The Vital Role of Co-operatives in India’s National Economy

India has over 6.21 lakh functional cooperative societies with nearly 29 crore members – a network so vast that it reaches into almost every village in the country. Yet for many, cooperatives remain an invisible force. They don’t make daily headlines, but they quietly ensure that a farmer in Maharashtra gets credit for sowing, a weaver in Andhra Pradesh finds a buyer for her sarees, and a dairy farmer in Gujarat receives a fair price for every litre of milk. The contribution of cooperatives to India’s national economy is not incidental – it is structural, deep-rooted, and indispensable.

Scale and rural reach: the foundation of cooperative India 🔗

The sheer scale of the cooperative movement in India is striking. With over 8.2 lakh cooperatives and nearly 29.98 crore members, the network spans 98 per cent of rural India. That translates to an institution present in virtually every village, touching the lives of three out of four rural households. India accounts for nearly 27% of all cooperatives in the world, making it the single largest national contributor to the global cooperative movement.

This is not a coincidence of geography or population. It reflects a deliberate and decades-long policy commitment that began with the Co-operative Credit Societies Act of 1904 and deepened through successive Five Year Plans. The cooperative structure was built as a tool for inclusive economic development – to bring institutional support directly to those who had the least access to markets, credit, and technology.

Agricultural credit: reaching where banks cannot 🔗

One of the most critical roles cooperatives play in India’s economy is in the supply of agricultural credit. Formal commercial banks have historically struggled to penetrate the deepest rural pockets, and it is here that cooperative credit institutions step in. According to NCUI’s Statistical Profile on the Indian Cooperative Movement, cooperatives accounted for 13.4% of total agricultural credit disbursed in 2016-17, with 19.13% of short-term agricultural credit reaching small and marginal farmers through cooperative institutions.

More significantly, cooperatives were responsible for issuing over 50% of all Kisan Credit Cards (KCCs), and when Regional Rural Banks are included, that share rises to 67.3%. The Primary Agricultural Credit Societies, or PACS, are the grassroots engine behind this. With more than 13 crore members, PACS procure 20% of India’s paddy and 13% of its wheat, anchoring national food security. For a small farmer who cannot offer collateral to a commercial bank, the local PACS is often the only institution willing to extend seasonal credit.

Fertiliser sector: production and distribution 🔗

Agriculture runs on fertilisers, and cooperatives have a commanding presence in both its production and distribution. Cooperatives account for 25% of fertiliser production nationally and manage 35% of total fertiliser distribution across the country. This is not a passive role – cooperative institutions actively move fertilisers to the last mile, reaching farmers who would otherwise depend on private traders at inflated prices.

At the centre of this is IFFCO (Indian Farmers Fertiliser Cooperative Limited), founded in 1967 and today one of the largest cooperatives in the world by turnover. IFFCO holds around 19% market share in urea and approximately 31% in complex fertilisers, making it India’s largest fertiliser manufacturer. Its network of over 40,000 member cooperatives ensures reach even into remote districts. IFFCO’s recent development of nano urea – a liquid fertiliser that can reduce usage by up to 50% while maintaining crop yields – shows how cooperative enterprises can drive agricultural innovation, not merely supply inputs.

Alongside IFFCO, KRIBHCO (Krishak Bharati Cooperative Limited) contributes significantly to urea production and has diversified into crop protection and soil health services, further deepening the cooperative sector’s role in sustainable agriculture.

Sugar production: a cooperative stronghold 🔗

The sugar sector offers one of the clearest illustrations of cooperative dominance in a major agro-industry. Sugar cooperatives are responsible for procuring around 40% of India’s total sugarcane and contribute approximately 45% to the country’s overall sugar production. Maharashtra, the largest sugar-producing state, built its sugar economy almost entirely on the cooperative model. Sugarcane farmers in Maharashtra are shareholders in the mills that process their cane – a structural design that ties the mill’s success directly to the farmer’s livelihood.

This model has deep social roots. Over the last sixty years, local sugar cooperatives have played a crucial part in encouraging rural political participation and in creating local employment in processing, logistics, and allied trades. The shareholder relationship between the farmer and the mill is straightforward: the farmer commits to supplying a certain quantity of cane per season, and the mill is bound to purchase it – a form of contractual security that private mills rarely offer to small growers.

Dairy cooperatives and the white revolution 🔗

If there is one sector where cooperatives have delivered transformational economic impact, it is dairy. India is today the world’s largest producer of milk, contributing 24% of global milk production – and the cooperative movement is directly responsible for this achievement. The story begins with Amul, established in 1946 in Anand, Gujarat, which pioneered the three-tier Anand Pattern: village-level dairy cooperative societies feeding into district unions, which are then federated into state-level marketing bodies.

Operation Flood, launched in 1970 under the National Dairy Development Board (NDDB) and Dr. Verghese Kurien, replicated this model nationwide. On average, 22.5% of the income of rural households is contributed by milk, and this income reaches even the landless, since dairy farming does not require land ownership. Women, who perform the majority of dairy tasks, are among the primary economic beneficiaries of this model. The Gujarat Cooperative Milk Marketing Federation (GCMMF), the parent of the Amul brand, is the largest food company in India – a cooperative enterprise competing successfully against multinational corporations.

Other sectors: handloom, cotton, edible oil, and fisheries 🔗

Beyond the headline sectors, cooperatives hold significant shares across several other industries that are critical to rural livelihoods. The cooperative sector accounts for 55% of all looms in the hand-weaving sector, around 60% of cotton marketing and distribution, and processes or markets approximately 50% of edible oils. Each of these figures represents millions of artisans, weavers, and small producers who rely on cooperative institutions for access to raw materials, market linkages, and fair pricing.

In fisheries, cooperative societies connect coastal and inland fishing communities to markets, provide access to institutional credit, and offer a buffer against the exploitation of middlemen. The fisheries cooperative network spans both marine and inland waterways, covering communities that are often geographically remote and economically marginalised. India accounts for nearly 27% of all cooperatives in the world, and the diversity of sectors they cover reflects the breadth of economic activity they support.

Cooperative banking: rural deposits and financial inclusion 🔗

The financial infrastructure built by cooperatives is substantial in its own right. Rural cooperative banks hold deposits of ₹6.53 lakh crore, while urban cooperative banks hold deposits of ₹5.5 lakh crore. These are not trivial sums – they represent the savings of millions of households that have trusted cooperative institutions with their money, often in areas where commercial banking infrastructure is thin.

District Central Cooperative Banks (DCCBs) and State Cooperative Banks (StCBs) form a layered credit architecture that channels funds from NABARD down to individual PACS, which then disburse loans to farmers. This transmission chain is essential for the timely delivery of agricultural credit, particularly in the sowing seasons when demand is highest. Without this network, a large portion of rural India would remain dependent on informal moneylenders at exploitative interest rates.

The new cooperative push: ministry, policy, and PACS computerisation 🔗

In 2021, the Government of India created a dedicated Ministry of Cooperation, signalling an institutional commitment to revitalising the sector. One of the flagship initiatives under this ministry is the computerisation of PACS – bringing over 63,000 primary agricultural credit societies onto a common ERP (Enterprise Resource Planning) platform. This aims to bring transparency, reduce transaction costs, and expand the range of services PACS can offer, from insurance to common service centre functions.

As of December 2024, India has 6,21,514 functional cooperative societies with a membership base of over 28.69 crore individuals, a number that continues to grow. The government’s target is to establish at least one multipurpose cooperative in each of the country’s 2.5 lakh gram panchayats – an ambition that, if realised, would mark a new chapter in the cooperative movement’s reach.

Challenges limiting cooperative contribution 🔗

Despite the scale and importance of cooperatives, their contribution to the national economy is constrained by several structural issues. Many cooperatives – particularly PACS – remain single-function, under-capitalised, and weakly staffed. The report on marginal farmers’ engagement with PACS finds that cooperatives deliver the strongest outcomes where they function as multi-service platforms – combining credit, inputs, marketing support, extension services, and digital tools. Where PACS remain limited to a single function, their impact on the most vulnerable farmers stays minimal.

Political interference, poor governance, and lack of professional management have historically weakened many cooperative institutions. Additionally, lack of technology adoption has been one of the major reasons that contributed to the decline in market share of cooperatives relative to private sector competitors in several sectors. Addressing these weaknesses is as important as expanding cooperative reach.

Why the cooperative share in the national economy matters 🔗

India’s cooperative sector does something that neither markets nor the state can do alone: it integrates small producers into the formal economy while preserving their ownership and voice. Of the 300 largest cooperatives in the world by turnover, 15 are from India – with IFFCO at the top, followed by Amul. These are not charity organisations. They are competitive enterprises, operating at scale, generating surpluses, and returning benefits to their members.

The cooperative sector’s share in agricultural credit, fertiliser distribution, sugar production, dairy, handloom, and cotton marketing together add up to a substantial and irreplaceable contribution to India’s GDP – even if there is, as yet, no single official measure to capture it comprehensively. What is clear is that in a country where nearly 63% of the population is rural and depends on agriculture, any serious strategy for equitable growth must account for the role cooperatives play in stabilising incomes, reducing market exploitation, and channelling institutional support to those who need it most.

What do you think? Given that cooperatives cover 98% of rural India yet still face challenges of under-capitalisation and limited services in many areas, what reforms do you believe are most urgent to unlock their full economic potential? And with the government’s push to establish multipurpose cooperatives in every gram panchayat, do you think this top-down expansion can succeed without stronger grassroots governance and member participation?

References

1. https://www.indiancooperative.com/from-states/india-has-6-21-lakh-co-ops-and-29cr-members-co-op-database/
2. https://agrospectrumindia.com/2025/12/26/new-report-flags-cooperatives-as-missing-link-for-marginal-farmers-under-indias-new-cooperative-policy.html
3. https://www.nabard.org/annual-report/cooperatives-tackling-challenges-building-opportunities.html
4. https://www.indiancooperative.com/from-states/cooperatives-hold-key-share-in-national-economy-reveals-govt-data/
5. https://en.wikipedia.org/wiki/Indian_Farmers_Fertiliser_Cooperative
6. https://currentaffairs.adda247.com/cooperative-week-2024/
7. https://en.wikipedia.org/wiki/Agricultural_cooperative
8. https://www.srpublication.com/role-and-contribution-of-dairy-cooperatives-in-development-of-india/
9. https://amul.com/m/a-note-on-the-achievements-of-the-dairy-cooperatives
10. https://ijip.in/wp-content/uploads/ArticlesPDF/article_8541772c07b98b1525470d21c6d82b52.pdf