Chapter -2
DEVELOPMENT OF CO-OPERATIVE CREDIT MOVEMENT IN INDIA AND MAHARASHTRA
2.1 Introduction
2.2 Co-operative Credit Structure in India 2.3 Co-operative Credit Societies in India
2.3.1 Co-operative Movement Development Before Independence
2.3.2 Co-operative Movement Development After
Independence
2.3.3 Co-operative Movement Development during the
Planning Era
2.4 Co-operative Movement in Maharashtra
2.5 Conclusion
Chapter -2
DEVELOPMENT OF CO-OPERATIVE CREDIT MOVEMENT IN INDIA AND MAHARASHTRA
2.1 Introduction
At the end of 19th century the peasantry was in the grip of the
money lenders and the rural debt was mounting. The condition of the agriculturists was deplorable. As a result of increase in population and lack of industrialization the pressure of population on land was increasing.
Farmers who were once prosperous became petty peasants with small holding and were finally were reduced to the status of landless labours.
They were in the clutches of the money lenders. Rural debt was increasing and this increased the burden on the farmer. The economic position was deteriorating and he was finding himself in a hopeless condition, the farmer did not have the incentive to improve the condition.
The government felt that the farmer could be helped through some of co
operative efforts.
The introductions of the Co-operative Credit Societies Act in 1904 marked the beginning of the co-operative movement in India.
It is a turning point in economic and social history. The Act provided to, encourage of thrift, self-help and co-operation amongst agriculturist, artisans and persons of limited means.
In order to provide the credit at low rate of interest to farmers the co-operative societies were established.
2.2 Co-operative Credit Structure in India
In India more than 70 percent of population is engaged in agriculture. As stated earlier, the Indian farmers were at the mercy of money lenders as their position in economic terms was very precarious.
The existing commercial banks didn’t meet the requirements of the farmers. But the co-operative movement has changed the position of the farmers during the planning era.
The financial requirements of the Indian farmers can be broadly classified into three types depending on the period to the purpose for which they required such finance.
1) Short Term Loans
2) Medium Term Loans
3) Long Term Loans.
The co-operative credit structure is three-tier to meet short term and medium term loans. Coming to state co-operative banks India has one at each state. Central co-operative banks at each district and primary co-operative credit societies or agricultural societies of each village to meet short term and medium term loans. We have also land development banks at each state and primary land/mortgage/
development banks at each district for long term loan.
Farmers get short- term and medium term loans from primary agricultural credit societies which are financed by central co-operative banks. The Central Co-operatives get financial help through state co-operative banks of their own funds. They have again access to NABARD, state government and RBI.
2.3 Co-operative Credit Societies in India
The study of credit society’s co-operative movement has been divided into two parts, i.e. before independence and after independence.
2.3.1 Co-operative Movement Development Before Independence-
Poverty and indebtedness of the Indian farmers results into birth of co-operative movement. In British India cotton textile mills have started and also started to import the cloth from England. As a result, Indian handicrafts declined. Hence, pressure on land was increased due to poverty and famine. Money lenders exploited the farmers; hence, the farmers started agitation at Deccan. In order to reduce the burden of debt measure has been taken. Fredric Nicholson reported that, rural credit societies should be started as early as possible to protect the farmers. In India co-operative societies have been started on the recommendation of Fredric Nicholson’s report. Simultaneously Edward also followed Raiffesion co-operative societies model in 1901. At the same time number of societies were established in India. But most of them have failed to achieve the success. Despite failure, government of India passed co-operative act in 1904. This act was the foundation
stone of co-operative movement. Sir, Danniel Hamilton pointed out that, this Act "lead the way from poverty to plenty."
2.3.2 Co-operative Movement Development After Independence.
The study of co-operative movement is divided into five phases.
1) The First Stage of Movement (1904-1911)
The introduction of the co-operative credit society’s act in 1904 marked the beginning of the co-operative movement in India.
The measure was hailed as a turning point in economic development by Henry W. Wolff the great co-operator and the way from poverty to plenty by Sir Daniel Hamilton. The object of the act as stated in preamble was to encourage thrift, self-help and co-operation among agriculturists. During this co-operative movement achieved remarkable progress.
Table 2.1
Progress of Co-operative Movement from 1906-07 to 1910-11.
Year No. of Societies No. of Members in thousand
Working capital Rs. In lakh
1906-07 843 19.84 23.72
1907-08 1357 149.16 44.14
1908-09 1963 180.34 82.32
1909-10 3428 224.40 124.68
1910-11 5321 305.06 203.05
Average Growth 106.23 287.52 151.21
Source - B. S. Mathur Co-operative in India. P. 55.
Table 2.1 indicates progress made by co-operative movement during 1906-07 to 1010-11. The number of societies, members and working capital have incurred registering the annual growth rate of 106.23, 287.52, 151.221 percent respectively during the period.
The act of 1904 was insufficient to meet the needs of the movement.
2) Second Stage (1912-1918)
The lacunas of the 1904 act were removed in the act of 1912 with the passing of this act, the movement entered into the second stage.
The new act gone incentive to the growth of the co-operative movement.
Table No. 2.2
Progress of the co-operative movement during 1911-12 to 1918-19
Year No. of Societies No. of Members in thousand
Working capital Rs. In lakh
1911-12 8177 4.7 335.7
1917-18 25192 10.9 760.09
Annual Growth 29.73 18.84 18.06
Source - As per Table 2.1.
During the period before 1911-12 to 191?-1S the societies, membership and working capital has increased 29.73 percent, 18.84, 18.06 percent respectively.
During the period under review the co-operative made rapid progress. In order to study the progress the Government of India appointed committee under the chairmanship of Sir E. D. Maclagan, the committee warned for hurried expansion of the movement and care
is to be taken in formation of the society. The failure of the co-operative movement was due to neglect of precautions.
3) The Third Stage (1919-1929) - Period of Unplanned Expansion
After the end of first world war the reforms act of 1919 was placed.
The earlier period witnessed that, there was a hurried expansion.
The post-war boon and rising prices further provided fill up to the co-operative movement. Different kinds of co-operative societies in the field of credit supply distribution, better farming, mortgage banking saw the light of the day during this period. Some of the provinces were active.
Table No. 2.3
Progress of the Co-operative Movement (1918-19 to 1928-29)
Year No. of Societies No. of Members in thousand
Working capital Rs. In lakh
1918-19 28997 9.67 8.09
1923-24 54203 17.68 16.55
1928-29 87991 30.04 32.38
Annual Growth 20.37 21.07 30.02
Source - Quoted in A. R Railkhelakar and Oange - Principles of Co-operation.
Third stage also witnessed cupid expression of the co-operative movement. Number of societies, membership and working registered for annual growth of 20.37, 21.07 and 30.02 percent respectively.
This shows that there was a lack of qualitative increase.
4} The Fourth Stage <1929-30 to 1938-39)
During this period the co-operative movement entered the phase which was marked by the great depression of the thirties. The economic crisis reflected in a fall in prices, particularly of agricultural commodities which adversely affected the economic conditions of the agriculturists.
The demand for increased while overdues increased. The overdues increased for 20 to 40 percent during 1927-28 to 1931-32. Due to over financing overdues was increasing. During this period emphasis was given to rehabilitation rather than expansion. Registration of lifeless and unprogressive societies was cancelled. The number of agricultural credit societies fell him 93512 in 1930-31 to 92226 in 1933-34. Another feature of this period was that close supervision and strict scrutiny of loan operation of the societies began to be followed. Many efforts were made to recover over dues. These measures yielded good dividends.
A significant of this period was the establishment of the RBI in 1935 and its agricultural depts. which was changed the duty of studying various problems relating to agricultural credit. In 1937 the RBI stressed the importance of organizing multi-purpose co-operative societies.
5) Fifth Stage (1939-1946)
Fifth stage is also called as recovery stage. The second world war came as a boon to the agricultural classes as it led to a 600 in prices.
The replying capacity of fanners increased. The all India overdues deceased from Rs. 14.05 crores to 8.92 crores during the period.
Table No. 2.4
Progress of Co-operative Movement 1938-39 to 1945-46 Year No. of Societies
(in thousand)
No. of Members (in lakh)
Working capital Rs. in Crores
1938-39 122 53.7 106.47
1939-40 137 60.8 107.10
1940-41 143 64.0 109.32
1941-42 145 67.4 112.42
1942-43 146 69.1 121.14
1943-44 156 76.9 132.21
1944-45 160 83.6 146.63
1945-46 172 91.6 164.00
Annual
Growth 5.12 8.22 6.75
Source - Review of Co-operative movement in India. 1936-46, p. 3
It would be seen from the table no. 2.4 that there was an appreciable increase in number of societies, membership and working capital of these societies. During this period, the same has increase by 5.12, 8.22, 6.75 percent respectively. During this period most important contribution of war was the shifting of emphasis from credit to non-credit aspect. It has broadened the co-operative movement.
Discussing the role of co-operative movement the D. R. Gadgil Agricultural Finance Sub-Committee observed, spread of co-operation provided the best and most lasting solution for the agricultural credit.
The R. G. Saraiya committee pointed that the main cause for the limited success of movement were far policy and illiteracy, lade of knowledge of co-operative principles, selection of members, management, uneconomic holdings, price structures etc.
2.3.3 Co-operative Movement during the Planning Era
The circumstances which promoted its rapid growth during tHe second world war persisted Laisser thereby accelerating the spread of co-operative movement. From time to time government has taken many steps to reorganize and to develop co-operative movement in terms of recommendations of various committees like - Co-operative Planning Committee (1946), The All India Rural Credit Committee (1954), The V. L.
Mehta Committee (1960) etc.
After independence the co-operative movement has assigned an important role in the countries plan. It is considered as the basis of planned growth and social development. The co-operative planning committee has an important role to play as the suitable medium for the democratization of economic planning. It provides the local unit which can fulfill the dual function of educating public in favour of plan.
1) First Year Plan (1951-1956)-
The first plan started “the principle of mutual aid, which is basic of co-operative organization, and the practice of thrift and self-help which sustain it, feeling of self-reliance, which is the basic importance in a democratic way of life.
Table No. 2.5
Achievements of Cooperative Movement during 1st Five Year Plan Sr.
No. Cooperative Sector Programme 1950-51 1955-56 1. Number of Primary Agricultural Societies 1,15,462 1,59,939
2. Membership 51,54,000 77,91,00
3. Average Membership per society 45 49
4. Percentage of rural population served 10.30% 15.60%
5. Loans Issues (In crores) 22.90 50.16
6. Average Loan per member (Rs.) 45.00 64.00 7. Average share per society (Rs.) 727.00 1051.00 8. Average working capital (Rs.) 3547.00 4946.00 9, Average deposits for society (Rs.) 391.00 441.00 10. Percentage of overdues to outstandings 21.00% 25.00%
Source: (1) RBI Bulieting Cooperator.
From the table it was found that, by the end of 15.60 percent of the rural population come in fold of co-operative sector. The amount of loan issued doubled i.e. 22.90 crores to Rs. 50.16 crores. Average loan per member, per society have increased rapidly.
2) Second Five Year Plan (1955-56 to 1960-61)
The co-operative plan was prepared on the recommendation of Rural Credit Survey Committee. The second plan laid emphasis on;
organization of large societies, rationalization of banking structure, reorganization of primary marketing societies, etc.
Table No. 2.6
Achievements of Cooperative Movement during the Second Five Year Plan Sr.
No. Cooperative sector Programme 1955-56 1960-61
1. Number of societies 2,40,000 3,32,000
2. Membership of Primary Societies 1,76,00,000 3,42,00,000 3. Share capital (in crones) Rs. 77.00 221.00 4. Working capital (in crores) Rs. 469.00 1312.00 5. Loans Advanced by primary societies
(in crores) Rs. 50.00 203.00
6. Percentage of rural population covered by
primary credit societies 12.00% 24.00%
7. Average loan advanced per member (Rs.) 64.00 119.00 8. Average membership per society 49.00 80.00 9. Average deposits per society (Rs.) 441.00 688.00 10. Average working capital per society (Rs.) 4,946.00 2,913.00
Source: 1. RBI Bulletin 2. Cooperator
In view of the progress that is evident form above table no 5 the National Development Commission in 1958 considered the role of cooperative movement in increasing agricultural production and in building rural economy. The National Development Commission considered the cooperation as a people’s movement and in the light of that it emphasized organizing the cooperative movement on the basis of village cooperatives and the primary unit. Where village cooperatives and village panchayats play the responsible role of socio economic development, co-operative sector programmes have acquired remarkable progress.
3) Third Five Year Plan and Growth of Cooperative Sector : (1961-62 to 1965-66)
Table No. 2.7
Achievements of Co-operative Movement during Third Five Year Plan Sr.
No. Cooperative Sector Programme Targets Achievements Formation cooperative Societies 2,30,000 1,91,904
1 - 23,680
Dormant Active
- 1,68,224
2 Villages covered 5,63,620 5,02,816
3 Membership of Credit Coops 3,70,00,000 2,46,00,000 4 Loans and Advances (crores) Rs. 530 Rs. 427 5 Loans outstanding (crores) Rs. 150 Rs. 165 6 Working Capital (crores) RS. 4,200 Rs. 2800 7 Number of Marketing Societies 3600 3198 8 Turnover by Marketing Societies
in (crores) 520 309
9 Cooperative Sugar Factories 66 78
10 Industrial Cooperatives 15800 14806
11 Consumer cooperatives 16500 13077
12 Cooperative Housing Societies 20,000
sources: 1. R. B. I. Bulletin 2. Cooperator
In the third plan, total co-operative has achieved the remarkable progress, but compared to the achievement to target progress was not satisfactory.
4) Forth Five Year Plan (1969-70 to 1973-74)
Growth with stability was the main feature of the forth plan.
The following table shows the progress in the fourth plan.
Table No. 2.8
Achievements of Cooperative Movement during Fourth Five Year Plan Sr. No Cooperative sector Programme In terms of
Position as on 1969-70
Position as on 1973-74
1 Number of cooperative Lakhs 3.30 3.30
2 Membership of Primary societies Crores 5.70 6.78
3 Share Capital; Rs Crores 663 1,051
4 Circulating Capital Rs Crores 4,089 8,585
5 Population Covered Percentage 34% 41%
6 Capital of Primary Societies Rs Crores 163.31 271.06 7 Loan disbursement by primary
Societies Rs Crores 501.97 760.46
8 Medium term loans out of total
loans Rs Crores 47.48 71.15
9 Average deposits per society Rs Rupees 3390.00 5800.00
10 Average loan per member Rs Rupees 173.00 217.00
11 Loan outstandings Percentage 35% 42%
Land development Banks;
12 Central Number 19 19
Primary Number 750 857
13 Loans Disbursed by Land
Development Banks Rs Crores 148.17 158.09
14 Loan outstanding Percentage 16.80% 33.70%
15 Sale turnover by Agricultural
cooperatives Crores 588.46 1214.91
16
Distribution of Fertilizers, seeds, pesticides and implements by agricultural societies Rs
Crores 253.02 757.71
Source: India 1978-79
The above table shows that, performance of cooperative movement during with plan presented a mixed picture. Cooperative making, agricultural produce, cooperative credit and storage the targets were achieved. The overall performance was quite satisfactory.
5) Fifth Five Year Plan (1974-75 to 1978-79)
The fifth plan emphasized to strengthen the network of agricultural co-operatives, viable consumer co-operatives, remove the regional imbalances etc.
Table No .2.9
Achievements of cooperative movement during Fifth Five Year Plan Sr.
No Cooperative Sector Programme In terms of Targets Achievements
1 Short-term loan: Rs Crores 1,200 1262
2 Medium term loans: Rs Crores 350 753
3 Long term loans: Rs Crores 1500 1095
4 Sale of agricultural produce: Rs Lakhs 1600 1334 5 Cooperative processing societies
Rs. Lakhs 1900 1900
6 Sale of Fertilizers Rs. Crores 1000 900
7 Sale of seeds Rs Crores 200 115
8 Cooperative storage capacity tons Lakhs - 50 45 9 Distribution of consumer
provisions Crores 1200 1250
Sources 1. R. B. I. Bulletin 2. Cooperator 3. India
The above figures reveals the fact that credit cooperatives was effective in distributing short term and medium terms loans. Urban & rural consumer societies is very well.
6) Sixth Five Year Plan (1979-80 to 1984-85)
The sixth plan emphasized the conceived action programme, reexamination of existing co-operatives and reorientation and consolidation of the role of co-operative federal organization.
Table No 2.10
Achievements of Cooperative Movement during the Sixth Five Year plan
Sr.
No Cooperative sector programme Targets Achievements 1 Short-term loans (Rs. Crores) 2500 2500
2 Medium terms loans (Rs crores) 240 250
3 Long term loans (Rs crores) 555 500
4 Distribution of products (Rs crores) '2500 2700 5 Distribution of fertilizers (Rs. Crores) 1600 1500 6
Distribution of consumer goods Rural (Rs crores)
Urban (Rs crores)
2000 1600
1400 1400 7 Establishment of sugar factories 185* 185*
8 Establishment of cooperative spinning mills 80* 90*
9 Establishment of Cold-storage warehouses 275* 185*
Source; As earlier.
The above table shows that short term loan advanced through co-operative sector was constant. Whereas distribution of products, have achieved the rapid progress.
7) Seventh Five Year Plan (1984-85 to 1989-90)
In the light of advancement and shortfalls of the sixth five year plan, the planning commission thought of redressing to the areas and aspects of co-operative development where it failed. The seventh plan emphasized that, developing agricultural credit co-operatives as multipurpose viable units, realignment of the policies and procedure, development co-operatives in eastern region, promotion of professional management etc. Achievement of the Seventh plan is indicated in the following table.
Table No. 2.11
Achievements of co-operative development during Seventh Plan.
Sr. No Cooperative sector programme Target Achievement 1 Short-term loans (Rs. Crores) 5540 4909
2 Medium terms loans (Rs crores) 500 770
3 Long term loans (Rs crores) 1030 671
4 Distribution of Agriculture products (Rs crores) 5000 5929 5 Sale of fertilizers (million tones) 8.63 5.30
e
Distribution of Consumer Goods:
Rural (Rs crores) Urban (Rs crores)
3500 3500
2850 2332 7 Godown capacity (Million tons) 10.00 13.00
8 Number of Sugar factories 220.00 224,00
9 Number of spinning mills 130.00 113.00
10 Number of cold storages 250.00 212.00
Sources: As earlier
Considering the above table it was noticed that, the achievement was good in case of medium term loans. Distribution of agricultural fertilizers, distribution of consumer goods done well.
8) Eighth Five Year Plan (1989-90 to 1994-95)
Eighth five year plan emphasized self-governed and controlled co-operative development to increase production in rural areas and to create employment, support national programme and to eradicate poverty, co-ordination between PDS and consumer co-operative societies, educating training etc. The progress of the eighth plan is as follows.
Table No. 2.12
Achievements of the cooperative output in eight plan.
Sr. No Programme Base year 1991-
92
Actual position year 1996-97
1 Short term loans Rs. 4,350.00 Rs.7,025.00
2 Medium term loans Rs.360.00 Rs. 615.00
3 Long term loans Rs. 965.00 Rs. 1625.00
4 Agricultural produce marketed Rs. 7,130.00 Rs. 7500.00
5.
Distribution of household goods (consumer)
A. Rural area B. B. Urban area
Rs. 2,725.00 Rs. 2,700.00
Rs. 4,500.00 Rs. 5,000.00
6 Storage capacity 121.00 142.00
, 7 Number of sugar mills 220.00 268.00
8 Number of spinning mills 130.00 158.00
Note : 1) Rupees in crores 2) Storage capacity in million tons 3) Mills-actual number.
Sources: 1. R. B. I. Bulletin 2. Cooperator 3. India.
of goods storage capacity has achieved the remarkable progress.
9) Ninth Five Year Plan (1997-98 to 2002-03)
The Ninth plan focused on raising the level of agricultural and rural incomes. The plan emphasized that priority to agricultural development, economic development, increase of rural credit etc.
In short, co-operative movement is India has failed to achieve the remarkable progress. It has failed because of lack of spontaneity, shortage of funds, lack of multi-purpose co-operatives, public support, inefficient management etc.
| From the above table it is noticed that the no. of societies, members deposits loan and advances have increased rapidly which shewn that there is a remarkable progress of the co-operative units}
2.6 Co-operative Movement in Maharashtra.
Maharashtra state is leading in co-operative movement co-operative movement has achieved remarkable progress in the field of socio-economic development. Co-operative development has become model for other states. Maharashtra is leading state in co-operative movement because of dynamic leadership late V. L. Mehata, D. G. Gadgil, D. G. Karve, etc. For common people co-operative movement has created confidence. The urban co-operative banks, co-operative housing societies have been established. The co-operative movement has developed both quantitatively & qualitatively.
Table No. 2.13
Progress of Co-operative Development in Maharashtra.
Sr.
No. Types of Co-operative
Numbers as on 30/31 March.
1981 1991 1999 2001 2002 Annual
Growth
1.
No. of Apex & Central Agricultural non-credit societies
31 31 32 34 34 (0.43)
2. Primary Agricultural Credit
Societies 18577 19565 20354 20551 20674 (0.51)
3. Non-agricultura! credit
societies 5474 11294 19864 22014 23555 (15.01)
4. Marketing societies 423 931 1055 1115 1140 (7.70)
5. Sugar Factories, Rice Mills,
Dairy Co-operatives 14327 28954 37882 39070 39521 (7.99)
6. Social & other co-operative
societies 21915 43845 67464 75285 80865 (12.23)
Total 60747 104620 146641 158017 165789 (7-86)
Source: 48th All India Co-operative week 14-11-2001.
Table No. 2.13 Shows that, performance of co-operative movement in Maharashtra state. Number of primary agricultural societies marketing societies, sugar factories etc, have increased by 0.51, 7.70, 7.99 percent annual during 1981 to 2002.
Table No. 2.14
Table of Urban Co-Operative Society.
Sr.
No. Item Salary Earners
Societies
Urban Credit Societies
1. No. of Society 7370 11155
2. No. of Members (Lakh) 35.18 53.21
3. Own Fund (Crores) 1090 574
4. Deposits (Crores) 1300 1580
5. Total investment fund 3020 2273
6. Loan . 1550 1511
7. Dues 158 214
Source: 'Sahakari Maharashtra, 2003
2.5 Conclusion
Poverty was the main cause in rural India and due to mass poverty number of co-operatives were established. Banking services were established to provide credit to the co-operative societies. Co-operative banks classified into agricultural credit societies, rural and urban credit societies, non-agricultural societies etc. Banking services were integral part of banking structure in economic development.
