Cooperation awaits its “finding Raiffesisen” movement

News: India enacted legislation for cooperatives in 1904. All India rural credit survey committee in 1954 pointed out that the cooperatives have failed in their objective.

How did the cooperative movement start?

It started in Europe with pioneers like Friedrich Raiffeisen and Schulze-Delitzsch In Germany. They were based on principles of self-help, self-governance, and self-responsibility.

How did the cooperative movement start in India?

In India, it started in Madras presidency with the enactment of the Indian cooperatives act in 1904. Registrar of cooperative societies (RCS) acts as nodal agencies for the cooperatives.

Pioneers like Dr. John Mathai, who graduated from the London School of economics, assisted in the initial phases.

Why did cooperatives fail in India?

In India, cooperatives were created by resolution of the government, Unlike Europe, where they were created Bottom-up. Co-operatives demanded a flexible model, but government grip increased over the years in the form of regulations.

Some cooperatives like Amul, IFFCO performed successfully.

What should be done to improve the condition of cooperatives?

First, the power of RCS should be reduced. They should act as facilitators and not as instruments of inspection and domination.

Second, the Rural-urban dichotomy in regulations should be done away with. The regulation should be based on the size of the cooperative or the nature of the business of the cooperative.

Third, the regulation and supervision mechanism needs to be streamlined. Currently, urban cooperatives are regulated by RBI and rural by NABARD. The regulatory mechanism should be combined and it should have its own regulator with norms created specifically for cooperatives.

What should be the way forward?

We need former commercial banks – cooperative sector linkages, which can provide finances to cooperatives and make cooperatives viable in long term.

Source: This post is based on the article “Cooperation awaits its “finding Raiffesisen” movement” published in The Hindu on 6th December 2021.