Cooperatives and MSMEs together strengthen India’s economic foundation

Source: The post Cooperatives and MSMEs together strengthen India’s economic foundation has been created, based on the article “How cooperatives can boost MSME potential” published in “Businessline” on 4th July 2025

UPSC Syllabus Topic: GS Paper 3-Economy- Industries (MSMEs)

Context: On July 5, 2025, India celebrates the International Day of Cooperatives alongside four years of the Ministry of Cooperation. The article highlights the role of cooperatives and MSMEs in promoting community-led economic development, with a focus on the PM Vishwakarma scheme.

For detailed information on Steps to Reclaiming India’s Cooperative Dream read this article here

The Expanding Role of Cooperatives in India

1. Community-Based Economic Systems: Cooperatives are built on mutual support and collective ownership. They aim to ensure equity, self-reliance, and grassroots participation. They serve as tools for socio-economic and political empowerment, enabling communities to manage resources and production.
2. Successful Models and Economic Presence: India has notable cooperative giants like Amul, IFFCO, Kribhco, and NAFED. With 8.14 lakh cooperatives and a 29 crore membership base, India leads globally in cooperative presence.
3. Sectoral Engagement and Contribution: About 20% of cooperatives operate in banking; the rest are active in fisheries, dairy, housing, logistics, agro-processing, and more. Housing, dairy, and credit account for 54% of total societies. PACS disburse 15% of short-term farm credit to 13 crore farmers, and cooperatives manage 30% of sugar, 35% of fertilizer, 20% of paddy, and 13% of wheat procurement.
4. Employment and Rural Development: Cooperatives contribute to 13.3% of direct employment in India. Their outreach in rural areas boosts credit access, procurement services, and economic decentralization.

MSMEs as Drivers of Inclusive Growth

1. Economic Backbone and Policy Support: MSMEs are vital to India’s economy. The MSME Development Act, 2006 structured their growth. Between 2020–2025, definitions were revised to include turnover-based criteria.
2. Contribution to Economy and Jobs: Of 6.24 crore registered MSMEs, the majority are micro-units. These enterprises employ 26 crore people, contribute 33% to GDP, and account for 48% of exports. Among them, 34,897 are cooperative MSMEs.
3. Linking to Schematic Benefits: Identifying MSME activities helps link them to government schemes, improving access to finance, technology, training, and markets for targeted support.
4. Complementing Cooperatives: Both MSMEs and cooperatives aim at employment generation and self-reliance. Their convergence strengthens inclusive development from the bottom up.

PM Vishwakarma Scheme and Traditional Artisans

1. Recognising Traditional Skills: Launched on September 17, 2023, the scheme supports skilled artisans like carpenters, potters, blacksmiths, and others. These trades are passed down through the mentor-disciple tradition.
2. Targeted Support and Formalisation: The scheme provides training, financial aid, and market access. It encourages digital inclusion and product qualityimprovements.
3. Cooperatives as a Delivery Mechanism: Forming cluster-level cooperatives among artisans enables shared resources, collaboration, and structured growth. It integrates artisans into value chains and formal systems.
4. End-to-End Support: PM Vishwakarma offers complete support to help artisans improve skills, productivity, and living standards.

Artisan Cooperatives and Collective Growth

1. Collaborative Production and Marketing:,Artisan cooperatives enable members to combine diverse skills and produce quality products. Shared tools and infrastructure reduce costs and enhance efficiency.
2. Access to Credit and Infrastructure: Cooperatives help artisans access credit, invest in shared assets, and expand their businesses while reducing individual financial pressure.
3. Skill Development and Innovation Ecosystem: They promote training, innovation, and resource sharing. Artisans receive continuous guidance and growth opportunities.
4. Stronger Representation and Branding: Cooperatives aid in branding, certification, and e-commerce integration, while also representing artisan interests in forums.

The Road Ahead for Cooperative MSMEs

1. Towards Viksit Bharat@2047: Cooperative MSMEs can reshape industry and support Viksit Bharat@2047, thanks to their scale and outreach.
2. Institutionalising Artisan Cooperatives: District-level registration and awareness campaigns are key to mobilising PM Vishwakarma-trained artisans.
3. Continuous Monitoring and Feedback: Regular monitoring and feedback mechanisms will improve cooperative performance and further the goal of Sahkar Se Samriddhi.

Question for practice:

Discuss how cooperatives and MSMEs together can promote inclusive and sustainable economic development in India.