An inclusive development strategy for enhancing shared economic prosperity—‘Sahakar se samriddhi’—has yielded impressive outcomes for India so far. The cooperative movement started in the pre-independence era to take on the challenge of alleviating poverty that often resulted from recurrent droughts and usurious exploitation.
While the initial driving forces powering the movement may be losing steam, there are many emerging challenges for the rural economy that require a new direction for the movement as the country marches ahead on its goal of achieving a Viksit Bharat by 2047.
The new challenges range from raising farmers’ income to achieving an efficient rural supply chain, lowering food inflation on a durable basis, creating non-farm employment opportunities, enhancing farm productivity and climate resilience, and harnessing opportunities in a digital world. Cooperative institutions may be particularly suited to manage these challenges because of their strong local knowledge, ability to forge and strengthen forward and backward linkages, and readiness to adapt to a new business environment.
For designing supportive policies, it may be useful to draw insights from the UN’s July 2023 report on cooperatives in social development, which stresses, “Cooperatives make significant contributions to the national economy by addressing market failures, empowering marginalised people, creating employment opportunities and supporting sustainable development.”
The report recommends an entrepreneurial ecosystem approach for the cooperatives, connecting all players through an interconnected network within a local environment.
India’s own success with milk and sugar cooperatives attests to the significance of an integrated approach. Another major success is India’s oldest workers’ cooperative—the Uralungal Labour Contract Co-operative Society in the infrastructure space in Kerala, which is celebrating its centenary in 2024—that exemplifies an alternative entrepreneurial model.
Two aspects of cooperation need special mention. First, the importance of “cooperation among cooperatives”. When Uralungal had to repay a large loan taken for a road project, it formed a consortium of 38 primary cooperatives and raised a large sum from them, thereby protecting its creditworthiness while scaling up. Second, employment protection may be ensured by a workers’ cooperative even in the midst of a crisis, unlike at private firms.
After the formation of the ministry of cooperation (MoC), the recent policy enablers for cooperatives have been designed keeping in perspective the wide-ranging and complex nature of the emerging challenges in the rural economy, need for a policy focus, and an emphasis on efficiency and outcomes.
Some of the major initiatives include primary agriculture credit societies (PACS) as common service centres; computerisation of PACS; formation of farmer-producer organisations and retail oil and gas distributorships for PACS; a large network of warehouses in the cooperative sector; formation of fish farmer producer organisations; new multipurpose PACS, dairy and fishery cooperatives in uncovered panchayats; and model bylaws for PACS.
NABARD, with its multi-layered support architecture for cooperatives under the MoC’s guidance, strengthens the enablers as a continuous process, comprising broadly a provision to refinance rural cooperative banks, supplement their resources for lending; developmental support through the Cooperative Development Fund and promotion of financial inclusion in rural areas; implementation support such computerised PACS providing more than 300 e-services; and supervision to safeguard financial stability.
NABARD also promotes cooperation among cooperatives by facilitating the sharing of benefits from their comparative advantages. An important component on the financial side would be to consolidate the existing bank accounts of cooperatives and their members in various commercial banks and place them under a district/state cooperative—thereby keeping the resources of the cooperatives within the system.
Certain areas may require sharper policy attention. In the context of the food inflation surges experienced in recent years, it could help to have more farmer-producer organisations and an integrated supply chain like the one for milk.
To garner the benefits of economies of scale in horticultural crops, particularly in the context of rising fragmentation of cultivable land, multi-state cooperatives may need to build an extensive network of producers to help reduce costs and improve bargaining power. Pooling of land for reaping scale economies may have to be explored on a wider scale.
WTO-compliant processed products to help in building a strong agri-export product line; ease of doing business through tech adoption and greater transparency; and capacity building through training, and interlinkages with agri start-ups as integral parts of the entrepreneurial ecosystem would also need to be promoted.
Cooperatives may also need to put in place a system to identify promising innovators or new business ideas, and nurture them with financial and add-on services. A rejuvenated cooperative movement can be the harbinger of more inclusive rural economic prosperity in India.
Shaji K V
Chairman, NABARD