Reforming India’s Cooperative Sector: From Sahkar Se Samriddhi to a Professionally Managed and Competitive Cooperative Economy

Introduction

India’s cooperative movement stands at an important juncture. Cooperatives have historically played a significant role in rural credit, agriculture, dairy, fisheries, marketing, housing, consumer services and employment generation. However, the changing economic environment requires the cooperative sector to move beyond its traditional role and emerge as a professionally managed, technology-enabled and market-oriented pillar of the Indian economy. The vision of “Sahkar Se Samriddhi” provides an important framework for this transformation. The objective should not merely be to increase the number of cooperative societies, but to make existing cooperatives economically viable, professionally managed, financially sustainable and capable of competing with commercial enterprises while retaining their democratic and member-owned character.

The proposed inputs for the Union Budget 2027–28 provide an opportunity to undertake such a transformation. They focus on rural transformation, employment generation, financial sustainability, technology, professionalization, social inclusion, taxation, investment and knowledge sharing. The central challenge is therefore to transform cooperatives from institutions that are primarily administered and monitored into institutions that are mentored, professionally supported and commercially empowered.

1. From Traditional Cooperatives to Multi-Service Economic Institutions

Primary Agricultural Credit Societies (PACS) are at the grassroots of India’s cooperative credit architecture. Their transformation into Multi-Service Centres (MSCs) can become one of the most important reforms in rural India.

Traditionally, PACS have been primarily associated with agricultural credit and the distribution of agricultural inputs. Their future role, however, can be considerably broader. They can provide agricultural equipment on a hiring basis, soil-testing services, storage and processing facilities, LPG distribution, drone-based agricultural services and other locally relevant services. Such diversification would create a “Credit Plus” model, under which a farmer can access not only credit but also technology, equipment, information, input services and market-related support through the local cooperative institution. The proposed computerization of 67,930 functional PACS provides an important foundation for this transformation. Digital connectivity can enable PACS to become integrated service platforms linking farmers with banks, markets, government schemes, agricultural advisories and value-chain institutions.  The transformation should nevertheless be accompanied by professional business planning. Every PACS should ideally develop a business plan based on its local economic potential. A PACS in a dairy-intensive region may focus on milk collection and processing, while one in a horticultural region may develop aggregation, grading and cold-chain services.

Thus, the future PACS should be viewed not simply as a credit society but as a local economic enterprise owned by its members.

2. Cooperative Enterprises as Engines of Rural Employment

Cooperatives can become significant employment generators if their activities are expanded into emerging sectors. The proposed “Sahkar Mitra” initiative is particularly relevant in this context. Under such a programme, young professionals trained in cooperative management could provide technical assistance, business mentoring, accounting support, digital services and market guidance to primary cooperative societies.

This approach can simultaneously address two challenges: inadequate professional capacity in cooperatives and unemployment among trained youth. The cooperative sector should also move into emerging service industries. Urban cooperatives, for example, can provide elderly care, home healthcare, skilled household services and other professional services. The care economy has considerable employment potential and can create opportunities for trained youth, women and local entrepreneurs. Similarly, rural cooperatives can be encouraged to develop enterprises in food processing, dairy, fisheries, animal husbandry, renewable energy, agricultural mechanization and logistics. The proposed integration of rural cooperative enterprises with the SME Growth Fund could help successful cooperatives expand from small local institutions into professionally managed production and processing enterprises.

3. Professionalization and Human Capital: The Missing Link

Capital, technology and infrastructure alone cannot make cooperatives successful. The most important long-term requirement is human capital. One of the structural weaknesses of many cooperative institutions is the absence of standardized and continuous professional training. Cooperative employees and managers increasingly need knowledge of finance, accounting, digital technologies, marketing, governance, risk management, entrepreneurship and business analytics. Therefore, a national framework for cooperative professional development should be established through institutions such as the National Council for Cooperative Training (NCCT) and the Tribhuvan Sahkari University. The proposed use of Tribhuvan Sahkari University for standardized professional management training is an important step in this direction.

Training should move away from a purely programme-based approach towards a competency-based and outcome-oriented model.

A national cooperative training framework could include:

1. standardized competency frameworks;
2. training-needs assessment;
3. structured induction programmes;
4. managerial development programmes;
5. digital and financial literacy;
6. leadership development;
7. cooperative entrepreneurship;
8. performance evaluation; and
9. post-training impact assessment.

The ultimate objective should be to develop a new generation of professional cooperative managers who understand both the cooperative philosophy and modern business management.

4. Financial Sustainability and Institutional Protection

Financial sustainability is another critical requirement for the future of the cooperative sector.

Repeated dependence on government recapitalization cannot be the permanent solution to weaknesses in rural cooperative banking. The proposed Institutional Protection System (IPS) for Rural Cooperative Banks (RCBs) provides an alternative institutional mechanism.

An IPS could provide a structured mechanism for mutual support, early identification of financial stress, risk monitoring and institutional stabilization within the cooperative banking system.  The fundamental principle should be that financially stronger cooperative institutions contribute to a system that protects the wider cooperative banking structure. Such a mechanism can gradually reduce dependence on recurring government assistance while strengthening internal resilience. At the same time, cooperative banks need appropriate avenues for strengthening their capital base. The proposal to permit Rural Cooperative Banks to raise capital through instruments such as long-term subordinated bonds, without compromising their cooperative character, deserves serious consideration.

Similarly, granting eligible District Central Cooperative Banks (DCCBs) Scheduled Status could enhance their credibility, operational capacity and integration with the broader financial system. These reforms should be accompanied by stronger governance, professional risk management and transparent financial reporting.

5. Technology as a Tool for Transparency and Competitiveness

Digital transformation is no longer optional. It is essential for cooperative institutions seeking to compete in a technology-driven economy. The computerization of PACS provides the foundation for creating a digitally connected cooperative ecosystem. However, computerization should not be understood merely as installing software. It should lead to end-to-end digital transformation. Cooperative institutions should increasingly use digital platforms for accounting, member management, financial transactions, procurement, inventory, audit, reporting and business analytics.

The proposed expansion of multilingual AI-based agricultural advisory services such as Bharat-VISTAAR can further strengthen the relationship between farmers and cooperatives by providing real-time agricultural information and risk-related inputs. Digital transformation must also incorporate strong data governance. Implementation of the Digital Personal Data Protection (DPDP) framework can improve accountability and reduce risks relating to misuse of member information. The cooperative sector should therefore aim for a model of Digital Cooperative Governance, combining technology, transparency, cybersecurity and member-centric services.

6. Women and Social Inclusion

The cooperative model has enormous potential to promote inclusive economic development.

Women-led cooperatives can play a particularly important role in dairy, fisheries, animal husbandry, food processing, handicrafts and other value chains. The proposed strengthening of women-led participation in these sectors can generate both income and social empowerment. A national-level women-oriented multi-state cooperative could provide a platform for aggregation, collective bargaining, branding and market access for women-led enterprises. The proposal seeks to connect such an institution with the large network of Self-Help Group federations operating under DAY-NRLM.  The strategic importance of this proposal lies in moving women from beneficiaries to owners, entrepreneurs and market participants. Similarly, cooperative development should prioritize weaker sections and regions with limited access to capital. A national Share Capital Grant Scheme could strengthen the equity base of weaker cooperatives and improve their ability to access institutional finance.

7. Tax Neutrality and Cooperative Capital Formation

Tax policy should recognize the distinctive nature of cooperative organizations.

Cooperatives operate on principles of member ownership and internal capital circulation. Taxation that results in repeated taxation of transactions between cooperative institutions can weaken the economic efficiency of the cooperative system. The proposed permanent relief relating to inter-cooperative dividends is therefore aimed at maintaining tax neutrality and facilitating internal circulation of cooperative capital. Similarly, continuation and rationalization of existing tax incentives can support cooperative enterprises operating in sectors such as agriculture, dairy and allied activities. A coherent cooperative tax policy should seek to achieve three objectives: neutrality, simplicity and competitiveness.

8. Knowledge, Research and Innovation

A modern cooperative movement requires a strong knowledge ecosystem.

Cooperatives frequently operate in different regions under different economic conditions. Successful innovations in one state or sector can therefore provide valuable lessons for others. However, the absence of a systematic knowledge-sharing mechanism often prevents such innovations from being replicated. The proposed establishment of a national-level knowledge-sharing platform, drawing inspiration from models such as the UN Solution Exchange, could facilitate the exchange of successful business models, research findings, policy innovations and management practices. Such a platform should connect cooperative institutions, researchers, universities, training institutions, policymakers and practitioners. The objective should be to create a National Cooperative Knowledge Network where evidence-based solutions can move quickly from one cooperative ecosystem to another.

9. From Monitoring to Mentoring

Perhaps the most important conceptual shift required in the cooperative sector is a transition from monitoring to mentoring. Regulation and accountability will always remain necessary. However, weak cooperatives cannot become strong merely through inspections and compliance requirements. They need professional guidance, capacity building, technology support, access to capital and market opportunities. A mentoring-based cooperative ecosystem would classify institutions according to their developmental needs. Strong cooperatives could receive support for expansion and internationalization, while weaker institutions could receive intensive managerial and financial assistance. This approach would transform government and institutional support from a predominantly supervisory model into a developmental partnership model.

10. Towards a Competitive Cooperative Economy

The proposed reforms should ultimately be integrated into a coherent national strategy.The cooperative sector should be connected with major economic priorities such as rural transformation, employment generation, financial inclusion, digitalization, women’s empowerment, exports, food processing and entrepreneurship. Existing initiatives such as PACS computerization, NCDC financial assistance, NCEL-led export promotion and Dairy Sahakar should therefore be supported through measurable outcomes. The success of cooperative reform should not be measured simply by the number of societies registered or training programmes conducted. It should be measured through indicators such as:

• increase in cooperative turnover;
• employment generated;
• member income growth;
• access to institutional finance;
• reduction in non-performing assets;
• digital adoption;
• women’s participation;
• export growth;
• professionalization of management; and
• measurable social and economic impact.

Conclusion

India’s cooperative sector possesses enormous economic and social potential. The challenge is to convert this potential into sustainable institutional performance. The proposed Union Budget 2027–28 reforms provide a framework for this transformation. Strengthening PACS as Multi-Service Centres, creating employment through “Sahkar Mitra”, developing professional cooperative managers, establishing an Institutional Protection System, improving access to capital, accelerating digitalization, promoting women-led enterprises, ensuring tax neutrality and creating a national knowledge-sharing ecosystem can collectively reshape the cooperative landscape.  The future cooperative institution should be member-owned but professionally managed; locally rooted but globally competitive; socially responsible but economically viable; and democratically governed but technologically advanced. The vision of Sahkar Se Samriddhi will achieve its full potential when cooperatives cease to be viewed merely as instruments for implementing government programmes and become dynamic economic institutions capable of generating employment, income, innovation and inclusive growth. The real reform, therefore, is not simply to expand the cooperative sector—it is to build a new generation of competitive, resilient and professionally managed cooperatives capable of contributing meaningfully to the making of Viksit Bharat.