Co-operative Evolution in India’s Third Five-Year Plan: Broadening Horizons

When India launched its Third Five Year Plan in April 1961, the country was riding on a wave of cautious optimism. The first two plans had built a basic institutional foundation. Now the ambition was bigger: make India self-reliant and self-generating. For the cooperative movement, this plan marked a decisive turning point. Instead of limiting co-operatives to credit and agricultural supply, the Third Plan envisioned them as the primary instrument of rural socio-economic transformation – reaching every village, covering every sector, and governed by the people themselves.

The vision: village as the basic unit of cooperative organisation 🔗

One of the defining ideas of the Third Plan was the principle that cooperative organisation must be rooted in the village. The Planning Commission recognised that rural development could not be achieved through top-down administration alone. Co-operatives, organised at the village level and aligned with Panchayats, were seen as the right vehicle for combining democratic participation with economic purpose.

Five Year Plans actively encouraged having at least one cooperative society per village, and the Third Plan gave this idea institutional weight. The goal was a multipurpose village cooperative – one that would handle credit, supply agricultural inputs, support marketing, and over time extend into other economic activities that the community needed. This was a shift from the narrow credit-only model that had dominated earlier. The village cooperative was now expected to be a comprehensive economic institution.

The Third Plan also sought to extend the Community Development Programme and cooperative reach to all of rural India by 1963. Agricultural cooperatives were projected to grow to approximately 230,000 societies by 1966, with a membership of 16 million – a substantial scale-up from what the earlier plans had achieved.

Consumer co-operatives: bringing fairness to daily transactions 🔗

One of the most visible expansions in the Third Plan was the deliberate push to grow consumer cooperatives. Urban and semi-urban India was increasingly dealing with price volatility, middlemen exploitation, and uneven access to essential goods. Consumer cooperatives were positioned as the solution – member-owned stores that would procure goods directly and pass on savings to consumers.

The First Plan had already recommended setting up consumer cooperatives as part of community development, but implementation remained scattered. The Third Plan gave this renewed priority, particularly in urban areas and industrial towns. Consumer cooperative growth became a notable development of this period, with societies being established to supply everyday goods at fair prices, reduce dependence on private traders, and create a stable distribution network.

The broader cooperative philosophy behind this was straightforward: when consumers collectively own the shop, the profit motive is replaced by the service motive. Surplus generated goes back to members, not to private shareholders. In practice, building viable consumer cooperatives required overcoming entrenched trading networks, member apathy, and management limitations – challenges that would persist well beyond the Third Plan period.

Industrial co-operatives: organising workers and artisans collectively 🔗

The Third Plan recognised that the industrialisation drive could not leave small producers and workers behind. Industrial cooperatives – formed by workers, artisans, and small-scale producers – were seen as a way to bring organised economic activity to those outside the factory system.

The First Plan had already laid the groundwork by providing for industrial cooperatives of workers alongside consumer and housing cooperatives. The Third Plan built on this, aiming for wider dispersal of small manufacturing units to small towns and semi-rural areas, and the growth of cooperative organisations for common facilities such as raw material procurement and marketing. The idea was to tie small-scale industries into a cooperative network that would give individual producers the collective bargaining power and shared services they could not access alone.

Industrial cooperatives covered a wide range – handloom weavers, craftspeople, small manufacturers, and workers in cottage industries. The plan’s emphasis on small industries in rural areas and small towns, including subsidies and access to institutional finance, created a more supportive environment for these cooperatives to function. By organising collectively, artisans could negotiate better prices for raw materials, access credit through cooperative banks, and market their products through cooperative marketing channels rather than depending on exploitative intermediaries.

Labour and construction co-operatives 🔗

A distinct and often overlooked focus of the Third Plan was on labour cooperatives and construction cooperatives. India’s rapid infrastructure development – dams, roads, public buildings, irrigation projects – was generating large-scale demand for organised construction labour. Labour cooperatives were a way to ensure that workers could collectively contract for these jobs, share earnings equitably, and have a measure of economic security rather than being at the mercy of private contractors.

Construction cooperatives organised skilled and unskilled workers to bid for government projects collectively. This directly served two goals: providing employment to the rural labour force, and ensuring that the benefits of public investment did not flow primarily to private contracting firms. The Third Plan’s Rural Work Programme similarly aimed to mobilise surplus rural labour through organised channels, and labour cooperatives were part of this broader employment-generation strategy.

The NCDC: giving the cooperative sector its institutional backbone 🔗

Perhaps the most significant institutional development to emerge during the Third Plan period was the establishment of the National Cooperative Development Corporation (NCDC) on 14 March 1963, created under the NCDC Act of 1962. This was a statutory corporation under Parliament, and its purpose was precisely what the Third Plan demanded: a dedicated apex body to plan, promote, and finance cooperative programmes across the country.

The NCDC was empowered to finance programmes covering production, processing, marketing, storage, and distribution of agricultural produce and other notified commodities through cooperatives. It advanced loans and grants to state governments for financing cooperative societies at the primary and secondary levels, and directly to national-level cooperatives. The NCDC was established as a successor to the National Cooperative Development and Warehousing Board, which had been set up in 1956, indicating a deliberate upgrading of institutional capacity to meet the Third Plan’s ambitions.

The creation of the NCDC was significant because it addressed a structural gap. Cooperative societies at the grassroots level needed more than policy encouragement – they needed reliable financial support, technical assistance, and planning coordination. The NCDC provided exactly this, ensuring that the Third Plan’s goals for cooperative expansion had a dedicated institutional engine behind them.

Training and organisational improvement: building people, not just structures 🔗

The Third Plan marked a clear recognition that setting up cooperative societies on paper was not enough. The movement had, over the preceding decade, accumulated a significant number of inactive or poorly managed societies. Weak leadership, inadequate financial management, low member awareness, and dependence on government officials for day-to-day decisions were all documented problems.

The plan therefore placed special emphasis on training and organisational development. This was not a peripheral concern – it was understood as the foundation on which genuine cooperative self-reliance would have to be built. Earlier committees had consistently emphasised training and member education, including training of registrars and cooperative staff, and the Third Plan continued this thrust with greater urgency.

What training was meant to achieve 🔗

The training agenda under the Third Plan had several layers. At the leadership level, elected office-bearers of cooperative societies needed to understand financial statements, governance responsibilities, and member rights. Without this, even well-funded societies would drift into mismanagement. At the staff level, the need was for trained cooperative managers, accountants, and field workers who could run societies professionally. At the member level, education about the cooperative principles – democratic control, equitable distribution of surplus, member participation – was essential if cooperatives were to be genuinely democratic institutions rather than state-run entities with a cooperative label.

Cooperative training institutes at the state level, along with cooperative unions, were expected to expand their capacity to deliver this education. The National Development Council had already, in 1958, recommended a national policy on cooperatives and training of personnel, and the Third Plan gave concrete shape to implementing these recommendations.

Organisational reform and democratic governance 🔗

Alongside training, the Third Plan identified the need for organisational reform. Cooperative legislation in several states had provisions that undermined genuine democratic functioning – excessive government control over elections, removal of office-bearers, and day-to-day management. The plan reflected a policy direction of moving cooperatives toward genuine self-management, where elected boards and members – not government officials – would drive decisions.

The Resolution on Cooperative Policy that had shaped earlier plan decisions had recommended that the village cooperative be organised on the basis of the village community as the primary unit, with close coordination between the village cooperative and the Panchayat, and that restrictive features of existing cooperative legislation should be removed. Many state governments had begun amending their cooperative acts in response to this recommendation, and the Third Plan continued to push in this direction.

The broader socio-economic vision 🔗

The Third Plan’s approach to cooperatives was not merely functional – it was ideological in a principled sense. The plan articulated the goal of a socialist pattern of society, and identified development of the cooperative sector as one of the principal means for effecting the transition toward a more equitable economic order. Co-operatives were not just a delivery mechanism for rural credit or consumer goods – they were meant to be a structural alternative to concentrated private economic power.

By the 1960s, the cooperative movement had established a strong foothold across agriculture, dairy, consumer supplies, and urban banking, and the Third Plan sought to deepen this across more sectors and more geographies. The emphasis on consumer cooperatives, industrial cooperatives, and labour cooperatives – alongside the continuing focus on agricultural credit cooperatives – reflected a vision of cooperatives as a comprehensive economic institution covering the full economic life of rural and semi-urban communities.

Pandit Jawaharlal Nehru’s view of cooperatives as one of the three pillars of democracy – alongside Panchayats and schools – gave the cooperative movement political importance beyond its economic functions. A cooperative society was meant to be a school of democracy: where members voted, debated, held office-bearers accountable, and participated in collective economic decision-making. The Third Plan’s training and organisational agenda was ultimately about making this democratic ideal real at the village level.

Challenges and the reality on the ground 🔗

For all its ambition, the Third Plan period was severely disrupted. The Sino-Indian War of 1962 and the Indo-Pakistani War of 1965 shifted fiscal priorities toward defence. These conflicts substantially shifted the focus towards defence production, draining resources from development programmes. Droughts in 1964-65 and 1965-66 hit agricultural production hard, and the rupee was devalued for the first time in 1966, contributing to inflation and economic instability.

The overall Third Plan is historically assessed as falling significantly short of its growth targets – achieving an actual growth rate of around 2.2-2.4% against a target of 5%, leading to the declaration of plan holidays from 1966 to 1969. Cooperative development was similarly affected: many societies remained dormant, over-dues on cooperative loans were high, and the aspiration of genuinely self-managed cooperatives remained largely unrealised in this period.

Yet the Third Plan’s contribution to the cooperative movement should not be judged by these wartime disruptions alone. The institutional infrastructure built during this period – particularly the NCDC – provided the foundation for cooperative expansion in subsequent decades. The policy directions on training, democratic governance, and multi-sector cooperative development set the agenda that later plans would continue to build on.

Legacy and what came next 🔗

The Third Plan period saw the cooperative movement attempt a qualitative leap – from credit-focused agricultural societies to a multi-sector movement covering consumers, industrial workers, construction labour, and rural communities. The establishment of the NCDC in 1963 was a key milestone in supporting rural credit and cooperative development that would outlast the disruptions of the plan period itself.

The emphasis on training and organisational improvement during the Third Plan also left a lasting mark. It established the principle that cooperative development is as much about building human capacity as building institutions. The Vaikunth Mehta National Institute of Cooperative Management, set up in Pune in 1967, was a direct institutional response to the training agenda that the Third Plan had highlighted. The idea that cooperatives must be self-reliant, democratically managed, and professionally run – rather than state-dependent and bureaucratically controlled – would remain a recurring theme in every subsequent plan.

What do you think? The Third Plan envisioned village-level cooperatives as the foundation of rural economic democracy – but decades later, concerns about government interference and weak member participation in cooperatives remain. What structural changes do you think are most essential to make cooperatives genuinely self-reliant and member-driven? And given that the Third Plan tried to extend cooperatives beyond agriculture into consumer, industrial, and labour sectors, why do you think agricultural credit cooperatives remained the dominant form while other types struggled to take root at scale?

References

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