Seventh Five Year Plan (1985-1990): Comprehensive Development of Co-operatives

By the mid-1980s, India’s cooperative movement had already seen decades of planning and policy support – yet significant gaps remained. Loan overdues were piling up, weaker sections of rural society were still underserved, and many cooperative processing units were operating far below their capacity. When the Seventh Five Year Plan (1985-1990) was launched under Prime Minister Rajiv Gandhi, it carried a sharper, more focused vision for co-operatives: not just expanding their reach, but comprehensively restructuring how they functioned, managed resources, and served communities. The plan’s motto – Food, Work, and Productivity – set the tone for the cooperative sector’s priorities over these five years.

Context: what the Seventh Plan inherited 🔗

The Sixth Five Year Plan (1980-1985) had already laid groundwork by recommending the reorganisation of Primary Agricultural Credit Societies (PACS) into strong, viable multipurpose units, and the establishment of NABARD in 1981 to channelise refinance support to cooperative banks. But the Seventh Plan’s own assessment was candid: while there had been overall progress in cooperative credit, poor loan recovery and high levels of overdues remained serious concerns. This honest acknowledgment shaped the plan’s corrective agenda across every segment of the cooperative sector.

As documented by the Ministry of Cooperation, the Seventh Plan identified these structural weaknesses and responded with a multi-pronged approach covering credit societies, consumer cooperatives, marketing societies, and processing units – each with specific reform measures.

Primary Agricultural Credit Societies: from credit outlets to multipurpose units 🔗

Primary Agricultural Credit Societies (PACS) are the grassroots institutions of India’s short-term cooperative credit structure. Operating at the village level, they deal directly with rural borrowers – providing loans, collecting repayments, and undertaking distribution and marketing functions. They form the base of a three-tier structure, with District Central Cooperative Banks above them and State Cooperative Banks at the apex.

A central recommendation of the Seventh Plan was the development of PACS as multipurpose viable units – moving them beyond their traditional single-function role as credit dispensers. The idea was that a PACS functioning only as a credit outlet was underutilising its potential. If the same institution could also supply agricultural inputs, distribute consumer goods, and facilitate marketing of farm produce, it would become far more economically relevant and financially self-sustaining for its members.

This direction built on a long-standing policy vision. The Mehta Committee as far back as 1937 had recommended reorganising credit cooperatives as multipurpose institutions. The Seventh Plan gave this vision renewed momentum by linking it with the concurrent objective of expanding credit access specifically for weaker sections – small and marginal farmers, agricultural labourers, and rural artisans who were frequently bypassed by formal lending institutions.

Realigning credit flow toward weaker sections 🔗

One of the concrete steps the Seventh Plan envisaged was the realignment of policies and procedures to expand credit flow and ensure inputs and services reach those most in need. This meant revisiting loan eligibility norms, simplifying documentation requirements, and ensuring that cooperative credit – which exists as a state subject under Entry 32 of the Seventh Schedule of the Constitution – was more equitably distributed within rural communities.

NABARD describes PACS as institutions whose membership specifically encompasses individual farmers, artisans, and members of other weaker sections as shareholders. The Seventh Plan’s thrust was to translate this membership structure into actual credit access – not just nominal inclusion. Special programmes were also envisaged for the North Eastern Region, which had historically remained underserved by the cooperative credit network.

Professional management: addressing a structural weakness 🔗

One of the most significant – and institutionally difficult – reforms envisaged under the Seventh Plan was the promotion of professional management in cooperative societies. Historically, cooperatives were managed by elected boards whose members were often not equipped with the technical, financial, or administrative skills needed to run increasingly complex institutions. This had contributed to poor loan recovery, financial mismanagement, and operational inefficiency.

The plan called for strengthening the professional capacity of cooperative management – a theme that would be amplified even further in the subsequent Eighth Plan. This included recruiting qualified professional staff for key positions, improving training for elected functionaries, and modernising internal systems. Research on the cooperative movement consistently identifies lack of professionalism in management as one of the chronic challenges that plans from this era attempted to address.

The Vaikunth Mehta National Institute of Cooperative Management, established in Pune in 1967, and the broader network of cooperative training institutes were expected to play a key role in building this professional capacity during the Seventh Plan period.

Consumer cooperatives and the Public Distribution System 🔗

The Seventh Plan placed considerable emphasis on strengthening consumer cooperatives – both in urban and rural areas – particularly in their role within the Public Distribution System (PDS). The PDS was the government’s primary mechanism for distributing essential commodities like food grains, sugar, and kerosene to the population at controlled prices, especially to economically vulnerable households.

The plan’s policy direction was clear: the government would give preference to consumer cooperatives or other cooperatives in the allotment of fair price shops. This was not merely a logistical arrangement – it was a deliberate policy choice to use the cooperative structure as the delivery vehicle for welfare goods, rather than relying on private dealers whose profit motives might conflict with equitable distribution.

Consumer cooperatives, formed to provide goods at reasonable prices by eliminating middlemen, were well-suited for this role. Well-known examples like Kendriya Bhandar and cooperative retail chains already demonstrated that this model could work at scale. The Seventh Plan sought to deepen this integration, making consumer cooperatives the preferred institutional channel for PDS operations across the country.

Urban and rural dimensions of consumer cooperative expansion 🔗

While the PDS linkage was a significant urban dimension of the consumer cooperative push, the Seventh Plan also recognised the need to strengthen these cooperatives in rural areas. Rural consumer cooperatives served a dual function – providing daily necessities to rural households at fair prices while also reducing the dependence of rural populations on exploitative private traders for essential goods. The plan envisaged a strengthened consumer cooperative movement that could effectively serve both these contexts.

Cooperative marketing societies: connecting farmers to markets 🔗

Cooperative marketing societies occupy a critical position in India’s agricultural economy. Their foundational purpose is to help farmers collectively market their produce, eliminating the chain of middlemen and securing better prices. The structure of cooperative marketing in India follows a three-tier pattern: primary cooperative marketing societies at the grassroots, district or regional marketing federations in the middle, and state marketing federations at the apex – with NAFED (National Agricultural Cooperative Marketing Federation), established in 1958, serving as the national apex body.

The Seventh Plan envisaged strengthening cooperative marketing societies to make them more effective in serving farmer members. This included better market intelligence, stronger linkages between credit and marketing functions, and improved capacity to execute price support operations on behalf of the government. The plan recognised that a farmer who could access cooperative credit but not cooperative marketing was still vulnerable to price exploitation at the point of sale.

The period leading into the Seventh Plan had seen marketing cooperatives play a significant role during the Green Revolution – supplying inputs and helping farmers access markets for increased output. The plan sought to consolidate these gains and address the operational weaknesses that had emerged, including poor financial management and limited market reach of many primary marketing societies.

Cooperative processing units: improving capacity utilisation 🔗

A recurring concern across Five Year Plans was that cooperative processing units – whether sugar mills, oil mills, cotton ginning units, or dairy processing plants – were frequently operating well below their installed capacity. Studies on cooperative marketing societies note that agro-processing cooperatives like sugar cooperatives and dairy cooperatives had demonstrated successful models, but the potential across the sector remained significantly underutilised.

The Seventh Plan specifically focused on improving the utilisation of cooperative processing units. Poor capacity utilisation was both a financial problem – fixed costs spread over lower output meant higher per-unit costs – and a developmental problem, as underutilised processing capacity meant less value addition for farmers’ produce. By improving utilisation rates, cooperatives could offer better prices to farmer-members, generate surpluses for reinvestment, and create more rural employment.

This objective required addressing supply-side constraints (ensuring consistent raw material supply from farmer-members), management improvements (better scheduling and operational planning), and in some cases, infrastructure upgrades to modernise ageing equipment. The plan’s emphasis on professional management was directly connected to improving these operational outcomes.

Financial outlay and broader rural development context 🔗

The Seventh Plan’s commitment to cooperative development was backed by substantial financial support. Academic research on cooperative development in planned economy notes that the Seventh Plan allocated Rs. 22,233 crore – representing 12.4 percent of the total plan outlay – for agriculture and rural development, within which cooperative strengthening was an integral component.

Overall, the Seventh Plan achieved a compound annual growth rate of approximately 6 percent, exceeding its 5 percent target – suggesting that the broader development framework, including the cooperative sector’s contribution to rural credit and distribution, functioned reasonably well even if challenges persisted. The plan’s success in cooperative development, however, was uneven: credit flow improved, but overdues remained a problem that the subsequent Eighth Plan would need to address more directly through institutional autonomy and self-reliance measures.

Legacy and significance 🔗

The Seventh Five Year Plan’s approach to cooperative development was distinctive in its comprehensiveness. Rather than focusing on a single dimension – say, only expanding credit or only building processing infrastructure – it attempted to address the entire cooperative ecosystem simultaneously. PACS were to become multipurpose units, credit was to reach weaker sections, professional management was to replace amateur administration, consumer cooperatives were to anchor the PDS, marketing societies were to be strengthened, and processing units were to run at higher efficiency.

This holistic vision set the agenda for cooperative reform in India for the years ahead. Many of the challenges identified by the Seventh Plan – overdues, weak management, low processing capacity utilisation, inadequate reach to marginalised communities – remain policy concerns even today, as seen in the government’s ongoing efforts to computerise PACS and transform them into multipurpose service centres through ERP-based technology platforms. The continuity of this agenda across decades speaks both to the ambition of the Seventh Plan’s vision and to the structural depth of the challenges it sought to resolve.

What do you think? Given that loan overdues and poor capacity utilisation in cooperative processing units were already acknowledged as problems in the Seventh Plan era, what institutional factors do you think made these issues so persistent across successive Five Year Plans? And if you were redesigning the cooperative credit system today, would you prioritise professional management reforms or technology-driven transparency – or do you think both are inseparable?

References

1. https://www.cooperation.gov.in/sites/default/files/2022-12/History_of_cooperatives_Movement.pdf
2. https://www.cooperation.gov.in/about-primary-agriculture-cooperative-credit-societies-pacs
3. https://www.nabard.org/digitalizing-cooperatives-faq.aspx
4. https://vamnicom.gov.in/uploads/4f51e1ee3035ac8005355277540565be.pdf
5. https://www.clearias.com/cooperative-societies-in-india/
6. https://www.businessmanagementideas.com/marketing/cooperative-marketing/20692
7. https://www.academia.edu/38913256/Working_of_Cooperative_Marketing_Societies_in_India_Some_Emerging_Issues
8. https://www.researchgate.net/publication/235950973_A_STUDY_ON_DEVELOPMENT_OF_COOPERATIVE_MOVEMENT_IN_PLANNED_ECONOMY
9. https://en.wikipedia.org/wiki/Five-Year_Plans_of_India
10. https://www.nabard.org/digitalizing-cooperatives.aspx