The National Cooperative Policy 2025 aims to empower 50 crore citizens, strengthen cooperatives, and position them as India’s third pillar of development
Dr. Goutam Saha & Dr, Indranil Saha
India’s story of economic growth has often been celebrated for its high GDP numbers, rapid industrialisation, and burgeoning digital economy. Yet, this success hides stark inequalities. Around 90 percent of India’s workforce is employed in the unorganised sector, where average earnings remain below ₹11,000 per month (National Sample Survey Office [NSSO], 2019). The plight of marginal farmers is even more alarming—NSSO data reveals that their annual cultivation income averaged only ₹17,232 between 2018–19. These figures help explain why nearly 81 crore Indians continue to depend on subsidised food under the National Food Security Act (Government of India, 2013) and why cash transfer schemes have proliferated at the state level.
While recent reports, including the World Bank’s World Development Report 2025, indicate that consumption inequality has narrowed in India due to food and cash transfers, income inequality remains deeply entrenched. It is against this backdrop that the National Cooperative Policy, 2025, has been launched by the Ministry of Cooperation, established in 2021. The policy seeks to empower nearly 50 crore citizens over the next decade and aims to triple the cooperative sector’s contribution to the national economy. This initiative is ambitious, yet also contested. An analytical assessment of the policy requires exploring its mission pillars, the federal controversy it has triggered, the opportunities it presents, and lessons to be drawn from both Indian and global cooperative experiences.
Strategic Mission
The policy is built around six strategic pillars that collectively aim to modernise and democratise the cooperative sector. Let us explain those six pillars. a)Strengthening the Foundation – This includes legal and regulatory reforms, ensuring free and fair elections within cooperatives, rationalising cooperative taxation, and establishing financing mechanisms through state and national-level networks (Ministry of Cooperation, 2025). By improving governance structures, this pillar attempts to reduce the entrenched problem of corruption and political interference in cooperatives. b) Promoting Vibrancy – Each district is expected to develop a model cooperative village. The policy also seeks to position cooperatives as leaders in organic produce under the Bharat brand and to promote products through geographical indication (GI) registration. This initiative aspires to give cooperatives a competitive edge in domestic and global markets c) Future Readiness – The emphasis here is on digital transformation, incubation centres, cooperative-focused curricula, and integrating cooperative education into schools and universities. By mainstreaming technology and knowledge creation, the policy envisions a future-ready cooperative ecosystem d) Promoting Inclusivity and Deepening Reach – Women, youth, small and marginal farmers, Scheduled Castes, Scheduled Tribes, and the specially-abled are to be prioritised. By showcasing success stories and leveraging multiple outreach channels, this pillar seeks to make cooperatives genuinely inclusive e) Entering New and Emerging Sectors – Cooperatives are encouraged to diversify into health, micro-insurance, education, waste management, rural tourism, and organic farming. Such diversification not only spreads risks but also aligns with India’s evolving developmental needs. f) Shaping the Young Generation for Cooperative Growth – By promoting careers in cooperatives among rural and semi-urban youth and developing standardised, universally accessible cooperative-focused courses, the policy hopes to nurture a new generation of cooperative leaders.
Taken together, these six pillars seek to transform cooperatives from being localised, often politically influenced institutions into competitive, community-driven enterprises with national and international visibility.
Federal Controversies
Despite its promise, the policy has been controversial from its inception. The Kerala Cooperative Employees Union (KCEU) has strongly opposed the policy on constitutional grounds. Cooperatives are listed under Entry 32 of the State List in the Seventh Schedule of the Indian Constitution, giving states exclusive powers over them (Constitution of India, 1950). The fear is that the new national policy and the Union Government’s assertive role may encroach on this constitutional space. Kerala provides a useful case study. The state has one of the most vibrant cooperative sectors in India, contributing nearly 70 percent above the national average. Yet, under the Multi-State Cooperative Societies (MSCS) Act, 2023, around 95 multi-state cooperatives already operate in Kerala without state oversight. The KCEU fears that such centralisation could weaken state-level autonomy and impose uniform models that may not suit local realities. These concerns are not unfounded. Historically, over-centralisation of cooperatives has often led to bureaucratisation and inefficiency, diluting their grassroots essence. Thus, the challenge lies in balancing state autonomy with the need for national frameworks that allow cooperatives to scale and compete with corporate entities.
Market-Driven Economy
While state-level apprehensions deserve respect, the opportunities offered by a strong national cooperative framework cannot be ignored. In a neoliberal, market-driven economy, cooperatives must compete not only with domestic corporates but also with multinational giants. Controlled cooperatives often fail to thrive in such environments. However, India already has inspiring cooperative success stories: Amul (Gujarat Cooperative Milk Marketing Federation), with a turnover exceeding ₹9,000 crore, has demonstrated how purpose-driven community models can achieve economies of scale, branding excellence, and market leadership (Kurien, 2007). Shree Mahila Grihaya Udyog Lizzat Papad, with ₹1,600 crore turnover and 45,000 women members, exemplifies the strength of decentralised, ethical, and sustainable models. Self-Employed Women’s Association (SEWA), with 3.2 million members across 18 states, integrates livelihoods with social security, influencing informal economy policies while ensuring grassroots, member-centric leadership (Chen, 2016). State-led programmes like Kudumbashree (Kerala) and Mission Shakti (Odisha) demonstrate how cooperatives can become engines of inclusive development (Government of Kerala, 2021; Government of Odisha, 2022) . These examples highlight that cooperatives, when member-driven and innovative, can scale successfully without excessive government control. The National Cooperative Policy, if designed to facilitate rather than dominate, could enable such models to flourish nationwide.
Global Lessons
The cooperative movement worldwide has navigated similar tensions between state support and autonomy. We may consider two contemporary examples. In China, Post-liberalisation, 40 percent of agricultural cooperatives went bankrupt. To address this, China introduced the Farmer Professional Cooperative (FPC) model, allowing non-farmers such as enterprises and institutions to join cooperatives while maintaining farmer dominance (80 percent membership). Innovative voting rights were introduced, where large contributors could hold up to 20 percent of votes, deviating from the classical one-member-one-vote principle. Importantly, cooperatives enjoyed tax incentives, such as exemptions from VAT on member inputs. European Union: Cooperatives receive preferential tax treatment, subsidies, and favourable access to public procurement. This supportive ecosystem has allowed cooperatives to emerge as a strong “social economy” sector, effectively addressing income inequality within a globalised market economy. For India, these international models underline two lessons: (i) financial incentives and fiscal advantages are crucial for cooperative competitiveness, and (ii) flexibility in membership and governance models may help cooperatives adapt to modern market realities while retaining their social ethos.
Way Forward
Political capture of cooperatives has historically undermined their functioning. The success of the National Cooperative Policy depends on addressing certain challenges like reducing political differences in grassroots level and balance federalism in state & central government levels to ensure autonomy while facilitating growth of the cooperatives, supporting them in knowledge sharing, capacity building and providing them ecosystem like low-interest credit, tax benefits, marketing assistance and adequate training and sharing best practices in regional language from the successful cooperatives
The National Cooperative Policy, 2025 has the potential to become a landmark initiative in India’s quest for inclusive growth. It attempts to position cooperatives as a third pillar of development, alongside markets and the state, a vision articulated by economist Raghuram Rajan. Yet, its success hinges on careful navigation of federal tensions, minimisation of political interference, and genuine empowerment of grassroots members. If India learns from its own successful cooperatives—Amul’s branding, SEWA’s empowerment model, and Lizzat’s decentralisation—as well as from global experiences in China and the European Union, the cooperative sector can become a powerful instrument against income inequality. Ultimately, the policy’s effectiveness will not be measured merely by the number of cooperatives formed but by whether it provides millions of marginalised Indians with dignity, security, and sustainable livelihood.
(Authors are faculty members of National Institute of Fashion Technology Bhubaneswar and Kolkata respectively. Views Expressed are personal.)