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Can The Newly Minted Ministry Of Cooperation Boost The Indian Economy?

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When in the second week of July, the Cabinet Secretariat announced the creation of the Ministry of Cooperation, a thought arose whether the announcement date was planned or not as the first Saturday of July is celebrated as International Cooperative Day. If it was planned, maybe India wants to revisit its history and if it was not, it is time to look back. For it was India that played an important role in conceptualizing the modern Cooperative movement.

The Ministry Of Cooperation will be led by Amit Shah.

India’s History With The Cooperative Movement

Delegates from India attended the International Cooperative Alliance (ICA), which came up in August 1895, during the first Cooperative Congress in London. It was here that cooperative principles were defined to develop trade. Amongst the very few international organizations to have survived both the world wars, the ICA was granted the consultative status with the United Nations in the year 1946.

The alliance, which set the principles for the cooperative system, relied much on the Rochdale principle designed by the Rochdale Society of Equitable Pioneers in an attempt to resolve the problem of the cooperative system. With the said principles in mind, the cooperative system expanded to include credit, consumer products, capital products, and the Mondragon Corporation, based in Basque started by Fr. Jose Maria Madariaga in 1956 along with his students still stands today as a successful cooperative. It is also the seventh-largest company in terms of asset turnover in Spain.

In India, the cooperative system arose as a result of rural distress. The often-occurring peasant uprising, the most important being the Deccan Riots of 1879, led the British government to appoint a committee under E.D Maclagan in 1915 which led to the establishment of cooperative banks in India. These banks were based on the idea of cooperatives, which the crown started to encourage particularly with the enactment of the Cooperative Credit Societies Act, 1904 and the Cooperative Societies Act, 1912.

These cooperatives, however, never worked in India for as per the testimony recorded by a witness before the Royal Commission on Agriculture 1928, outcaste people never got credit from the cooperative society until he agreed to give his labor at a low rate to the people running the society. Further, it is recorded that people who ran the cooperative society sat on one side of the road and the other people on the other side of the road.

Cooperatives have played a major role in strengthening the rural economy.

Independent India gave impetus to the cooperative sector, for the founding fathers understood the role cooperatives could play in development. As of 1951, there were a total of 181,000 cooperatives in the country with a total membership of 15.5 million. It was this vision that led to the establishment of the National Cooperative Development Corporation (NCDC) by the parliament in the year 1963. NCDC was tasked with the planning, promotion, and providing financial assistance to the cooperative in different sectors. Along with this Institutions like the National Bank for Agriculture and Rural Development (NABARD), when the Reserve Bank of India (RBI) was already looking into the expansion and strengthening of credit cooperatives.

Challenges Faced Post-Independence

The problem, which arose from this, was that several institutions were working under the various heads, like NCDC was under the Ministry of Agriculture, (later renamed as Ministry of Agriculture and Farmer’s Welfare in August 2015) and NABARD under the Ministry of Finance. There was no sync and the cooperative sector lay without a common policy and agenda. There is no questioning to the fact that the number and the strength of the cooperative societies grew under State planning.

Data from the National Cooperative Union of India (NCUI) for the year 2007-08 shows that there were a total of 150,000 Primary Credit Societies with a total membership of 180 million, which was lower than the number of non-credit societies, standing at 260,000 with a total membership of 250 million. The 2004-05 data shows that the annual turnover of the non-credit societies stood at 700 billion INR.

Both the Union and State governments have given equal importance to cooperatives as a form of organization to strengthen the rural economy. It was, however, this excessive dependence on the state for financial, administrative, and logistical support, which also limited the scope of the cooperative in the country.

Entry 32 List II of schedule seven of the Indian Constitution entrusts the state governments with the power to incorporate, regulate, and wind up cooperation, other than those specified in the list I. Entry 43 and 44 List I of the Seventh Schedule intrusts the Union Government with incorporation, regulation, and winding up of the trading corporation, including banking, insurance, and financial cooperation and also of a corporation with objects not confined to one state. The Supreme Court of India based on the doctrine of severability noted that there is no overlap as far as cooperative societies are concerned, and the sole authority rests with the states, whereas, as far as multi-state cooperative societies are concerned, having objects not confined to a single state, the power rests exclusively with the parliament.

This Multi-State Cooperative Societies Act 2002, which rests with the department of agriculture, cooperation, and farmers’ welfare pay the way for the union government to act on the matter. As most of the big cooperative’s in India like the Gujarat Co-operative Milk Marketing Federation Ltd better known as AMUL, Shri Mahila Griha Udyog Lijjat Papad, better known as Lijjat Papad are working at a national level and International Level, the role of the Union Government has become imperative and a new Ministry of Cooperation would act as a catalyst in the growth and expansion of such cooperation in India.

Political And Administrative Hurdles For New Ministry

With all said and done, the newly born ministry faces serious political and administrative challenges ahead. The first serious challenge comes as to checking the politicization of the cooperatives and running the administration based on the norms of the market. It is here that the Ministry can fall back again on the Rochdale Principles. The cooperative must be functioning based on an open and voluntary basis, this is a parameter, which will lead to inclusivity and promote social harmony.

Cooperative must function on the ground as a democratic institution with every member having equal say in the policies and decision-making process. This will in turn strengthen the local institutions and lead to participatory governance. Members must contribute equally and have control over the capital of their cooperative.

The Ministry must regulate the sector, but at the same time must ensure that it does not intrude into the autonomy of the cooperative, both the state and union laws must ensure that autonomy of governance for the cooperative is registered within their jurisdiction. The Ministry must facilitate a proper training program for the members of the cooperative, and its employees. Timely information dissemination would only enhance the functioning of the cooperatives.

The Ministry is surely a step in the right direction, but it is still the very first step. The development of the cooperative sector would depend on the policies, which are floated in the days to come, and that is what will make the difference.

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