INDIAN ECONOMY IS IN TRANSITION: PROSPECTS AND CHALLENGES OF COOPERATIVES

 

Introduction

At the time of independence, India was primarily an agrarian economy, with three-fifths of output originating from agriculture. In the 73 years since independence, there has been a significant transformation of economic activity away from agriculture, with less than a fifth of the output now originating from agriculture, and the rest from manufacturing and services. India has become one of the fastest growing economies of the world. The growth of the economy has been very fast in the last 25 years or in other words, after the introduction of economic reforms in 1991. Contributing to this acceleration is a broad series of reforms including financial sector reforms, increased globalization, and the widening and deepening of product and financial markets. But these reforms could not contribute to the equal distribution of economic development in all the sections of society. The operational structure of the Indian economy changed completely as it became more open for global perspective.

However, recently, the Indian economy witnessed recessionary trend. India has never faced a sustained long-term downturn in economic activity in its 73 years of existence as an independent country. Further Covid 19 impact added fuel to the fire. The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. In this context, an attempt has made to examine the role of cooperatives in the Indian economy.

A Co-operative is a unique form of business used by people and businesses for their mutual benefit. Cooperatives are community-based, rooted in democracy, flexible, and have participatory involvement, which makes them well- suited for economic development. An economy based on one form of business organization alone is neither desirable nor possible in modern times. To justify their existence and fulfil their purpose, cooperatives must make a significant and unique contribution to solving some of the massive problems facing mankind today.

Objectives of the Study

This study aims at examining the prospects and challenges of cooperatives in the present context in India in general. The specific objectives of this study are

1. To examine the relevance of the cooperative sector in the Indian economy;
2. To discuss prospects of cooperatives in the changing context of globalization;
3. To study the challenges of cooperatives in the contemporary world; and
4. To give suggestions to the effective performance of cooperatives in India.

Methodology

The study is descriptive in nature and is based entirely on secondary data. For the purpose of the study, previous research works, reports, articles, and journals on cooperative sector have been referred to, and information has also been collected from online sources.

 

Meaning of Cooperation:

“Literally, Co-operation means working together. To be more appropriate, we may define Co-operative society as an organization of individuals with small means, formed for running in common of business, the profits being shared in accordance with the amount of labour or capital contributed by each” (Sami Uddin, 1983). A Co-operative association is generally an organization of the people who are financially weak. Individually their resources are so meagre that they cannot improve their prevailing conditions. But if they pool their meagre resources and work together for mutual benefits, their weakness can be converted into a dynamic strength. Thus, Co-operation propagates self-help through mutual help and all get the benefit of collective efforts.

 

Co-operation facilitates mass voluntary participation in an organized way to enlist the support of millions of small farmers, artisans, craftsmen, cottage and small- scale enterprises (Jha D., 1969). It is in this context that the Co-operative form of organization can be of immense operational value. Rural development through Co-operatives facilitates regional development of the areas neglected so far by the urban capitalists and industrialists, and at the same time, Co-operatives also reduce disparities in income and employment because the resultant gains are not polluted by a few, but shared by a large number of people.

 

The Co-operative form of organization thus is an effective medium for bringing about the socio-economic transformation of the hitherto neglected sectors. Where the masses flock, Co-operatives facilitate material advancement through united action which in turn fosters self-reliance (Jha D., 1969). The Co-operative movement is acclaimed in all plan documents as the means of transferring the rural society.

 

Co-operation has been accepted as an important medium for regeneration of the country’s socio-economic life. In the words of Margaret Digby, “only through Co-operative institutions can the common man influence the direction of social and economic change in a decisive manner. In fact, Co-operation in India has been recognised as part of the pattern of Indian socialism, especially interpreted in terms of rural society” (Margaret Digby, 1981). Co-operation, thus has a very significant role to pay in any programme of social and economic development of an underdeveloped country like India.

 

Co-operation is not in any way new to India. It has a fairly long history in India. The Co-operative form of social and economic activities has been in existence since times immemorial. The oldest scriptural works like the Vedas, the Upanishads, the Bhagawat Purana, Kautilya’s Artha Shastra, etc., referred about joint actions of the people (Bedi, R.D., 1992).

Evolution of Cooperative Movement in India

The Cooperative Movement in India can be studied into two phases:

1. Co-operative Movement in pre-Independence era, and
2. Co-operative Movement in post-Independence era.

Co-Operative Movement in Pre-Independence Era

The term ‘Cooperative Societies’ came into existence when the farmers of Poona and Ahmednagar spearheaded an agitation against the moneylenders, who were charging exorbitant rates of interest. Hence, the British government came forward and passed three Acts-

• The Deccan Agriculture Relief Act (1879),
• The Land Improvement Loan Act (1883), and
• The Agriculturists Loan Act (1884).

In 1919, Cooperation became a provincial subject and the provinces were authorized to make their own cooperative laws under the Montague-Chelmsford Reforms. This categorization was carried on to the Government of India Act, 1935. In 1942, the government of British India enacted the Multi-Unit Cooperative Societies Act to cover Cooperative Societies with membership from more than one province.

Co-Operative Movement in Post-Independence Era

India’s first Prime Minister Pt. Jawaharlal Nehru had strong faith in the cooperative movement. In his speech in international seminar on cooperative leadership in South-East Asia, he said “But my outlook at present is not the outlook of spreading the cooperative movement gradually, progressively, as it has done. My outlook is to convulse India with the Cooperative Movement or rather with cooperation to make it, broadly speaking, the basic activity of India, in every village as well as elsewhere; and finally, indeed, to make the cooperative approach the common thinking of India….Therefore, the whole future of India really depends on the success of this approach of ours to these vast numbers, hundreds of millions of people”.

Hence, after independence, Cooperatives became an integral part of Five-Year Plans.

1. In 1958, the National Development Council (NDC) recommended a national policy on cooperatives and for training of personnel and setting- up of Co-operative Marketing Societies.
2. In 1984, the Parliament of India enacted the Multi-State Cooperative Societies Actto remove the plethora of different laws governing the same type of societies.
3. The most important success stories lies behind the success of the White Revolution,which made the country the world’s largest producer of milk and milk products, and the Green Revolution and the conversion of villages into model villages assumed greater importance in the wake of the Green Revolution.
4. The Government of India announced a National Policy on Cooperatives in 2002. The ultimate objective of the National Policy was to-
5. Provide support for promotion and development of cooperatives,
6. Reduction of regional imbalances, and
7. Strengthening of cooperative education, training, and human resource development.

 

Prospects of Cooperatives in India

The Government of India, immediately after independence, realizing the significant role cooperatives can play in the development of the national economy, recognized them as the third economic sector. They were charged with the responsibility of taking care of the needs and aspirations of rural India with special emphasis on uplifting the small and marginal farmers as well as weaker sections of the society. Over the years now, in India, cooperatives have been an effective way for people to exercise control over their economic livelihoods. Now the Indian cooperative movement, the world’s largest movement covers almost 98% of rural India, having more than 8.50 lakh societies with membership of about 290 million. It provides a unique tool for achieving one or more economic goals in an increasingly competitive global economy. Cooperatives played a noteworthy role in the White Revolution, which made the country self-reliant in milk produce in India. Within a short span of time, the role of cooperatives extended beyond agricultural credit. Rural cooperative societies are now entering into real estate, power, insurance, healthcare, and the tourism sector. Cooperatives have tremendous opportunities in solving the problem of unemployment by training the rural population. The Co-operative movement in our country shall not only stay, but also grow in the times to come.

Cooperation in a vast country like India is of great significance because:

• It is an organization for the poor, illiterate, and unskilled people;
• It is an institution of mutual help and sharing;
• It softens class conflicts and reduces social cleavages;
• It reduces bureaucratic evils and follies of political factions;
• It overcomes the constraints of agricultural development; and
• It creates a conducive environment for small and cottage industries.

The share of Co-operatives in the national economy is as follows:

• Rural Network (villages covered) – 100%
• Agricultural Credit disbursed by Co-operatives – 46.15%
• Fertilizer disbursed (6.049 million tonnes) – 36.22%
• Fertilizer production (3.293 M.T. – N&P) Nutrient – 27.65%
• Sugar produced (10.400 million tonnes) – 59.0%
• Capacity Utilization of Sugar Mills – 111.5%
• Wheat Procurement (4.50 million tonnes) – 31.8%
• Animal Feed Production/Supply – 50%
• Retail Fair Price Shops (Rural + Urban) – 22% 5
• Milk Procurement to Total Production – 7.44%
• Milk Procurement to Marketable surplus – 10.5%
• Ice Cream Manufacture – 45% Oil Marketed (Branded) – 50%
• Spindlage in Co-operatives (3.518 million) – 9.5%
• Cotton Marketed / Procurement – NA Cotton yarn/Fabrics Production – 23.0%
• Handlooms in Co-operatives – 55.0%
• Fishermen in Co-operatives (Active) – 21%
• Storage Facility (Village level PACS) – 65.0%
• Rubber processed and marketed – 95.0%
• Arecanut processed and marketed – 50%
• Direct employment generated – 1.07 million
• Self-Employment generated for persons – 14.39 million
• Salt Manufactured (18,266 metric tonnes) – 7.6%

The statistics here indicates that the modern cooperative movement has made tremendous progress in every walk of its activities and occupies a major place in the share of the national economy.

Challenges of Cooperative Movement

Despite its rapid growth, the overall progress of the Co-operative Movement during the last 100 years is not very impressive. Some of the principal road-blocks have been the following:

• There has been an over-bearing role and intervention from the government, as cooperatives become instruments for delivery of goals set by the government, rather than a people’s movement of self-help.
• The politicization of cooperative leadership eroded the welfare aspect of the movement. Cooperatives are often seen as a stepping stone for political objectives.
• The small size, the poor resource base, and the low participation in the Primary Agricultural Credit Societies (PACS), has been significant barriers to increasing the efficiency and volume of credit flows through them.
• The lack of professional management of societies to improve governance.
• Looking at the variations in the regional intensity of the Cooperative movement, it becomes apparent that cooperatives have done well in areas where land reform has met with a greater degree of success. This would indicate that the sovereign control by farmers over land, the primary factor of production in agriculture, remains an essential prerequisite for the success of cooperatives. At the same time, there is possible link of the cooperative movement’s success to the prevalent demographic and cultural factors.

Suggestions

Several remedial measures have been made to remove the weaknesses involved in the co-operative movement. They are as follows:

1. Co-operative societies should be set- up taking the local conditions into consideration.
2. Encourage office-bearers and workers and continue to appreciate their work.
3. Audit should be conducted by qualified chartered accountants in the societies having turnover of Rs. 1 crore or more.
4. The agriculture cooperatives should use brand names for the handling of agriculture product, vegetable, fruits, etc.
5. The Cooperative institution has to arrange its own resources.
6. The village level agricultural cooperatives should diversity their business.
7. Motivate educated unemployed rural youth and women folk for organizing agro –

processing activity, and for marketing their products through cooperative channels.

 Conclusion

After independence, India marched ahead with economic planning in order to achieve economic development. The new economic policy of globalization after the nineties reduced the dominant role of the state. The pendulum of economic growth in India is swinging between over commitment of public sector to over enthusiasm of the private sector. The urban sector is growing very fast in India. The growth rate of the service sector has become very impressive, but the agricultural sector is totally ignored. The problem of mass poverty and unemployment among common people poses a real dilemma between the role of the government and role of the private sector. Market forces fail to unleash forces for growth, and at the most, it tends to generate low-income activities horizontally. This process fits perfectly well with an investment pattern and production structure to sub-serve a social milieu and lifestyle, which has no relevance for the broad mass of the rural people in India. It has created a dangerous process of marginalization and contractualization (Das, 1993) As a result, economic vulnerability and livelihood insecurity manifests. There is inherent urban bias in the formulation of macroeconomic policies. It is creating a system, which is ultimately as centralized and undemocratic as any that can be imposed by a meddlesome bureaucracy. Its success can at best be treated as a pyrrhic victory, when means win and ends lose. The market is never friendly to poor people. It creates sharp regional imbalance (Das, Banishree, Nirod Kumar Palai, and Kumar Das, 2006). Majority of the rural sector and the unskilled and illiterate section of the urban sector tend to lose their right to livelihood and economic citizenship. The vicious circle of poverty manifests in different forms. There is also the growth of a dangerous tendency of the elite to dismiss the deep concern towards poverty and economic vulnerability as the obsession toward egalitarian romantics. They strongly believe myopically in the trickledown theory. There is now increasing indifference towards the problem of poverty and inequality.

The economic reforms during the 1990s boosted economic growth, but a high level of poverty and unemployment persists in India. Despite impressive economic growth, a powerful wave of consumerism, computerization, and corruption coexists in the social life of India. It over emphasizes on high-tech efficiency of the industrial sector and the modern urban service sector at the cost of the rural sector, where the majority eke out their living. One must always remember that any model of development, which ignores India’s rich endowment of human resources and rich natural resources including land and water resources, is bound to falter. Any development route, which bypasses the rural people of India, is unlikely to be sustainable. The salvation of a developing economy, as vast and diverse as India’s, lies only in the transformation and revitalization of its rural economy, which requires people’s empowerment and participation. One’s sense of idealism is in direct proportion to one’s distance from the real scenario. Neither the private sector nor the public sector can promote social welfare. India requires a meaningful reform in the cooperative sector. In comparison to the step -motherly treatment of the past, cooperatives should be considered an important plank of development. The cooperatives have inherent advantages in tackling the problems of poverty alleviation, food security, and employment generation. Cooperatives have immense potential to deliver goods and services in areas where both the state and the private sector have failed.

 

References

1. Sami Uddin and Mahfoozar Rahman (1983). Co-operative Sector in India. New Delhi: S. Chand and Company Ltd. Pp. 8 – 9 2.
2. Jha, D. (1969). Development of Co-operation for Economic Development: An Interdisciplinary Approach. Poona: Vikunta Mehta National Institute of Cooperative Management. P.51.
3. Margaret Digby (1981). An assessment of Indian Co-operative. New Delhi: RBSA Publications. Pp. 20-21.
4. Bedi, R.D. (1992). Theory-History and Practice of Co-operation. Agra: Vikas Publishing House. P.7.
5. Das, Kumar (1993). Rural Development Through Decentralzation. Discovery Pub. House, Delhi. 180p.
6. Miss Banishree Das, Nirod Kumar Palai, and Dr. Kumar Das (2006). Problem & Prospects of Cooperative Movement in India under Globalisation Regime. XIV International Economic History Congress, Helsinki 2006, Session 72.

Mrs. Shama I N M
Research Scholar
Department of Economics
Mangalore University