Key Policy Making Bodies for Cooperatives and Farmers Organisations in India

India’s cooperative sector is one of the largest in the world, with over 600,000 cooperative societies operating at the grassroots level across virtually every sector of the economy. But cooperatives don’t thrive on goodwill alone – they need strong policy frameworks, financial backing, and institutional oversight to function effectively. In India, a set of dedicated policy-making bodies shapes the environment in which cooperatives and farmers’ organizations operate. Understanding these bodies – their roles, mandates, and influence – is essential for anyone studying cooperative development or agricultural policy in the country.

The Department of Agriculture and Cooperation: the policy backbone 🔗

For decades, the central authority responsible for cooperative policy in India was the Department of Agriculture, Cooperation and Farmers’ Welfare (DAC&FW). Organized into 27 divisions, with five attached offices and twenty-two subordinate offices spread across the country, the department coordinated with state-level agencies and oversaw the implementation of Central Sector Schemes. Under its administrative control functioned nine autonomous bodies and ten national-level cooperative organizations, making it the apex institutional home for India’s cooperative movement at the central level.

The department’s responsibilities included formulating the overall cooperative policy framework in India and overseeing key legislation such as the National Cooperative Development Corporation Act and the Multi-State Cooperative Societies Act. It also engaged actively in international agricultural cooperation and promoted agricultural exports – activities that directly shaped the environment in which cooperatives operated.

The creation of a dedicated Ministry of Cooperation 🔗

A landmark shift occurred in July 2021 when the Government of India carved out a separate Ministry of Cooperation from the erstwhile Ministry of Agriculture, Cooperation and Farmers’ Welfare. Launched with the vision of “Sahkar se Samriddhi” (Prosperity through Cooperation), the new ministry was tasked with providing a distinct administrative, legal, and policy framework to strengthen the cooperative movement across the country. Its focus includes deepening cooperatives as a genuine people’s movement, streamlining operations for ease of doing business, and enabling the development of Multi-State Cooperative Societies. This institutional separation signaled the government’s recognition that cooperatives warranted dedicated policy attention beyond agriculture alone.

The National Commission on Farmers: centering the farmer in policy 🔗

While the Department of Agriculture handled institutional policy, a separate and equally important body addressed the human dimension of farming – the National Commission on Farmers (NCF). Constituted on 18 November 2004 under the chairmanship of Professor M.S. Swaminathan, the NCF was formed in direct response to the nationwide crisis of farmer suicides. Its terms of reference reflected the priorities of the Common Minimum Programme, and it submitted five reports between December 2004 and October 2006.

The commission’s work went well beyond emergency response. Its five reports, collectively known as the “Serving Farmers and Saving Farming” series, laid out a comprehensive national policy agenda covering land reform, irrigation, rural credit, food security, and agricultural productivity. The fifth and final report, submitted in October 2006, focused specifically on the root causes of farmer distress and recommended addressing them through a holistic national policy framework. Based on these recommendations, a Revised Draft National Policy for Farmers was placed before Parliament in October 2007.

What the NCF recommended for cooperatives 🔗

The NCF placed significant emphasis on cooperatives as instruments of farmer welfare. It recommended cooperative farming as an ideal model for small and marginal farmers, arguing that cooperatives could provide centralized services – such as tractors, threshing machines, and drying equipment – to support small-scale, decentralized production. This, the commission reasoned, would reduce input costs and improve income.

Beyond cooperative farming, the NCF proposed the formation of Small Holders’ Estates for crops like cotton, horticulture, and medicinal plants – a group-based approach to farming where producers in a village or watershed cooperate under a shared framework. It also stressed the need for cooperatives to engage in direct sales to consumers, bypassing intermediaries, and called for post-harvest infrastructure to reduce losses. Critically, the NCF emphasized that cooperatives needed an enabling environment to operate with genuine autonomy and efficiency – free from excessive state interference and bureaucratic control.

Reflecting on the policy a decade later, M.S. Swaminathan emphasized that agricultural progress should be measured not just in statistical output but in farmers’ real income – a principle that gave cooperatives a central place in his vision for rural development.

The Planning Commission: cooperatives in the national development blueprint 🔗

The Planning Commission of India, established on 15 March 1950 under Prime Minister Jawaharlal Nehru, served as the architect of India’s economic strategy through its Five-Year Plans. Importantly, it treated cooperatives not as a peripheral sector but as a core component of inclusive national development. From the First Five-Year Plan, which focused on agriculture and rural reconstruction, cooperatives were recognized as vehicles for bridging the rural-urban economic divide and empowering marginalized communities.

Each successive plan included dedicated chapters and working groups on cooperative development. Agricultural cooperatives consistently received priority attention for their direct role in food security and rural livelihoods. The commission’s approach was holistic – it recognized that cooperatives operated across agriculture, credit, consumer goods, housing, and industrial production, and that their growth needed to be strategically planned rather than left to chance.

From Planning Commission to NITI Aayog 🔗

In 2014, Prime Minister Narendra Modi announced the dissolution of the Planning Commission. It was replaced by NITI Aayog on 1 January 2015, which shifted India from centralized Five-Year Plans to a more flexible, decentralized planning model built on cooperative federalism – where states actively participate in shaping national priorities. After 2017, NITI Aayog moved to a 15-year vision document, a 7-year strategy paper, and a 3-year action agenda, replacing the rigid five-year cycle. While the institutional structure changed, the intent to mainstream cooperatives in national development strategy has continued under the new framework.

The Reserve Bank of India: regulating cooperative banking 🔗

The financial health of cooperatives – particularly cooperative banks – is overseen at the apex level by the Reserve Bank of India (RBI). India’s rural cooperative credit system operates through a three-tier structure: Primary Agricultural Credit Societies (PACS) at the village level, Central Cooperative Banks (CCBs) at the district level, and State Cooperative Banks (StCBs) at the state level. While PACS fall outside the purview of the Banking Regulation Act, State Cooperative Banks and District Central Cooperative Banks are regulated by the Reserve Bank under the provisions of the Banking Regulation Act, 1949.

The RBI’s regulatory role includes oversight of banking operations, licensing, and ensuring that the affairs of cooperative banks protect depositor interests. A key feature of this arrangement is the duality of control – banking-related functions are regulated by the RBI, while management-related functions remain under respective state or central governments. To manage this complexity, the RBI constitutes State-level Task Forces for Cooperative Urban Banks (TAFCUBs) to bring all relevant decision-makers to a common platform for coordinated action. An important regulatory update came through the Amendment to the Banking Regulation Act in 2020, which significantly expanded the RBI’s supervisory control over urban and multi-state cooperative banks.

NABARD: the financial and supervisory pillar for cooperative credit 🔗

No discussion of cooperative policy bodies is complete without NABARD – the National Bank for Agriculture and Rural Development. NABARD came into existence on 12 July 1982 by absorbing the agricultural credit functions of the RBI and the refinance functions of the Agricultural Refinance and Development Corporation (ARDC). It was established based on the recommendations of the Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD), chaired by B. Sivaraman.

NABARD functions as the apex development financial institution for rural India and plays two interconnected roles in the cooperative ecosystem: financial support and supervisory oversight.

Supervisory functions 🔗

Under Section 35(6) of the Banking Regulation Act, 1949, NABARD is empowered to conduct inspections of State Cooperative Banks, District Central Cooperative Banks, and Regional Rural Banks. These inspections examine the financial soundness of institutions, assess governance and risk management, and ensure compliance with rules issued by the RBI and the Government of India. As of recent data, approximately 96,000 PACS, 370 DCCBs, and 33 SCBs operate under NABARD’s supervisory umbrella. Where inspections identify weaknesses, NABARD follows up with the concerned institutions and can make recommendations to the RBI for regulatory action.

Refinance and institutional development 🔗

Beyond supervision, NABARD provides crucial refinance support to cooperative credit institutions. It refinances funds from sources including the World Bank and the Asian Development Bank to State Cooperative Banks, Regional Rural Banks, and commercial banks approved by the RBI. This refinancing function ensures that cooperative banks have adequate liquidity to extend credit to farmers and rural borrowers.

NABARD’s Cooperative Development Fund (CDF) is another significant instrument – it supports capacity building in cooperative credit institutions, funds training programs through Cooperative Training Institutes, and finances computerization initiatives at the PACS level. NABARD also coordinates with the Government of India and the RBI to prepare policy notes for Parliamentary Committees and government agencies, ensuring that the challenges and needs of cooperative credit institutions inform national-level policy decisions.

NABARD also coordinates the rural financing activities of all field-level institutions and maintains liaison with the Government of India, state governments, the RBI, and other national institutions concerned with policy formulation – making it a connective tissue between on-ground cooperative realities and higher-level policy architecture.

How these bodies work together 🔗

These policy-making bodies do not operate in silos. The Ministry of Cooperation sets the legislative and administrative framework; the NCF’s recommendations inform the content of farmer-centric policies; the Planning Commission (now NITI Aayog) embeds cooperatives within the broader national development strategy; and the RBI and NABARD form the financial regulatory architecture that determines whether cooperatives can access credit, remain solvent, and serve their members effectively. Together, they represent a layered system – from visionary policy at the top to ground-level financial oversight at the bottom.

What is particularly noteworthy is the evolution of this system over time. The creation of a separate Ministry of Cooperation in 2021, the expanded regulatory role of the RBI under the 2020 Banking Regulation Amendment, and NABARD’s ongoing push to digitize over 63,000 PACS all reflect a system that continues to adapt to the evolving needs of India’s cooperative sector.

What do you think? Given that cooperative societies are constitutionally listed under the State List, how effectively can central bodies like the Ministry of Cooperation and NABARD shape cooperative policy without overstepping state autonomy? And with the Planning Commission replaced by NITI Aayog, do you think India’s cooperative development strategy has become more or less coherent in terms of long-term planning?

References

1. https://en.wikipedia.org/wiki/Cooperative_movement_in_India
2. https://www.mygov.in/group/ministry-agriculture-and-farmers-welfare
3. https://www.cooperation.gov.in/en/ministry-cooperation
4. https://en.wikipedia.org/wiki/National_Commission_on_Farmers
5. https://prsindia.org/policy/report-summaries/swaminathan-report-national-commission-farmers
6. https://www.clearias.com/national-commission-on-farmers-recommendations/
7. https://ras.org.in/index.php?Article=the_national_commission_on_farmers_17_years_on
8. https://en.wikipedia.org/wiki/Planning_Commission_(India)
9. https://vajiramandravi.com/current-affairs/planning-commission-of-india/
10. https://testbook.com/ias-preparation/five-year-economic-planning-in-india
11. https://m.rbi.org.in/scripts/FS_Overview.aspx?fn=2755
12. https://vajiramandravi.com/current-affairs/cooperative-banks/
13. https://en.wikipedia.org/wiki/National_Bank_for_Agriculture_and_Rural_Development
14. https://www.nabard.org/about-departments.aspx?id=5&cid=469
15. https://www.nabard.org/about-departments.aspx?id=5&cid=475