Reviving cooperatives must address foundational issues, regulatory overlap

India’s cooperative movement, once rooted in the agricultural sector, has expanded in several areas. From enabling access to credit and inputs to farmers, cooperatives today are expanding into diverse sectors. With 844,000 registered cooperatives across 30 sectors, the member-owned enterprises have worked towards empowering local communities and driving grassroots development. To further enhance their utility, the government recently unveiled the National Cooperative Policy 2025, with a 20-year vision. An attempt to revitalise India’s cooperatives was overdue after the first such policy was rolled out in 2002.

 

The policy aims to expand the number of cooperatives by 30 per cent, ensuring one in every village, and bring 500 million citizens who are either not members or are inactive in the sector into active participation. Given it’s primarily a state subject, the policy encourages states to reformulate their state cooperative policy and digitise all processes. States have also been urged to ensure timely elections, a much-needed intervention to counteract chronic inefficiencies and political interference that plague many of the cooperative societies. Further, the idea of strengthening the role of primary agricultural credit societies (Pacs) by designating them “implementing agencies” for various government schemes is a crucial one. It could help deepen service delivery at the grassroots.

 

Another thrust of the new policy is the emphasis on the marketing and export potential of cooperatives. Their potential to export high-quality products such as dairy, spices, handicrafts, handlooms, and organic produce has remained largely underutilised due to poor branding, weak logistics, and limited awareness of international standards and procedures. By promoting aggregation and standardisation, the policy aims to enhance the global competitiveness of cooperatives. The establishment of National Cooperative Exports Ltd in 2023 was a pivotal development in this regard, offering technical assistance, enabling economies of scale, and serving as a credible export platform for small cooperatives. Further, the computerisation of Pacs, the creation of model bye-laws to make them multipurpose, and the launch of the world’s largest decentralised grain-storage programme reflect the government’s commitment to reinvigorating cooperatives. The recent launch of Tribhuvan Sahkari University could potentially fill longstanding gaps in skill development and innovation capacity.

 

Yet, these gains may not translate into long-term success, unless the foundational challenges are addressed. Nearly 40 per cent of Pacs are currently defunct. There is limited adoption of digital tools, and this restricts access to online markets and digital banking, particularly in rural areas. Institutional capacity remains weak, and financing constraints deter expansion and diversification. Most cooperatives lack the technological infrastructure and human capital to increase scale or innovate. Another often overlooked but critical challenge is regulatory uncertainty. Cooperative banks, for instance, operate under dual regulation — supervised by both the Reserve Bank of India and the state registrar of cooperatives. This overlapping jurisdiction leads to issues related to compliance. As cooperatives are now being encouraged to expand into new areas such as insurance, the potential for regulatory overlap looms even larger. Some of these issues need to be addressed.