Cooperative Movement in India is an important part of the country’s economic and social development. A cooperative is an organization formed by a group of people who work together to meet their common needs. These needs can be economic, social, or cultural. In simple words, people join together, contribute resources, and run an organization democratically for mutual benefit.

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The International Cooperative Alliance (ICA) defines a cooperative as an autonomous association of people who voluntarily come together to fulfill common economic, social, and cultural needs through a jointly owned and democratically controlled enterprise.

Cooperatives play a major role in sectors like agriculture, banking, dairy, credit, and rural development in India.

Constitutional Provisions for Cooperatives

The 97th Constitutional Amendment Act, 2011 gave special importance to cooperative societies in India.

Important changes made under this amendment:

Provision	Details
Part IXB	Added to the Constitution for cooperative societies
Article 19(1)(c)	Citizens got the right to form cooperatives
Article 43B	Government should promote cooperative societies

This amendment gave citizens the fundamental right to form cooperative societies.

Supreme Court Judgment

In July 2021, the Supreme Court of India partially struck down the 97th Amendment.

Main points of the judgment:

Cooperative societies fall under the State List
States have the main power to make laws related to cooperatives
Parliament passed some provisions without approval from enough state legislatures
Therefore, some parts were invalid

However, the court kept the provisions related to Multi-State Cooperative Societies (MSCS) valid because such societies operate in more than one state.

Beginning of Cooperative Movement in India

The Cooperative Movement in India started during the late 19th century. At that time, Indian farmers faced serious financial problems.

Main reasons behind the movement:

Decline of village industries after the Industrial Revolution
More dependence on agriculture
Small and fragmented land holdings
Heavy land revenue collection
Irregular rainfall and crop failures
Exploitation by moneylenders

Farmers often borrowed money at very high interest rates. This created a need for affordable credit systems.

Early Informal Cooperatives

Even before official laws, cooperative-style systems existed in India.

Examples include:

Devarai / Vanarai
Chit Funds
Kuries
Bhishies
Phads
Nidhis in Madras Presidency

These systems were based on mutual support and trust.

One important early proposal came from Sir William Wedderburn, who suggested agricultural banks after the Deccan riots to reduce rural debt.

Cooperative Movement Before Independence

Initial Stage (1904–1911)

The first major step came after the Indian Famine Commission (1901).

The government formed a committee under Sir Edward Law, which recommended cooperative societies.

This led to the Cooperative Credit Societies Act, 1904.

Features of the 1904 Act

Minimum 10 people could form a cooperative credit society
Members had to belong to the same village, town, class, or tribe
Societies were classified as rural and urban
Rural societies could not distribute profits
Urban societies could distribute profits after keeping 25% in reserve fund

Problems of the 1904 Act

The act had many weaknesses:

No support for non-credit societies
Poor system for mobilizing urban savings
Rural-urban classification was impractical
Limited scope for growth

Because of these problems, reforms became necessary.

Modification Stage (1912–1918)

To remove the weaknesses of the 1904 Act, the government introduced the Cooperative Societies Act, 1912.

Features of the 1912 Act

Feature	Description
Wider Scope	Credit and non-credit societies allowed
Federal Structure	Central banks and unions could be registered
Share Limit	One member could not hold too much share capital
Tax Benefits	Exemptions from income tax and stamp duty

This law greatly improved the cooperative system.

Maclagan Committee (1915)

The government formed the Maclagan Committee under Sir Edward Maclagan.

The committee found several problems:

Illiteracy among members
Misuse of funds
Nepotism
Delay in loan approval
Poor understanding of cooperative principles

Recommendations:

Teach cooperative principles to all members
Maintain honesty in lending
Loans should go only to genuine members
Follow one member, one vote rule
Monitor loan usage properly

Many suggestions could not be fully implemented because of World War I.

Expansion Stage (1919–1929)

The Montagu-Chelmsford Reforms of 1919 made cooperation a provincial subject.

This gave more power to states.

As a result:

States made their own cooperative laws
Membership increased
More cooperative institutions were formed

Impact of Great Depression

The year 1929 brought the Great Economic Depression.

Its effects:

Agricultural prices fell sharply
Farmers lost income
Loan repayment became difficult
Overdue loans increased
Many cooperative societies suffered losses

This period slowed the growth of cooperatives.

Restructuring Stage (1930–1946)

During this phase, many committees were formed in:

Madras
Bombay
Travancore
Mysore
Gwalior
Punjab

Their goal was to improve weak cooperative institutions.

In 1937, Congress ministries in several provinces renewed efforts to strengthen cooperatives.

Role of World War II

The Second World War changed the economic situation.

Important changes:

Prices of agricultural products increased
Farmers earned more income
Marketing cooperatives expanded
Consumer and production societies grew rapidly

In 1945, the All India Cooperative Planning Committee further encouraged cooperative development.

Gandhiji’s View on Cooperatives

Mahatma Gandhi strongly supported cooperation.

He believed cooperatives could help create a fair and decentralized society.

Gandhi’s Ideas

Cooperatives can reduce inequality
They empower ordinary people
They prevent concentration of wealth
They support village self-reliance

Phoenix Settlement

In South Africa, Gandhi created the Phoenix Settlement.

It followed cooperative principles where members worked together and shared resources.

Tolstoy Farm

Gandhi also established Tolstoy Farm.

It was built to support families affected by the freedom struggle in South Africa.

Cooperatives for Farmers

After returning to India, Gandhi saw the suffering of farmers.

He believed industries related to agriculture such as:

Cotton
Sugar
Oil seeds
Wheat

should be run cooperatively so farmers get fair prices.

Cooperative Movement After Independence

After 1947, cooperatives became an important part of India’s development strategy.

India adopted a mixed economy, which had:

Sector	Role
Public Sector	Government-owned industries
Private Sector	Private businesses
Cooperative Sector	Member-owned organizations

Cooperatives acted as a balance between public and private sectors.

Role in Five-Year Plans

Cooperatives became an important part of India’s Five-Year Plans.

Pandit Jawaharlal Nehru considered three pillars of democracy:

Panchayat
Schools
Cooperatives

This shows how important cooperatives were for nation-building.

National Policy on Cooperatives

In 1958, the National Development Council (NDC) recommended a national cooperative policy.

Important suggestions:

Better training
Cooperative marketing societies
Stronger administration

Later, the Government of India announced the National Policy on Cooperatives in 2002.

Establishment of NCDC

The National Cooperative Development Corporation (NCDC) was established under the NCDC Act, 1962.

Main objectives:

Promote cooperative development
Provide financial assistance
Support agriculture and rural sectors

Major Committees After Independence

Rural Credit Survey Committee (1954)

Recommendations:

Greater state participation
Better credit support for rural areas

S.T. Raja Committee

This committee suggested:

Changes in cooperative laws
Government participation in management
Better regulation of cooperative societies

Successful Cooperatives in India

India has many successful cooperative institutions.

Agriculture and Allied Sector

National Cooperative Development Corporation (NCDC)
NAFED
IFFCO
AMUL
CORDET

Banking Sector

PMC Bank
Bharat Cooperative Bank
Saraswat Cooperative Bank

Among these, AMUL is one of the best examples of successful cooperative models in India.

Problems Faced by Cooperative Sector

Despite success, the Cooperative Movement in India faces several challenges.

1. Too Many Laws

Different states have different cooperative laws.

This creates confusion and uneven development.

2. Poor Governance

Many cooperative boards suffer from:

Weak leadership
Lack of accountability
Slow decision-making

3. Lack of Recognition

Many policymakers and citizens do not fully understand the economic importance of cooperatives.

4. Shortage of Skilled Professionals

Cooperatives often fail to attract experienced managers and experts.

5. Weak Capital Formation

Many societies struggle to raise funds.

Low member contribution affects growth.

6. Lack of Awareness

Many people do not understand:

Cooperative objectives
Rules and regulations
Member rights and responsibilities

This reduces active participation.

Future of Cooperative Movement in India

The Cooperative Movement in India remains highly important for future growth.

Cooperatives help in:

Rural development
Financial inclusion
Employment generation
Farmer empowerment
Democratic participation

They strengthen collective power and social trust.

In a country like India, where millions depend on agriculture and small businesses, cooperatives can create sustainable and inclusive development. Strong management, better awareness, and policy support can make cooperatives even more effective in the coming years.

FAQs

Q1. What is the Cooperative Movement in India?
The Cooperative Movement in India is a system where people voluntarily join together to meet common economic and social needs.

Q2. When did cooperative movement start in India?
It officially started with the Cooperative Credit Societies Act of 1904.

Q3. What is the purpose of cooperative societies?
Their purpose is to provide mutual support, fair services, affordable credit, and collective growth.

Q4. What is the 97th Constitutional Amendment?
It gave constitutional status to cooperative societies and added provisions for their promotion.

Q5. Which is the most successful cooperative in India?
Amul is considered one of the most successful cooperatives in India.