societies across India.

What is the significance of PACS computerisation?

The computerisation of PACS means bringing functional Primary Agricultural Credit Societies onto a common ERP-based software platform, enabling improved efficiency, faster transactions, better accounting and greater transparency.

What are the major challenges faced by cooperatives?

Cooperatives in India face political control and apathy from the bureaucracy, lack of ownership by members, lack of capital, problems in holding proper elections, elite capture, lack of professional management, and wide regional imbalances.