Intro: India’s cooperative sector is at a critical crossroads. With 8.53 lakh cooperatives, non-functionality, uneven profitability and rapid expansion of multipurpose PACS, the next phase cannot be measured by numbers alone. Speaking to Indiastat, Prof. Indranil De of IRMA asserts for stronger governance, professional management, transparent rankings, performance-linked public support and empowered members. An exclusive conversation with senior journalist Mahima Sharma, reveals his roadmap that showcases what can emerge as India’s third economic pillar. Read on at Socio-economic Voices this week…
MS: As of January 2026, India had 8.48 lakh cooperatives, but 1.41 lakh were non-functional and another 49,179 under liquidation. Should India pause the push for new cooperatives and first fix why nearly 1.9 lakh existing institutions are failing? What would you change first and how?
Prof. De: India should not simply pause the creation of new cooperatives, but it should shift the emphasis from numerical expansion to institutional quality. As of July 2026, out of around 8.53 lakh cooperatives, 17% were non-functional and 6% were under liquidation.
Cooperatives fail due to various reasons.
To make cooperatives better institutions, they should be free to make their own decisions as economic organisations. State cooperative laws should not interfere with their business decisions. However, the oversight and accountability mechanisms should also be reinforced through mandatory audits. Most importantly, cooperatives should be run by professional managers. Political patronage-based recruitment should be avoided as much as possible.
Ailing cooperatives may be revived through managerial and technical support or through restructuring and merger. Such initiatives can be taken only if they are dragonised and classified as viable or temporarily distressed, rather than potentially non-viable.
MS: India's National Cooperative Policy 2025 puts economic viability at the centre of the cooperative movement. How should future government support be tied to measurable outcomes such as member income, productivity and profitability rather than simply the number of societies or members?
Prof. De: Cooperatives are patronage-based institutions that aim to create value for members through various means, including better prices, lower input costs and improved access to credit or markets. That, even when their accounting profit is modest. Cooperatives sustain when they become salient to the lives and livelihoods of the people. Social benefits and reduced uncertainty keep members engaged even when returns are not the best. It also develops a trust-based system. Members' economic participation is one of the most important principles according to the International Cooperative Alliance.
It is a matter of concern that only 54% of the 6.6 lakhs functional cooperatives were profitable in July 2026. The economic viability of cooperatives is important; without it, they become unsustainable. In fact, cooperatives are hybrid organisations. They should balance economic efficiency gains with distributional gains.
Government support to cooperatives should never be based on the number of societies or members. It should be designed in such a manner that places considerable weight on members' value creation and member centricity. This is because, to fulfill non-economic objectives, cooperatives have to restrain financial profiteering. The government support should fill the gap. Support should not be provided if no such value is generated.
Government support should have a base component for essential institutional development and members' value creation. An initial endowment support may be essential for infrastructure development, depending on cooperative activities. In addition, it should include a performance-linked component to capture financial value.
MS: MoSPI's first pan-India survey of functional cooperatives is now underway to measure their GVA, output and employment, with results yet to emerge. Once those numbers are available, should India make economic performance—not merely membership or social reach—the basis for allocating public support to cooperatives?
Prof. De: The MoSPI Rapid Survey on Functional Cooperatives is specifically intended to estimate GVA, GVO and employment generated by cooperatives. It covers 30 sectors and is collecting data for 2020–21 and 2023–24. Fieldwork is scheduled from April to September 2026, so the results are not yet available[2]. The survey would provide the first-ever estimates of economic value generation by cooperatives and their contribution to the national economy.
However, estimating economic value generation by cooperatives is very difficult due to their lack of standardised operations. A milk cooperative would be very different from a cooperative bank and also different from a labor cooperative. The results have to be interpreted from the perspective of the methodology of estimation of economic value generation by cooperatives.
Once available, the survey data can be used to design performance-linked subsidies. Currently, there is no comprehensive dataset to understand cooperatives' financial conditions and operational efficiencies, as is available for companies. The Ministry of Cooperation provides rank, but that is not sufficient to understand their financial health. This survey data would provide estimates of financial and operational activities, which will help analysing relationships between the observed variables. The analysis would greatly help in strategizing for public support for cooperatives.
MS: India has 8.53 lakh cooperatives, of which 1.41 lakh are non-functional and 49,177 are under liquidation. At the same time, 37,454 new multipurpose PACS, dairy and fisheries cooperatives have already been registered against a target of 2 lakh. Is expansion still the right priority—or should India first build a rehabilitation model for weak cooperatives? What specific policy should make that model work?
Prof. De: We should be rehabilitating existing cooperatives and developing new ones simultaneously. New cooperatives are required where communities need aggregation, processing and market linkage. This is especially important in areas where no cooperatives are present.
If existing cooperatives in an area are ailing, there should be a serious attempt to revive them. People would not trust the new initiative and would not engage unless they find the cooperative a reliable and workable solution to their problems. A cooperative's failure may not be solely due to bad management but also due to capture by local power. Unless cooperatives are made more democratic, people will not trust them. They would engage to the extent they receive short-term net benefits, which may not be sustainable in the long term. However, if it is found that reviving the failing cooperative is potentially very challenging, a fresh start with new board members and activities would be a better idea.
The Central and State governments should collectively launch a cooperative rehabilitation initiative in mission mode. The Ministry of Cooperation has established a Co-operative Rehabilitation, Reconstruction and Development Fund to revise multi-State cooperatives.
MS: By December 2025, cooperatives represented around 32 crore members across 30 sectors. What institutional mechanism can turn that enormous membership into real collective bargaining power and measurable gains in member incomes?
Prof. De: The number of members automatically does not translate into collective bargaining power. It depends on members' engagement and institutional structure. Cooperatives should have a nested structure, with each tier connected to the others yet entrusted with defined, non-overlapping responsibilities.
At the lowest level, there should be a primary cooperative that interacts with and engages its members. Members can purchase inputs and sell their produce at their primary credit societies. A share of surplus may be distributed as a bonus to the members. Sharing surplus would not only enrich members but also improve trust and engagement. This tier is the main institution of institutional democracy, where elections should be held at regular intervals and meetings should be held for members to voice their concerns and needs.
The middle tier should be responsible for processing and production and the highest or third tier may be responsible for marketing. If processing and production do not require large investments and sophisticated technology, then the third or highest tier may handle these activities along with marketing.
The successful cooperatives in India have followed this model, with a primary cooperative at the village level, a union at the district level and a federation at the state level. For example, Gujarat Cooperative Milk Marketing Federation Ltd., known by the brand name Amul; Karnataka Milk Federation, known by the brand name Nandini; and other milk cooperative structures in India. Mondragon in Spain also has a similar multitier federated structure.
MS: The National Cooperative Database now captures financial performance and audit information and is being developed to support a ranking framework. What steps need to be taken for India to better rank cooperatives on governance, financial health and member benefit? How should the nation link preferential support to those rankings?
Prof. De: The Ministry of Cooperation does provide a ranking of cooperatives by sector and state. This is a leap forward compared to the situation before the ministry's formation, when no such comprehensive data was available at the national level.
The ranking framework takes into account five broad categories/parameters: audit compliance, operational activities, financial performance, infrastructure and basic identity information [3]. However, the ranks and overall scores may not be very useful for benchmarking and actions. It is not possible to assess the strength or weakness of a particular cooperative because the background data or indicators underlying the scores are not publicly available.
Information on financial health, including profitability, liquidity, capital and debt; operational performance such as turnover, productivity and asset utilisation; member benefits such as income, payments, etc.; governance such as audit compliance, elections; and availability of staff and their expertise or education should be made available for more informed decision-making.
Once information is made available, benchmarks can be set and preferential support can be provided. Detailed information on cooperatives would help determine the specific type of support they need. For example, a financially stressed cooperative needing funds for expansion in processing and production may receive funding, whereas cooperatives lacking expertise may receive training. Furthermore, greater availability of public information about cooperatives can increase public trust, which is lacking in some cases.
MS: India is pushing PACS beyond credit into storage, procurement, insurance and other businesses. Will this diversification make rural cooperatives economically stronger? Or will asking one institution to do too much actually dilute accountability and efficiency?
Prof. De: The Ministry of Cooperation has taken initiatives to convert PACS, Dairy and Fisheries cooperatives into multipurpose cooperatives. As of July 2026, there are 22,174 Multipurpose Cooperatives and 6,171 Large Area Multipurpose Cooperative Societies (LAMPSs) in India.
A multipurpose cooperative is economically justified because it expands economies of scope and optimises transaction costs. It becomes a one-stop solution for its members, resulting in higher member engagement. As cooperatives are trust-based organisations and trust depends on social networks and social capital, it is always wise to use social capital to its fullest. The Ministry of Cooperation has developed a Model Bye-laws for the states to increase the visibility of PACS and diversify their activities into more than 25 new sectors, including dairy, fisheries and warehousing [4].
However, diversification has its own problems. Credit, warehousing, procurement, insurance and retail activities have different risks, capital requirements and managerial needs. As a result, cooperatives may find it difficult to manage.
There is one more concern. Cooperatives may focus on easier-to-manage activities that yield higher returns, ignoring activities that are most important but difficult to manage and carry a higher risk. For example, PACS may focus on retail, ignoring credit, which is one of its major goals and the very purpose of its existence. This would lead to a drift in institutional logic from distribution to efficiency, undermining social development.
MS: As of January 2026, 59,261 PACS were actively using ERP software and 42,730 had completed online audits. What should be the next reform after digitisation: professional management, stronger member control or market-linked incentives? And why?
Prof. De: The next reform after digitisation should be professional management. However, it should not be at the cost of stronger member control.
With digitisation, a cooperative should be able to use information for financial planning, risk management, benchmarking, internal controls and business decisions.
Professionalism will increase market linkages and, in turn, yield greater benefits to the members. Maintaining strong member control and oversight, the professionals would remain accountable to the members. This would promote member centricity and engagement, which are the core strengths of the cooperatives.
Professionalisation would improve governance by enabling professionals to interpret audit-generated data and take appropriate corrective action. Trained managers can design viable business models, manage risk and ensure compliance with regulatory standards.
Dr. Verghese Kurien, known as the Father of the White Revolution, transformed India's dairy sector by ushering in innovation, management, financial discipline and transparent governance. His vision was rooted in professionalism, but he was also a great advocate of the democratic functioning of cooperatives. His initiatives under the leadership of Tribhuvandas Patel, regarded as the Father of the cooperative movement in India, made the Amul cooperative model successful. The joint leadership of community leader Tribhuvandas Patel and professional manager Dr. Verghese Kurien turned India from a milk-deficient to a milk-surplus country.
MS: India's cooperative network covers almost 98% of rural India. How can policymakers turn that extraordinary geographical reach into a genuine economic advantage for small producers without allowing red tape hurdles that weaken member ownership?
Prof. De: India had around eight lakhs fifty-three thousand primary cooperatives spread across 36 states in July 2026. This widespread network of cooperatives cannot automatically deliver economic advantage on its own. However, this network also provides enormous opportunities for network externalities, which can optimise production and transaction costs.
Small cooperatives in India fail due to low production volumes and a lack of linkages with larger aggregators such as federations. Apart from that, they also lack working capital, information, logistics, quality control, managerial capability and bargaining power. Cooperatives also face multiple administrative interfaces, such as the Registrar of Cooperatives, FSSAI, local authorities, the Banking Regulations Act (for credit cooperatives), audit requirements, labor regulations and environmental requirements. It inflates the managerial or transactional costs for small cooperatives.
A federated structure, along with the application of information technology, is used to eliminate information asymmetry in the market and enable primary cooperatives to make choices regarding prices and operations. Connecting primary cooperatives through e-markets and transparent pricing via mobile apps, real-time digital payments and ledger tracking would benefit them enormously. A federation can optimise the transaction costs, especially through automated digital audits. Federations can also deal with higher-level authorities to reduce, simplify and standardise processes. It will, in turn, help small producers.
MS: With the National Cooperative Policy 2025 now moving into implementation, what is the one institutional reform India should prioritise to make cooperatives a genuine third economic pillar alongside the state and private sector? And how can it be made accountable towards a measurable result within five years?
Prof. De: The National Cooperative Policy 2025 outlines six strategic pillars for the systematic and holistic development of the cooperative sector over the next 10 years [5]. They aim to strengthen the cooperative foundation, build a vibrant and self-sustaining ecosystem, make cooperatives future-ready, promote inclusivity and wider reach, expand into new and emerging sectors and engage the younger generation in cooperatives. The single most consequential reform would be an independent, professionally staffed supervisory function for cooperative governance and management. This will have ramifications for all six strategic pillars.
The following steps should be taken for measurable results within the next five years:
References Used from:
[1] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2297736®=48&lang=2
[2] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2297736®=48&lang=2
[3] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2298378
[4] https://cooperation.gov.in/en/initiatives-ministry-cooperation
[5] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2237650®=48&lang=2
About Prof. Indranil De
Dr. Indranil De is Professor of Social Sciences and Economics and Axis Bank Chair at the Institute of Rural Management Anand (IRMA), "Tribhuvan" Sahkari University, India. Here he also serves as Chair – Research, Consultancy and Training. He earned his doctorate from Jawaharlal Nehru University, New Delhi.
His research and teaching span institutional economics, political economy, public policy, service delivery, housing and gender. He has undertaken numerous research and consultancy assignments with national and international organisations and state and central governments in India, including the Department of Science and Technology, the 16th Finance Commission, the Governments of West Bengal, Gujarat and Meghalaya, UNICEF and the International Water Management Institute. He has numerous publications in reputed journals and has authored and edited books published by leading publishers.
About the Interviewer
Mahima Sharma is an Independent Senior Journalist based in Delhi NCR with a career spanning TV, Print, and Online Journalism since 2005. She has played key roles at several media houses including roles at CNN-News18, ANI, Voice of India, and Hindustan Times.
Founder & Editor of The Think Pot, she is also a recipient of the REX Karmaveer Chakra (Gold & Silver) by iCONGO in association with the United Nations. Since March 2022, she has served as an Entrepreneurship Education Mentor at Women Will, a Google-backed program in collaboration with SHEROES. Mahima can be reached at media@indiastat.com
Disclaimer : This interview is the personal opinion of the interviewed protagonist and not those of the organisation he/she works for. The facts and opinions appearing in the answers do not reflect the views of Indiastat or that of the interviewer. Indiastat does not hold any responsibility or liability for the same.
"Professional Management Must Follow PACS Digitisation Reform"... Read more
.png)
