Crisis in India’s Cooperative Sector, 47.05% of India’s Societies Defunct

Cooperative societies are an important part of India’s economic and social system, especially for rural development and financial inclusion. However, recent data presented in Parliament by Union Cooperatives Minister Amit Shah highlights serious concerns. 

Extent of Crisis in India’s Cooperative Sector 

As per data presented by the Central government in Parliament out of 8.48 lakh cooperative societies, only 3.49 lakh are in profit, while 2.11 lakh are in loss, 1.41 lakh are non-functional, and 47,688 are under liquidation. 

Defunct Cooperatives

• Uttar Pradesh has the highest percentage of defunct societies at 41.8% (16,997), followed by Madhya Pradesh with 34.4%, Rajasthan with 31.8%, Andhra Pradesh with 30.1%, and West Bengal with 27.8%. 
• The condition of smaller States is even worse, Nagaland (72.7%), Delhi (67.1%), Sikkim (55.3%), Manipur (52%) and Chandigarh (46.4%).
• Maharashtra, despite having the highest number of cooperatives (2.26 lakh), has the lowest share of defunct societies (1.21%). Similarly, Gujarat (7.25%), Karnataka (7.54%), and Haryana (8.23%) also have relatively low levels of defunct societies.

Although western and southern States have kept more cooperatives functional, many of them are still in loss, under liquidation, or lack proper financial data.

Loss Making Cooperatives 

Even among functional societies, the situation remains concerning. On average, around 31.75% of cooperatives in major States are running in loss. Telangana (47.22%), Haryana (41%), and Madhya Pradesh (38%) show particularly high levels of loss-making societies.

Cooperatives Under Liquidation 

Apart from loss-making societies, 47,688 cooperatives are under liquidation. Of these, about 93% (44,561) are concentrated in five States (Maharashtra, Gujarat, Telangana, Karnataka, and Madhya Pradesh) 

Sector-wise Challenges in Cooperative Societies

The crisis in India’s cooperative sector is concentrated in a few key sectors, where structural and financial challenges have led to large-scale distress.

Issues in Dairy Cooperatives

The dairy sector, which NABARD identifies as a crucial financial buffer against agricultural shocks, has seen 14,251 societies become non-functional or enter liquidation across the top five States. Key reasons for poor performance are:

• Post-COVID fall in milk prices failed to cover rising costs, reducing cooperative profitability.
• Milk production increased by 25% (Oct 2024-Mar 2025), but higher procurement costs due to unseasonal rains, geopolitical disruptions, and strong demand reduced cooperative margins.

Issues in Housing Cooperatives

Maharashtra and Gujarat top the list of non-functional or under-liquidation housing cooperatives. 

• Housing cooperatives in Maharashtra, Gujarat, and Telangana are facing a financial crisis mainly because depositors lost money in scam-hit cooperative banks like PMC, New India, and Mumbai Bank.
• Other issues plaguing the housing cooperatives are non-payment of maintenance charges by members, mismanagement of funds by committees and long-drawn redevelopment processes.

Issues in Credit and Thrift Societies

Credit and Thrift societies are member-owned financial cooperatives which promote the savings, credit, and insurance needs of their voluntary members. The terms and conditions of mutual aid are decided by the members themselves.

Gujarat, Telangana, and Madhya Pradesh have the highest number of non-functional Credit & Thrift societies, while 1,452 in Maharashtra and 1,424 in Madhya Pradesh are under liquidation. Key reasons for poor performance are: 

• Majority of the Credit and Thrift Societies operate with very small capital (often below ₹1 lakh), making them financially weak.
• They are not directly supervised by the Reserve Bank of India, leading to weak regulation.
• Lending and interest rates are self-determined and often unsustainable.
• High-cost lending increases defaults and pushes societies towards losses.
• Poor management and lack of financial discipline further worsen their performance.

Issues in Labour Cooperatives

Labour cooperatives are worker-owned and democratically managed institutions that help workers in the unorganised sector secure fair wages, contracts, and income. 

In most States, they form only a small share of non-functional societies, but Telangana is an exception where weak financial capacity and inability to handle legal and tax requirements are key reasons for their poor performance.

• Many construction-related cooperatives have gone bankrupt due to poor contracts and low earnings.
• Heavy tax liabilities, such as high GST demands, have further increased their financial burden.

Women’s Welfare Cooperatives

Women’s cooperatives are generally functioning well across most States, but they face serious distress in some regions.Madhya Pradesh has the highest number of defunct women cooperatives (8,495), followed by Telangana (562 non-functional societies). Key reasons for poor performance are: 

• Limited access to formal finance forces women to depend on informal sources like self-help groups (SHGs), restricting growth.
• Lack of exposure to business networks reduces opportunities for expansion and market linkages.
• Social barriers such as mobility restrictions and societal inhibitions limit active participation.
• Although around 60% of women are aware of government schemes, only about 25% actually benefit due to poor implementation and access issues.
• Lack of family support creates additional pressure, with nearly 80% of women struggling to balance work, household duties, and childcare.

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Road Ahead for India’s Cooperative Sector

The government has taken steps through the National Cooperation Policy, 2025 to strengthen and expand the cooperative sector, with a focus on inclusion and diversification into new areas like transport, insurance, and green energy. However, further efforts are needed such as: 

• Ensuring professional management, transparency, and reducing political interference in cooperative functioning.
• Stronger regulatory oversight, especially for smaller credit and thrift societies, is required to ensure financial discipline and prevent failures.
• Provide better access to institutional finance and support for loss-making but viable cooperatives.
• Simplify GST compliance for small labour cooperatives,
• Sector-specific reforms, particularly in dairy, housing, and labour cooperatives, are necessary to address their unique challenges.
• Supporting women’s cooperatives through easier access to finance, market linkages, and social support systems will improve inclusiveness.
• Maintaining a balance between Centre and State roles is important to ensure both effective policy implementation and cooperative autonomy.

Overall, while the government has initiated reforms, sustained and targeted measures are required to ensure long-term viability and inclusiveness of the cooperative sector.