Reviving the cooperative spirit demands more than policy change

Cooperatives were born in the 19th century out of a search for fairer economies. Robert Owen’s community-owned ventures planted the seed, but the real breakthrough came in 1844, when the Rochdale Pioneers in England laid down the rules of open membership, one-member-one-vote, and fair profit sharing. These principles remain the DNA of the cooperative movement. 

Thinkers, however, differed in their judgement: Marx and Engels doubted that cooperatives could topple capitalism, while Durkheim saw them as engines of social solidarity. Both perspectives hold truth. Cooperatives may not dismantle markets, but they have endured, evolving into resilient, people-centred enterprises. From Spain’s Mondragon network to India’s SEWA and America’s Evergreen model, cooperatives have continually adapted to tackle inequality, sustainability, and community empowerment.

The scale today is staggering. Over 12 per cent of humanity participates in three million cooperatives worldwide. The top 300 generate a combined turnover of $2.4 trillion and provide livelihoods to 280 million people—10 per cent of the world’s employed population. Within this global story, India occupies a unique place. 

The 2023 World Cooperative Monitor ranks Amul (GCMMF) and IFFCO first and second globally by turnover-to-GDP per capita, at 2.9 million and 2.6 million, respectively. With more than 844,000 cooperatives, including 200,000 credit and 600,000 non-credit cooperatives spanning housing, dairy, fisheries, and more, and 300 million members, India alone houses one in four cooperatives worldwide. Its cooperative journey is thus not only historic but also globally unmatched.

Yet scale does not guarantee spirit. From their inception, cooperatives were envisioned as democratic institutions grounded in seven guiding principles, with democratic member control at their core. In practice, however, this principle remains more aspiration than reality.

In India, where cooperatives have long been intertwined with politics, leadership is both the sector’s greatest strength and its Achilles’ heel. Elections to cooperative bodies are seldom free from partisan influence. Rather than empowering members, many have become breeding grounds for political patronage, undermining the cooperative spirit.

Classic research by BS Baviskar illustrates this duality. His comparison of Maharashtra’s sugar cooperatives and Gujarat’s milk cooperatives shows how politics shaped outcomes in contrasting ways. In Maharashtra, sugar factories became hubs of political power. Backed by state subsidies and licences, they reshaped rural economies—building roads, schools, and credit systems. Yet they also entrenched “sugar barons”, whose control over cane permits, jobs, and loans allowed them to consolidate power at the expense of smallholders and migrant workers. 

Democracy existed in form, but largely favoured rural elites. Gujarat’s milk cooperatives, by contrast, followed the Amul model under Verghese Kurien’s technocratic leadership. The three-tier federation insulated local societies from partisan capture, while the daily milk collection system brought in small farmers and women. Inclusivity was their strength, though Baviskar also noted that this technocratic structure limited genuine grassroots political participation.

The paradox deepens in India’s credit cooperatives. Cooperative banks, originally designed to democratise access to credit, now operate in a hybrid regulatory space under both state registrars and the RBI. This duality, compounded by political interference, has repeatedly produced governance failures. The Madhavpura Mercantile Bank collapse in 2001, the PMC Bank scam in 2019, and the massive Karuvannur Cooperative Bank fraud in Kerala in 2021 are telling examples.

 In the Karuvannur case, the amicus curiae appointed by the Kerala High Court observed that most cooperative societies were dominated by political parties, leaving them vulnerable to corruption and favouritism. Earlier this year, the Rs 122-crore embezzlement at New India Cooperative Bank added yet another chapter to this troubling pattern.

These recurring scandals underline how far some cooperatives, particularly in banking, have drifted from their founding ideals. Instead of empowering small borrowers and advancing financial inclusion, too many now serve as vehicles of corruption, tightly bound to political networks rather than to their members. It is against this backdrop of deep structural failures that the government has sought to reset the agenda.

Policy drift and the way forward

The United Nations has declared 2025 as the International Year of Cooperatives with the theme “Cooperatives Build a Better World.” In this context, India’s cooperative sector stands at a historic turning point. The creation of the Ministry of Cooperation in 2021 and the unveiling of the new National Cooperative Policy 2025 signal a renewed commitment to revitalising a movement that touches nearly one-third of rural citizens. The policy promises transformation, but whether this opportunity is seized — or squandered — remains an open question.

The 2025 framework lays out a bold vision. It envisions vibrant, self-reliant cooperatives that enhance member incomes and drive rural development. Key reforms include greater legal autonomy, more transparent governance, stronger access to finance, and market linkages designed to connect small producers with wider economic networks. Notably, inclusivity for women, youth, and tribal communities is positioned at the heart of the agenda, at least in principle.

One flagship proposal is the creation of Model Cooperative Villages, one in every district, built around the Primary Agricultural Credit Societies (PACS). These villages are envisioned as living examples of good governance, technological adoption, and diversified economic activities. 

The policy also acknowledges the urgency of engaging the next generation. Embedding cooperative education into school curricula and leadership training represents an important step towards nurturing future leaders. Similarly, the rollout of digitisation platforms such as Cooperative Stack and Agri Stack, alongside sustainability initiatives like circular economy approaches, reflects a forward-looking orientation.

Yet, despite its promise, the policy faces significant risks. Centralised digital systems may undermine grassroots participation and state autonomy, concentrating power at the expense of cooperative federalism. The absence of a binding cooperative code and inclusive mechanisms leaves space for manipulation and the marginalisation of women, youth, and minorities. 

Political interference remains endemic, with election-time loan waivers eroding financial discipline and long-term sustainability. Meanwhile, chronic delays in audits, despite regulatory mandates, allow mismanagement and irregularities to proliferate. Without robust infrastructure, accountability, and enforcement, reforms risk remaining on paper.

For the National Cooperative Policy 2025 to avoid becoming yet another aspirational but toothless document, immediate reforms are essential:

• Establishment of a National Commission on Cooperative Governance to insulate cooperatives from political capture and corruption.

• Adoption of uniform legislation through a Model Cooperative Code, harmonising state and central laws while upholding the federal spirit.

• Mandatory social audits and transparency mechanisms to restore public trust.

• Targeted equity missions for women, youth, and tribal cooperatives, ensuring that inclusion moves from rhetoric to reality.

• Recognition and expansion of urban cooperatives in housing, gig work, sanitation, and services, broadening the focus beyond rural agriculture.

Sarath Sarath is assistant professor, KCT Business School, Kumaraguru College of Technology, Coimbatore. Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth.