Friday, Nov 29, 2024 20:30 [IST]
Last Update: Thursday, Nov 28, 2024 14:48 [IST]
Sahakar se Samriddhi, as an inclusive development strategy for enhancing shared economic prosperity, has yielded impressive outcomes so far in India. Going back to the genesis of the cooperative movement in India in the pre-independence period, the trigger was the lingering challenge of how to alleviate poverty of the peasantry that often resulted then from recurrent droughts and usurious exploitation by the moneylenders. It is heartening to note that because of sustained and targeted financial inclusion initiatives of the Union Government, including through rural cooperative credit institutions, the dependence of rural households on money lenders and landlords has declined to as low as 4.2% now (according to NAFIS, 2021-22).
While the initial driving forces powering the cooperative movement in India may be losing steam, there are many new and complex emerging challenges for the rural economy which would require a new direction and focus for the cooperative movement, enabling a better future for all in the rural economy as the country marches ahead on its envisioned goal of a Viksit Bharat (Developed India) by 2047 as envisioned by Sri. Narendra Modi, the honourable Prime Minister of India.
The new challenges range from raising farmers’ income to achieving an efficient rural supply chain, lowering food inflation on a durable basis, creating non-farm employment opportunities, enhancing farm productivity and climate resilience, and harnessing opportunities in a digital world. Cooperative institutions may be particularly suited to manage these challenges because of their strong local knowledge, ability to forge and strengthen forward and backward linkages, and readiness to adapt to a new business environment. For designing supportive policies for the cooperative institutions, it may be useful to draw insights from the United Nations General Assembly Report of the Secretary General on Cooperatives in Social Development (July 2023), which stresses that “cooperatives make significant contributions to the national economy by addressing market failures, empowering marginalized people, creating employment opportunities and supporting sustainable development”. Importantly, this report recommends an entrepreneurial ecosystem approach for the cooperatives, connecting all players through an interconnected network, within local environment.
India’s own success in the areas of milk and sugar in the cooperative sector only attest to the significance of an integrated approach. Another major successful case has been India’s oldest worker cooperative - Uralungal Labour Contract Co-operative Society, in the infrastructure space, which is celebrating its centenary in 2024, and is an example of alternative entrepreneurial model. Two specific aspects of cooperation need a special mention: first, the importance of “cooperation among cooperatives” – when Uralungal had to repay instalments of a large loan taken for a road project, it formed a consortium of 38 primary cooperatives and could raise from them a large amount, thereby protecting its creditworthiness while scaling up significantly; second, employment protection may be ensured by a worker cooperative, even in the midst of a crisis, unlike private firms.
The recent policy enablers in India for the cooperatives, consequent to the formation of a new Ministry of Cooperation (MoC) at the government of India under the dynamic leadership of Sri Amit Shah, have been designed keeping in perspective the wide ranging and complex nature of the emerging challenges in the rural economy, need for a targeted policy focus to be effective, and an emphasis on efficiency and outcomes. Some of the major such initiatives include Primary Agriculture Credit Societies (PACS) as Common Service Centres; computerization of PACS; formation of Farmer Producer Organizations (FPOs) and Retail Petrol/Diesel Outlets/ LPG Distributorship for PACS; large network of warehouses in the cooperative sector; Formation of Fish Farmer Producer Organizations (FFPOs); new multipurpose PACS/Dairy/Fishery Cooperatives in uncovered panchayats; and Model Bye-Laws for PACS.
The National Bank for Agriculture and Rural Development (NABARD), with its multi-layered and dynamically responsive support architecture for the cooperatives, under the guidance of the MoC, strengthens the enablers as a continuous process, comprising broadly (a) provision of refinancing to rural cooperative banks, supplementing their resources for short-term and long-term lending for agriculture, allied, and rural non-farm activities; (b) developmental support through Cooperative Development Fund and promotion of financial inclusion in rural areas through the Financial Inclusion Fund; (c) policy and implementation support, such as computerisation of the PACS and implementation of PACS as common service centres providing more than 300 e-services, and (d) supervision to safeguard financial stability and prudence.
NABARD is also engaged in promoting “Cooperation among Cooperatives” to strengthen the movement, by facilitating cooperatives to benefit from the comparative advantages of each, and an important component from the financial side in this initiative would be to consolidate the existing bank accounts of cooperatives and their members in various commercial banks and placing them under a centralised district/state cooperative, leading to resources of the cooperative system remaining within the system.
Certain specific areas may require sharper policy attention, going ahead. In the context of surges in food inflation being experienced in the recent years, led by tomato, potato, and onion prices, more farmer producer organizations for these three items, and an integrated supply chain, on the lines of milk could help. Internal capital formation, or retaining earnings within cooperatives, that could help in planning expansion and modernization of cooperatives would be useful, given the rising importance of productivity and climate resilience. To garner the benefits of economies of scale in horticulture crops, particularly in the context of rising fragmentation of available cultivable land, multi-state cooperatives may need to build an extensive network of producers which could help reduce costs and improve their bargaining power. Pooling of land, without any risk to land ownership, for reaping scale economies may have to be explored on a wider scale by the cooperatives.
WTO compliant processed products to help in building a strong agri-export product line; ease of doing business through tech adoption and greater transparency; and capacity building, through training, and interlinkages with Agri Start-ups as integral parts of the entrepreneurial ecosystem would also need to be promoted. Access to financial resources may have to be made increasingly performance linked, which would require developing a strong data base, with information on the end use of resources and performance outcomes. The current supply-led approach to farm credit, based on assessment of credit potential, may have to be gradually replaced by effective demand for credit, based on commitments relating to end use and outcomes.
Cooperatives may also need to put in place a system to identify promising innovators or new business ideas and nurture them with needed financial and add on services, and thereby spread awareness about the importance of innovations, through demonstration. A rejuvenated cooperative movement, stimulated by policy nourishment, can be the harbinger of greater and more inclusive rural economic prosperity in India.
(A PIB Feature)