The cooperative movement in India owes its origin to agriculture and allied sectors. Towards the end of the 19th century, the problems of rural indebtedness and the consequent conditions of farmers created an environment for the chit funds and cooperative societies. The farmers generally found the cooperative movement an attractive mechanism for pooling their meagre resources for solving common problems relating to credit, supplies of inputs and marketing of agricultural produce. The experience gained in the working of cooperatives led to the enactment of Cooperative Credit Societies Act, 1904. Subsequently, a more comprehensive legislation called the Cooperative Societies Act was enacted. This Act, inter alia, provided for the creation of the post of registrar of cooperative societies and registration of cooperative societies for various purposes and audit. Under the Montague-Chelmsford Reforms of 1919, cooperation became a provincial subject and the provinces were authorised to make their own cooperative laws. Under the Government of India Act, 1935, cooperatives were treated as a provincial subject. The item "Cooperative Societies" is a State Subject under entry No.32 of the State List of the Constitution of India.

    In order to cover Cooperative Societies with membership from more than one province, the Government of India enacted the Multi-Unit Cooperative Societies Act, 1942. This Act was an enabling legislative instrument dealing with incorporation and winding up of cooperative societies having jurisdiction in more than one province. With the emergence of national federations of cooperative societies in various functional areas and to obviate the plethora of different laws governing the same types of societies, a need was felt for a comprehensive Central legislation to consolidate the laws governing such cooperative societies. Therefore, the Multi-State Cooperative Societies Act, 1984 was enacted by Parliament under Entry No. 44 of the Union List of the Constitution of India.

    After India attained Independence in August, 1947, cooperatives assumed a great significance in poverty removal and faster socio-economic growth. With the advent of the planning process, cooperatives became an integral part of the Five Year Plans. As a result, they emerged as a distinct segment in our national economy.In the First Five Year Plan, it was specifically stated that the success of the Plan would be judged, among other things, by the extent it was implemented through cooperative organisations.

    The All-India Rural Credit Survey Committee Report, 1954 recommended an integrated approach to cooperative credit and emphasised the need for viable credit cooperative societies by expanding their area of operation, encouraging rural savings and diversifying business. The Committee also recommended for Government participation in the share capital of the cooperatives.

    In view of these recommendations, different States drew up various schemes for the cooperative movement for organising large-size societies and provision of State partnership and assistance. During 1960s, further efforts were made to consolidate the cooperative societies by their re-organisation. Consequently, the number of primary agricultural cooperative credit societies was reduced from around two lakh to 92,000.


    In 1958 the National Development Council (NDC) had recommended a national policy on cooperatives. Jawaharlal Nehru had a strong faith in the cooperative movement. While opening an international seminar on cooperative leadership in South-East Asia he had said " But my outlook at present is not the outlook of spreading the cooperative movement gradually, progressively, as it has done. My outlook is to convulse India with the Cooperative Movement or rather with cooperation to make it, broadly speaking, the basic activity of India, in every village as well as elsewhere; and finally, indeed, to make the cooperative approach the common thinking of India....Therefore, the whole future of India really depends on the success of this approach of ours to these vast numbers, hundreds of millions of people".

    The cooperative sector has been playing a distinct and significant role in the country’s process of socio-economic development. There has been a substantial growth of this sector in diverse areas of the economy during the past few decades. The number of all types of cooperatives increased from 1.81 lakh in 1950-51 to 4.53 lakh in 1996-97. The total membership of cooperative societies increased from 1.55 crore to 20.45 crore during the same period. The cooperatives have been operating in various areas of the economy such as credit, production, processing, ,marketing, input distribution, housing, dairying and textiles. In some of the areas of their activities like dairying, urban banking and housing, sugar and handlooms, the cooperatives have achieved success to an extent but there are larger areas where they have not been so successful. The failure of cooperatives in the country is mainly attributable to: dormant membership and lack of active participation of members in the management of cooperatives. Mounting overdues in cooperative credit institution, lack of mobilisation of internal resources and over-dependence on Government assistance, lack of professional management. bureaucratic control and interference in the management, political interference and over-politisation have proved harmful to their growth. Predominance of vested interests resulting in non-percolation of benefits to a common member, particularly to the class of persons for whom such cooperatives were basically formed, has also retarded the development of cooperatives. These are the areas which need to be attended to by evolving suitable legislative and policy support.