History Of Cooperative Movement In India, All Details about Indian Cooperatives

In this article, we are going to discuss the history of cooperative movement in India in detail. We will explain the background of cooperatives, reports of various commissions, constitutional provisions and various legislations that led to the present shape of the cooperatives in India.

History Of Cooperative movement In India.

The concept of cooperation and cooperative activities existed in India long before they were given the formal cooperative structures. E.g., creation of water tanks, canals, village roads were done collectively by the village communities. Similarly. Cooperative farming and food grain pooling to feed the poor people were also very common.

Kautilya, in his Arthashastra has also laid down a rule of cooperation as, “Guilds of workmen as well as those who carry on any cooperative work shall divide their earnings either equally, or as agreed upon among themselves

The history of modern co-operatives in India is more than a century old and this movement finds its origin mainly in the turmoil and dissatisfaction which prevailed during the last quarter of the 19th century, in the aftermath of the industrial revolution. The advent of British rule in India marked further deterioration in the economic condition of the farmers.

The experience of British government with India’s peasant society on occasions of famines and other periods of scarcity, gave them an idea of providing some financial assistance to the village people. It was also found that Indian peasantry always suffered from lack of funds required for the development of farm produce.

The co-operative movement was introduced in India with the chief motive of making the lives of the people better, especially the vast majority of agriculturists, who were unable to find any way to come out of their indebtedness.

This indebtedness was mainly due to the reason that they used to get loans from the money lenders (mahajans) at very high interest rates and then inability to repay that, put them into the vicious cycle of indebtedness.

Owing to the deep indebtedness of the Indian farmers, they often had to hand-over their land to the money lenders. Fed up by this impoverishment, farmer uprisings occurred in many parts of India. The Deccan Riots and the prevailing environment of discontent among the farmers resulted in the government taking various initiatives but the legislative measures did not substantially improve the situation.

The Government, first took some indirect steps to check the growing control of Money lenders (Mahajnas) over the farmers but they were not very successful. “Deccan Agriculturists Relief Act” of 1879 was the first legislation by the colonial Government of Deccan (South India) for the regulation of long term co-operative credit. Apart from this law, government also introduced Taccavi laws.

Note: The land improvement loans act of 1885 and agricultural loans act of 1884 are together known as Taccavi Laws

The Real Process Begins

Government’s interest in the co-operative form of organization was aroused by a scheme suggested In 1882 by Sir William Wederbum in consultation with Justice M G Ranade ,for establishing an agricultural Bank.

Although this proposal was not accepted by the Government, its essential recommendations  were embodied in the Land Improvements Loan Act of 1883 and the Agriculturists Loans Act of 1884 (relating to loans to farmers on short term credit), which were adopted by the local Governments for granting loans and credit facilities to the farmers for their agricultural activities. This scheme was, however, found to be in many ways defective and the government had therefore to consider other suitable schemes for providing credit to the agriculturists.

In March 1892, Mr. Frederick Nicholson was deputed by the Governor of Madras Presidency to study the working of cooperatives in Europe and suggest the  possibility of introducing in his Presidency, a system of agricultural or other land banks. He submitted his report in two volumes in 1895 and 1897. He summed up his report in two words.” Find Raiffesisen”. His recommendations were inspired by the credit societies in Germany. So it won’t be wrong to say that India drew its inspiration for the cooperative movement from Germany.

Note; Friedrich Wilhelm Raiffeisen (30 March 1818 – 11 March 1888) was a German mayor and cooperative pioneer.

Famines Devastate India

While government was planning to do some thing towards farmer welfare, two famines struck India. To study the effects and causes of these famines and to suugest some remedial measures in this regard, a Famine commission was appointed in 1901.

The Famine Commission recommended the establishment of Rural Agricultural Banks through the establishment of Mutual Credit Associations. It believed that a strong association competent to offer guarantees and advantages of lending to groups instead of individuals will have more advantages. This Commission also suggested the principles that would run these Agricultural Banks.

(Note: India witnessed two disastrous famines in 1896-97 and 1899-1900. The huge loss of life in these famines compelled the British Govt to take some substantial steps to prevent recurrence of famines. The first step towards this was the appointment of Famine Commissions by the British government. Famine commission 1901 is also called MacDonnell Commission. It was appointed by Lord Curzon in 1901. The MacDonnell Commission stressed on the better transport facility, opening of agricultural banks etc.)

Following the recommendation of Famine Commission, the Government of India appointed in 1901, a Committee under the presidentship of Sir Edward Law to report on the steps to be taken for the establishment of the co-operative credit societies in the country.

The Edward Law committee recommended the establishment of co-operative societies on the lines of Raiffeisen model. The report of this committee also laid down that the government should immediately legislate an act, if they really wanted the cooperative structures to succeed. It was on the basis of this report that the Co-operative Credit Societies Act of 1904 was passed, modeled largely on the English Friendly Societies Act.

Stages of development of cooperative societies in India.

The cooperative movement in India has passed through various stages, which are discussed below;

First stage of Cooperative development (1904-1911).

This stage involved the enactment of cooperative credit societies act 1904, which is elaborated below:

Cooperative Credit Societies Act, 1904.

Taking notice of the facts discussed in part 1, and to provide a legal basis for cooperative societies, the Edward Law Committee with Mr. Nicholson as one of the members was appointed by the Government to examine and recommend a future course of action. Based on the recommendations of this committee, an act titled, cooperative credit societies act was passed in 1904 on 25th march.

This act contains only 29 sections. As per section 1, this act was extended to the whole of British India. Section 2 states the definitions of some important terms. Section 3 is concerned with the constitution of societies.

As per the preamble, the objective of the cooperative credit societies act 1904 are as:

(a). to encourage thrift, self help and cooperation amongst agriculturists, artisans and persons of limited means, and,

(b). to constitute and control the cooperative credit societies.

Main Features Of Cooperative Credit Societies Act-1904

The main features of cooperative credit societies act-1904 are:

(1) Any ten persons living in the same village or town or belonging to the same class or tribe could form a co-operative credit society ‘for the en­couragement of thrift and self-help among the members’.

(2) Societies were classified as Rural and Urban. A society in which 80% of the total membership was agricultural was classed as rural, and the one in which 80% of the membership was non-agricultural, was classed as urban.

(3) Rural society was to have unlimited liability but urban societies were free to opt for either limited or un-limited liability.

(4) Rural society was not permitted to distribute profits, but in the case of urban societies, profits could be distributed after carrying 25% of the net profits to the Reserve Fund.

(5) Loans could be made only to members usually on personal security or on the security of some immovable property.

(6) Loans could also be made by one credit society to another with the sanction of the Registrar.

(7) No member could hold shares in a society for more than Rs. 1000.

(8) The organisation and control of the movement in each province was put under the charge of a Registrar of Cooperative Societies.

(9) The societies were exempted from the payment of stamp and registration duties as well as the Income Tax.

In short, The 1904 Act provided for constitution of societies, eligibility for membership, registration, liabilities on members, disposal of profits, shares and interests of members, privileges of societies, claims against members, audit, inspection and enquiry, dissolution, exemption from taxation and rule making power.

All other operational and managerial issues were left to the local governments namely to formulate suitable rules and model bye-laws of the cooperative societies. The institution of the Registrar, visualized as a special official mechanism to be manned by officers with special training and appropriate attitudinal traits to prompt and catalyze cooperative development was the result of the Cooperative Societies Act of 1904.

Note: The Co-operative Societies Act, 1904, was based on the principles of “simplicity” and “elasticity”. Small and simple societies were to be organised under this Act to meet the credit of the people both in rural and urban areas.

Shortcomings of Cooperative Credit Societies Act 1904

The main shortcomings of cooperative credit societies act-1904 are:

  1. This act was restricted to credit cooperatives only and gave no legal protection to non-credit societies.
  2. It made no provisions for mobilizing urban savings for financing agricultural operations.
  3. The act was silent about the establishment of any central bank which could act as a regulatory agency.
  4. Many of the clauses in this act were vague and hence subject to different connotations, which when given different interpretations by the courts proved detrimental for the cooperative movement.

Some of the famous cooperative societies registered under this act were Rajahauli village bank, agriculture service cooperative society ltd. Under this Act, several non credit initiatives also came up such as the Triplicane society in Madras which ran a consumer store, weaver credit cooperatives in Dharwar and Hubli, which gave credit in the form of yarn etc. However, these were registered as Urban Credit Societies.

Note;  Agricultural Credit Cooperative Society, of Kanaginahal village of Gadag District in Karnataka was the first cooperative Society formed under Cooperative Credit Societies Act, 1904.

Significance of Cooperative Credit Societies Act

The introduction of the Co-operative Societies Act in 1904 marked the beginning of the co-operative movement in India. The first stage was essentially an experimental one. The Indian organisers of the movement had little experience and knowledge of the imported ideas of co-operation. Their task was difficult, because they were expected to spread a new idea among the uneducated rural people. The characteristic feature of this period was the Act of 1904 and the legal reorganisation of the co-operative societies that were in existence.

During the first years (between 1904 and 1912) the law only allowed primary (local) co-operatives, without the right to federate and to from unions or federations. In 1912, when the law was amended for the first time, the need for co-operatives to form secondary (regional) and tertiary (national) organisations was recognised and authorised.

2nd stage | The period of rapid expansion (1912-1918)

In this period, Cooperative Societies Act-1912 was passed to rectify the defects of Act of 1904. This enactment paved way for mushrooming of the cooperatives in India.

The features of Cooperative Societies Act-1912 are discussed below:

Under this act:

(1) Any society, credit or otherwise, could be registered which had as its objective, the promotion of the economic interest of its members.

(2) A federal society like the central Bank or union could be registered.

(3) Unless otherwise directed, the liability of central societies was to be limited and that of rural credit societies un-limited.

(4) No member could have more than 1/5 of the total share capital or hold share exceeding Rs. 1,000 in such a society.

(5) The societies were granted exemption from compulsory registration and from the payment of income tax and stamp duties.

(6) 1/4 of the net profits of a society were to be carried to its reserve fund.

(7) Co-operative Societies were given the first claim to enforce the recovery of certain dues.

(8) Requirements of annual audit were retained, as were numerous other provisions of the Act of 1904.

With this enactment, it did not “take long to outgrow the dreams of its founders” and the number of cooperative societies grew very rapidly to 15000 in 1914. In the credit sector, urban cooperative banks converted themselves into Central Cooperative Banks with primary cooperatives and individuals as their members as this law allowed their organization.  Similarly, non-credit activities were also cooperatively organized such as purchase and sales unions, marketing societies, and in the non agricultural sector, cooperatives of handloom weavers and other artisans were set up.

Other than consumer cooperatives and weavers cooperatives, other non-agricultural credit cooperatives generally performed well and grew in strength and operations during this period.

The Government of India, however, wanted to be sure that the movement was progressing on sound lines, before taking the responsibility of fostering further growth. In 1914, therefore, a committee under the chairmanship of Sir E.D. Maclagan, was appointed to take stock of the situation.

Maclagen Committee on Cooperation (1914)

(Note:in 1913, banking crises occurred due to which  in India The period of 1913-14 saw closure of around 54 banks, mostly in Punjab and Bombay. Their closure was blamed on the lack of a regulatory bank-central bank. Further world war 1 began in 1914.The Banking Crisis and the First World War both affected the growth of cooperatives. Although member deposits in cooperatives increased sharply, the war affected the export and prices of cash crops adversely, resulting in increased over-dues of loans of primary agricultural societies. To take stock of the situation, in October, 1914 a Committee on Cooperation under Sir Edward Maclagen was appointed by the Government, in October 1914, to look into the condition of cooperatives and make necessary suggestions in this regard.)

The Committee’s recommendations,are basically related to credit cooperatives. It recommended:

  1. building up a strong three-tier structure in every province with primaries(local cooperatives) at the base, the Central Cooperative Banks at the middle tier and the Provincial Cooperative Bank at the apex, basically to provide short-term and medium-term finance,
  2. that steps should be taken for ensuring the cooperative character of these institutions,
  3. training and education of cooperative members, Registrar and his staff,
  4. careful scrutiny of loan applications,
  5. one man-one vote,
  6. proper auditing mechanism to prevent bad management and embezzlement, and prompt repay­ment of loans,
  7. that optimal group size be limited to 40 members to ensure cohesion and peer pressure.

The Maclagan committee wisely sounded a note of warning on the hurried expansion of the movement and recommended that the utmost care was to be exercised in the formation of a society. He suggested that the officials should give consent to register a society only after they were convinced that its would be members understood co-operative principles and duties and were prepared to act upon them.

It is indeed a matter of profound regret that many of the valuable suggestions made by the Meclagan Committee remained on paper and even to this day the co-operative movement suffers from the same defects and deficiencies which the committee pointed out above five and a half decades back.

3rd Stage | Period Of Unplanned Expansion (1919-1929)

In 1919, with the passing of the Govt of India Act, Cooperation as a subject was transferred to the provinces. The Bombay Cooperative Societies Act of 1925, the first provincial Act to be passed, inter-alia, introduced the principle of one-man one-vote. This was another landmark in the history of this movement. With this, the movement entered in the third stage.

The post war boom and rising prices further boosted the co-operative movement. Different kinds of co-operative societies in the field of credit supply distribution, better farming, mortgage banking saw the light of the day during this period.

Some of the provinces, where the co-operative movement had made considerable progress, found that the many sided development which it had attained could not be adequately be served by the 1912 Act. Bombay gave a lead in this regard and passed a new Act in 1925. It was followed by Madras, Bihar, Orissa and Bengal which passed their own Acts during the latter years.

In both agricultural and non agricultural non-credit sectors, societies were organized, but most faced difficulties in operation as a result of opposition by private marketing agencies and also the inexperience of their office bearers. This focused attention on strengthening of cooperative institutes and unions for education and training. A prominent development of this time was the setting up of the All India Association of Cooperative Institutes in 1929.

The agricultural credit scenario was a matter of concern and various committees looked into the problems of cooperative banks in various provinces. During this period the working of the co-operative movement was examined by the Royal Commission on Agriculture, the Central and provincial Banking Enquiry Committee and the Oakden Committee of Madras and the Calvert Committee of Burma. These committees made valuable contributions to co-operative thought and practice. The Royal Commission on Agriculture referring to the role of co-operatives commended that these were “the best hope of rural India” The Royal Commission in its recommendations,among other things, recommended the setting up of land mortgage banks.

4th Stage-Period of consolidation and reorganization (1929-30 to 1938-39)

During this period the co-operative entered the next phase which was marked by the great depression of the thirties ( In 1930, there was a severe global economic depression). This economic crisis resulted in a catastrophic fall in prices, particularly of agricultural commodities which very adversely affected the economic conditions of the agriculturists. Their repaying capacity dwindled considerably. The demand for loans increased while overdues mounted up.

When farmers failed to pay their loans, it directly affected the cooperative societies. Their assets got frozen which ultimately paralysed their working in maximum parts of the country. Even, when the land of the defaulters was taken by the coopeartivs, it caused more problems. It became difficult to dispose off and manage that land. This had a detrimental effect on the cooperative societies and In some provinces such as the Central Provinces and Berar, Bihar, Orissa and Bengal the movement nearly collapsed. An investigation by Sir Darling showed that up to the end of 1934, 24% of the total number of societies started since the beginning of the movement had gone into liquidation

There is a general notion that the world-wide depression of 1929 was chiefly responsible for the general deterioration of the cooperatives. But according to Mr. J.P. Niyogi, their seeds of decay had been sown very early by completely resorting to inefficient administration. He argues that the slump of 1929 would not have paralased co-operative credit  if they had not resorted to over financing, which had been practicised on a large scale and the virtual absence of any check on the activities of rural societies. This depression also brought to fore various organizational and structural lacunas  of the co-operative societies in India which had been partially observed during the post war period of rising prices and prosperity.

Consequently,In several provinces, committees were appointed to assess the real situation and make suggestion for the development of the cooperative movement. It was agreed upon that there must be some regulatory bank that will oversee the functioning of the lending institutions.

Consequently, this period witnessed the establishment of the Reserve Bank of India in 1935 and it’s Agricultural Credit Department which was charged with the duty of studying various problems relating to agricultural credit. In 1937, the Reserve Bank of India stressed the importance of organizing multi-purpose co-operative societies which could embrace the whole like of the agriculturists.

5th stage-Period of Recovery (1938-39 to 1945-46)

(Note: In 1939, world war II started)

The Second World War had a marked impact on the cooperative movement in country, and with this the movement entered into the next phase. The war came as a blessing in disguise for the farmers as it increased the prices of their produce and therefore brought prosperity to them. The repaying capacity of the farmers increased and they were able to clear off their old debts.

As the over dues were repaid and the demand for new loans fell, the result was  that many societies and central banks came to possess surplus funds for which they were keen to find profitable outlets of investment.

One of the most important contribution of war was that it shifted the emphasis of the movement from credit to non-credit domains. For example, the shortage of consumer articles like sugar, cloth, Kerosene and matches led to the establishment of a large number of consumer’s Co-operative Stores. Likewise, many new types of producers’ societies like fruit grower societies and sugar cane grower societies were set up.

Even though credit societies still continued to have a major role and had a larger share in the movement, yet the obsession of these societies was gone and the movement spread into various directions which were hitherto only and only covered by the private sector.

This period also witnessed the expansion in the purpose of the cooperative societies which would encompass all aspects of a farmer’s life. The movement of organising multi-purpose societies which would cater to all needs of daily life and business of agriculturists, gained momentum.

In short, the war expanded the functional spectrum of the movement and shifted its emphasis from the credit aspect to the productive and distributive functions or to its multipurpose poten­tialities, and thereby gave it that ‘richness and balance’ which was so important for its proper development.

Multi-Unit Cooperative Societies Act, 1942

By now, cooperatives had started getting members from more than one state such as the Central Government sponsored salary earners credit societies, had members from many states. Therefore, it was felt that there should be a law to govern such multi-state cooperatives.

Consequently, the Multi-Unit Cooperative Societies Act was passed in 1942 with an objective to cover societies whose operations were extended to more than one state. It also delegated the power of the Central Registrar of Cooperatives to the State Registrars for all practical purposes.

Two important committees were appointed during this period to suggest measures for development of cooperatives. They are discussed below:

1. Gadgil Committee.

In 1944, the Government of India appointed a committee under the chairmanship of Prof. D.R. Gadgil, known famously as Gadgil Committee.

Gadgil Committee had a mandate to look into the farmer welfare and to suggest the ways in which indebtedness of farmers could be reduced. It had also the mandate to suggest how short term and long term finance could be provided under efficient control for the development of agriculture.

The committee observed that  cooperatives can act as the best and the most lasting solution for the problem of agricultural credit.

(NOTE : If cooperation which had subsisted for 50 years, had done so little. we in India had to confess that cooperation had failed and yet cooperation was the only hope- D.R.Gadgil)

The Gadgil Committee recommended compulsory adjustment of debts and setting up of Agricultural Credit Corporations, wherever cooperative agencies were not strong enough.

Cooperative Commonwealth

Dr.Gadgil suggested to link marketing co-operative to credit co-operatives in agri business. With this linkage a kind of co-operative network would be woven. This network was later called as “Co-operative Commonwealth” by D.R.Gadgil himself.

The First Co-Operative sugar factory in Maharashtra was established at Loni, under the able guidance of D.R.Gadgil.

The first independent “Crop Loan Scheme” in india was introduced by D.R.Gadgil.

2. Cooperative Planning Committee (1945)

The Cooperative Planning Committee under the chairmanship of Shri R.G. Saraiya was set up in 1945. It is also know as Saraiya Committee.

Purpose of Saraiya Committee.
The purpose of Saraiya Committee was to chalk out a plan for cooperative development in India.

Recommendations of Saraiya Committee.
Saraiya Committee laid down:
  1. that all village credit societies must be converted into multi purpose societies and credit must be given for all purposes of life.
  2. that cooperative as a subject should be taught in schools and colleges.
  3. that rural and urban housing societies should be formed.
  4. an overall target of bringing 50% of villages and 30% 0f the rural population within the scope of the movement in a period of 10 years.
The Saraiya Committee found cooperative societies to be the most suitable medium for democratization of economic planning and examined each area of economic development.

By and large, the co-operative movement did not occupy a significant position in the overall economy of the country in this period. Even though the cooperative movement had a limited scope vis-a-vis its work and operation, it still managed to produce some dedicated people who built-up very useful and admirable institutions.

in 1947, India achieved freedom. The new India saw formation of govt with socialistic tendencies and advent of planning commission, because of which role of cooperatives underwent a radical change.

In order to prepare the cooperative movement for its new role, it was considered very important to devise a long term policy in regard to its structure and organisation. Keeping all this is mind, the Rural credit survey Committee was appointed in 1951.

Development of cooperatives in the Post-Independence Era

Till 1947, the government policy in India was not directed towards the overall economic development or for the achievement of any socio-economic objectives for which the co-operative could serve as an instrument.

After, India achieved independence in 1947, there was a drastic change vis-a-vis the socio-economic development in the country. The idea of the welfare state began to be the guiding principle in all activities of the Government. The country aspired to achieve rapid and balanced economic development. Consequently, the govt introduced the pattern of planned and socialistic economy. To achieve the goals of the planned and socialistic economy,  the co-operative movement was to play an increasingly important role.

After India attained Independence in 1947, cooperative development received a boost as cooperatives started getting a vital role in the various plans formulated by the Planning Commission.

Cooperative Movement In First five year plan (1951-56)

The First Five Year Plan  outlined in detail the vision of the cooperative movement in India and the rationale for emphasizing cooperatives and panchayats as preferred organizations for economic and political development. The plan described the co-operative movement as an “instrument of planned economic action in democracy”.

In the first plan, special targets, for the promotion and the development of co-operative movement were fixed and efforts were made to achieve them. A matter of great significance, in the first plan period, was the setting up of a committee by RBI with an aim of carrying out of an All India rural credit survey in the country. It assessed the past performance of the cooperative movement, worked out the reasons of slow progress and also suggested the lines for its future development. The report came out in 1954, with the famous observation, “cooperation has failed but co-operation must succeed” and gave authentic data to the planning commission for the formulation of a definite policy for the reorganisation of the movement.

The Plan emphasized the adoption of the cooperative method of organization to cover all aspects of community development. It provided for setting up of urban cooperative banks, industrial cooperatives of workers, consumer cooperatives, housing cooperatives, diffusion of knowledge through cooperative training and education and recommended that every government department should follow the policy of building up cooperatives.

In the First Five Year Plan, for achieving the goal of co operative socialism, the Planning Commission laid emphasis on co ordination between village Panchayats and co operative societies, multipurpose societies, co operative farming and industrial co operative societies.

The Reserve Bank of India set up National Agricultural Credit, long term fund and national agricultural credit stabilisation fund. The central and state Warehousing corporations were set up and the state bank of India came into existence.

Cooperative Movement In Second Five Year Plan (1956 to 1961 )

It’s guiding principles were the recommendations of the All india rural credit society Committee (AIRCSc)-1951. (it submitted its report in 1954).

Recommendations of All India Rural Credit Society Committee (AIRCSC):

1. AIRCSC was appointed by RBI.
2. It is also known as Gorwala committee.
3. It is also known as Magna Carta Of Indian Cooperation.
4. It said,” Cooperation has failed but cooperation must succeed.”
5. it recommended Crop Loan system.
6. it recommended setting up of SBI and NCDC.

The committee shaped the future of cooperatives in India and also suggested an integrated scheme of rural credit based on:

(a) State partnership at different levels.

(b) Full coordination between credit and other economic activities, especially marketing and processing.

(c) And administration through adequately trained and efficient personnel, respon­sive to the needs of the rural population.

This scheme was approved and accepted as the basis for the future development to be incorporated into the second Five year plan.

A notable shift in policy occurred in 1958 when the National Development Council passed a drastic and sweeping resolution which in effect, led to the rejection of the old large-sized credit society and the emergence of small sized ‘Service Cooperatives’.

National Development Council suggested, that for the development of cooperatives as a peoples movement, it was essential to give them a proper organization. It said that the smallest unit of cooperatives, which they called as the primary unit should be a village community. It also suggested that responsibility of village level development should be given to cooperatives and gram panchayats.

Cooperative Movement in Third Five Year Plan (1961 to 1966)

Third Five Year Plan stressed that “Cooperation should become, progressively, the principal basis of organization in branches of economic life, notably agriculture, minor irrigation, small industries and processing, marketing, distribution, rural electrification,  housing and construction and provision of essential amenities for local communities. Even the medium and large industries and in transport an increasing range of activities can be undertaken on cooperative  lines”.

The Agricultural Refinance Corporation was  set  up in 1962 by the Government of India to provide long-term loans to cooperatives, through Central Land Mortgage Banks.

In 1963, the National Cooperative Development Corporation (NCDC) was established as a statutory corporation by an Act of Parliament.

What is NCDC
1. NCDC is a statutory body that was set up in 1963.
2. Its chief objectives are planning and promoting programmes for production, processing, marketing, storage, export and import of agricultural produce, livestock, etc. on cooperative principles.
3. It has 18 regional directorates and its headquarter is at New-Delhi.
4. It was hitherto functioning under the Ministry of Agriculture, but will not function under the Ministry of Cooperation.
5. Slogan of NCDC is : Assisting cooperatives, Always!

The main provision in the Plan was to cover all the villages and 60 percent of the agricultural population by 1965-66; to revitalize Primary Agricultural Societies to make them economically viable, to develop Cooperative Marketing Processing and link credit with marketing; to develop non-credit cooperatives; and to strengthen cooperative personnel at all levels.

Cooperative Movement In Fourth five year plan

This was an important plan for cooperative movement. The plan stated, “it is important for a planned development to bring out growth of co-operatives in all the parts of the country to ensure the co-ordinated operation of various types of cooperative organisations

The Mirdha committee in 1965 laid down standards to determine the genuineness of cooperative societies and suggest measures to weed out non genuine societies, and to review the existing cooperative laws and practices to eliminate vested interests.

1. The Mirdha Committee, while assessing the growth of the co-operative movement in 1965, had observed that the government policy of deliberate expansion of cooperatives had led to their politicisation and the entrenchment of vested interests.
2. The Committee observed that cooperatives had drifted far away from their original objectives.
3. Based on the observations of the Mirdha Committee, the Conference of State Ministers of Co-operation, in 1969, recommended stringent provisions in cooperative legislation to curb vested interests.

The recommendations of this committee introduced restrictive provisions, which inturn legalised government interference. This resulted in amendments in the cooperative acts in most states, which destroyed the autonomous and democratic character of cooperatives.

In the same plan, All India rural Credit Review committee  (AIRCRC) was set up in 1966 under the chairmanship of B.Venkatoppiah. Its task was to review the supply of rural credit for intensive agriculture and to suggest measures for the reorganization of rural credit.

Recommendations of All India rural Credit Review committee  (AIRCRC)

1. It was appointed by RBI in 1966.
2. It suggested multi agency approach in rural credit.
3. It suggested setting up of Small Farmers Development Agency (SFDA).
4. It suggested establishment of Rural Electrification corporation.
1. appointed by RBI1. appointed by RBI
2. appointed in 1951 and subitted its report in 19542. appointed in 1966 and submitted its report in 1969
3. also known as Gorwala committee3. also known as Venkatoppiah Committee

Cooperative movement In Fifth Five Year Plan

The objective of the Fifth Plan was to consolidate and strengthen the co-operatives as democratic and viable units responsive to the needs of the peasants. The co-operative movement was reorganised to serve as an important instrument for implementing national policies of “Growth with Social Justice ”.

In 1975, emergency was declared in the country . Throughout this period co-operative system of working was encouraged and their economic viability was ensured.

The 20 point economic programme was launched and accordingly the societies were asked to advance more and liberal loans to the weaker sections of the society. In addition more loans were channalised through the societies. A network of rural banks was setup in the country.

Cooperative Movement In The Sixth Five Year Plan

It emphasized the importance of cooperative efforts being more systematically directed towards improving the economic conditions of the rural poor. The Plan suggested steps for re-organizing Primary Agricultural Credit Societies into strong and viable multipurpose units. It also suggested strengthening the linkages between consumer and marketing cooperatives. Consolidation of the role of Cooperative Federal Organizations, strengthening development of dairy, fishery and minor irrigation cooperatives, manpower development in small and medium cooperatives were some of the planned programmes.

The National Bank for Agriculture and Rural Development (NABARD) Act was passed in 1981 and NABARD was set up to provide re-finance support to Cooperative Banks and to supplement the resources of Commercial Banks and Regional Rural Banks to enhance credit flow to the agriculture and rural sector.

1. NABARD is a development bank working mainly on the rural sector of the country.
2. NABARD is a Statutory body established under NABARD act 1981.
3. NABARD was set up on the basis of the recommendations of a Committee under the Chairmanship of Shri B. Sivaraman. The name of the committee “committee to Review the Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD)”.
4. Headquarter of NABARD is located in Mumbai.
5. NABARD’s role is actually a continuation of the RBI role in the sphere of Agriculture and Rural Development.
6. NABARD act was amended in 2018 to pave way for increase in it’s authorised capital.
7. NABARD is the top most banking institution to provide finance for Agriculture and rural development.
8. NABARD supervises Cooperative Banks and Regional Rural Banks (RRBs) and helps them develop sound banking practices and integrate them to the CBS (Core Banking Solution) platform.

With the objective of introducing a comprehensive central legislation to facilitate the organization and functioning of genuine multi-state societies and to bring uniformity in their administration and management, the multi state cooperative societies act (MSCS Act) of 1984 was enacted. The earlier Multi-Unit Cooperative Societies Act of 1942 was repealed.

Cooperative Movement In The Seventh Five Year Plan

It pointed out that while there had been all round progress in credit, poor recovery of loans and high level of overdues were matters of concern. The Plan recommended amongst others development of Primary Agricultural Credit Societies as multiple viable units; realignment of policies and procedures to expand flow of credit and ensure inputs and services particularly to weaker sections; special programmes for the North Eastern Region; strengthening of consumer cooperative movement in urban as well as rural areas and promoting professional management.

As the demands for the autonomous cooperative movement and reforms in cooperative laws gained momentum, the Government constituted a Committee on Cooperative Law for Democratization and Professionalization of Management in Cooperatives in 1985, headed by Shri K.N.Ardhanareeswaran. The Committee suggested the scrapping of those legal provisions in State Cooperative Acts, which go against the democratic character and autonomy of cooperatives. It also recommended incorporation of several provisions which could boost democratic processes for infusing professional management into cooperatives.

Know About committee On Cooperative Law
1. Committee on Cooperative Law is also known as Ardhanareeswaran committee.
2. It was appointed by Govt Of India in 1985 and gave its report in 1987.
3. It examined various state cooperative acts to check their flaws.
4. It observed that the existing acts were against the democratic character and autonomy of the cooperatives.

Recommendations of Committee on cooperative Law/Ardhanareeswaran Committee.
1. It suggested that cooperatives should be free to decide the matters related to management, money, membership and manpower.
2. It suggested that powers of the Registrar cooperative societies should be reduced and he should act as a developmental agency of cooperatives.

In 1989 the Agricultural Credit Review Committee was set up under the chairmanship of Prof. A.M. Khusro. This committee studied the problems of agricultural and rural credit and suggested a major systemic overhaul.

Khusro Committee
1. Khusro Committee was constituted by RBI
2. Khusro Committe is also known as Agricultural Credit Review Committee

Recommendations of Khusro Committee:
1. The Khusro committee recommended putting a ceiling on lending rate of commercial banks on agricultural lending at 15.5 per cent, whereas in case of Primary Land Development Banks, it was recommended at 5 per cent and for the RRBs 8.65 per cent.
2. It suggested setting up of an apex institution for cooperative banks to be called National Cooperative Bank of India.
3. It recommended the Merger of Regional Rural Banks (RRBs) with the respective sponsoring banks.
4. It suggested establishment of Agricultural and Rural Development Corporations for some eastern and north-eastern states of India, in order to enhance the process of agricultural lending.
5. It recommended that the Eighth five year Plan should be used as a plan  for revival of weak and ailing agricultural credit societies.

(Note: in 1991, LPG reforms were introduced in Indian Economy)

The opening up of the economy in 1991, and the liberalized economic policies followed by the government since then, led to increasing pressures for various governments, state and central, to bring about changes that would provide cooperatives a level playing field to compete with the private sector.

In this period, Model cooperatives act 1990 was also passed.

In 1990, Planning Commission appointed a Committee under the chairmanship of Choudhary Brahm Perkash which had a mandate to review the overall functioning and status of the cooperative movement, suggest future directions and finalize a Model Cooperatives Act. This expert Committee submitted its report in 1991.

As we know that cooperation is a State subject and each state is having its own acts and laws to govern the cooperatives within their jurisdiction. Owing to this reason. the report of the Brahm Perkash Committee, along with a draft Model Cooperative Law, was presented before all the State Governments for their necessary perusal and recommendations, so as to make the draft model cooperative law adoptable at the State level. That model cooperative law later took the form of Model Cooperatives Act 1990.

FAQs about Cooperatives in India

Which was the first cooperative society formed under cooperative credit societies act-1904?

Agricultural Credit Cooperative Society, of Kanaginahal village of Gadag District in Karnataka was the first cooperative Society formed under Cooperative Credit Societies Act, 1904.

Which committee recommended the legislation of cooperative credit societies act-1904?

The Edward Law Committee with Mr. Nicholson as one of the members was appointed by the Government to examine and recommend a future course of action. Based on the recommendations of this committee, an act titled, cooperative credit societies act was passed in 1904 on 25th march.

From which country did India draw its inspiration for cooperative movement?

India drew its inspiration for cooperative movement from Germany. In March 1892, Mr. Frederick Nicholson was deputed by the Governor of Madras Presidency to study the working of cooperatives in Europe and suggest the  possibility of introducing in his Presidency, a system of agricultural or other land banks. He submitted his report in two volumes in 1895 and 1897. He summed up his report in two words.” Find Raiffesisen”. His recommendations were inspired by the credit societies in Germany. So it won’t be wrong to say that India drew its inspiration for the cooperative movement from Germany.

Who is the father of cooperative movement in India?

Sir Frederic Nicholson is called the father of cooperative movement in India.In March 1892, Mr. Frederick Nicholson was deputed by the Governor of Madras Presidency to study the working of cooperatives in Europe and suggest the  possibility of introducing in his Presidency, a system of agricultural or other land banks. He submitted his report in two volumes in 1895 and 1897. He summed up his report in two words.” Find Raiffesisen”. His recommendations were inspired by the credit societies in Germany. So it won’t be wrong to say that India drew its inspiration for the cooperative movement from Germany.father-of-cooperative-movement-in-india

What are cooperative societies in India?

Cooperative society is a voluntary association of various persons who have common needs and who join together to achieve a common economic goal.

Is Amul a cooperative society?

Yes, Amul is an Indian diary cooperative society. It is based in Anand district of Gujrat and it is one of the most successful cooperatives in India.

When did cooperative officially begin in India?

Cooperatives in India have a very long history, but the institutionalised structure to them was given in 1904, when cooperative credit societies act-1904 was passed.

Who gave the concept of Cooperative Commonwealth in India?

The idea of Cooperative Commonwealth was given by Dr.Gadgil. He suggested to link marketing co-operative to credit co-operatives in agri business. With this linkage a kind of co-operative network would be woven. This network was later called as “Co-operative Commonwealth” by D.R.Gadgil himself.

When was Rural Credit survey Committee appointed?

The rural credit Survey Committee was set up in 1951.

Cooperative Planning Committee is also known as?

Cooperative planning committee is also known as Saraiya Committee.

When was Gadgil Committee appointed?

Gadgil Committee was appointed in 1944. Gadgil committe had a mandate to look into the farmers’ welfare and to suggest the ways in which indebtedness of farmers could be reduced. It had also the mandate to suggest how short term and long term finance could be provided under efficient control for the development of agriculture.

When was Multi-Unit Cooperative Societies Act passed?

Multi-Unit Cooperative Societies Act was passed in 1942 to govern such multi-state cooperatives which had members from many states.

What is Cooperative Commonwealth?

Cooperative Commonwealth refers to the cooperative network formed by the linking of marketing co-operative to credit co-operatives in agri business.

Who gave the concept of Cooperative Commonwealth?

The concept of cooperative commonwealth was put forward by Mr. Laurence Gronlund in his book “cooperative commonwealth”. However, in India, this concept was put forth and popularised by D.R.Gadgil.

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