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1. OVERVIEW 1- 3

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The co-operative movement has a tremendous potentiality to bring about a
social change in rural India. But this potentiality is yet to be recognized and
explored. This assignment gives a comprehensive picture of Indian rural
situation, concept of rural development and role of co-operatives in rural

About 75% of the Indian population lives in the economically underdeveloped
rural areas. At present, they are unable to manage their resources for their
development because of malnutrition, illiteracy, ignorance and ill-health. The
rural people have developed certain characteristics of their own which mould
their life style, and way of work. The primitive method of cultivation, belief in
fate, family-centred villages and exploitation by money lenders and outsiders are
some of the factors responsible for their under-development. Moreover, the
indifferent attitude of urban people and the government has brought these
villages to the lowest level of destitution, chronic poverty and indebtedness.
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Besides, population has been increasing at a rapid rate, leading to an increased
demand for food and other consumer goods. This points out the significance of
promoting agricultural development. A lot of efforts have been made for
achieving the self-reliance in agriculture, but the main drawback with all
programmes is the lack of coordination among the various programmes, and
disintegrated or individual approach to agricultural development. At this point if
anything is to be done to improve the condition of our people, it is the need to
formulate an integrated, resource-based rural development approach. Rural
cooperatives can play a significant role in the whole development process of
agriculture, and rural development.
A co-operative is generally viewed as an autonomous association of persons
united voluntarily to meet their common social and economic needs and/or
objectives. Thus, a co-operative is a socio-economic organisation that is expected
to have its members interest truly at heart. For the purpose of this paper, we
are concerned with co-operatives that are registered under a legislative act of
either the Central government or a State government. A cooperative is based on
certain values and principles of its own which distinguish it from other forms of
organizations The International Co-operative Alliance (ICA) Congress held in
Manchester on September 23, 1995, adopted the following seven principles:
i. Voluntary and open membership;
ii. Democratic member control;
iii. Member economic participation and limited interest on share capital;
iv. Autonomy and independence;
v. Provision of co-operative education, training and information;
vi. Co-operation among co-operatives; and
vii. Concern for community.
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Section 4, of the Indian Co-operative Societies Act, 1912 defines a cooperative
"as a society which has its objective the promotion of economic interest of its
members in accordance with co-operative principles".
According to Calvert, a co-operative denotes a form of organization wherein
persons voluntarily associate together as human beings on the basis of equality
for the promotion of economic interests of themselves.

A co-operation has three dimensions, that is, economic, social, and moral, which
are equally crucial for its success. The very motto of co-operation, each for all
and all for each, signifies loyalty, trust, faith, and fellowship. A co-operative is a
perfect democratic institution of the members, for the members, and by the
members and is based on the one member-one-vote system of decision making.

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Approximately three-fourth of the country's huge population lives in 5.75 lakh
villages of varying sizes, environment, resources, demography and productivity.
The density of the population varies from place to place such as deserts, hills and
plains, the average being 267 persons per square kilometer. Agriculture is the
main occupation of the rural people, but most of the holdings are very small and
unconsolidated. It has been estimated that small owners of farms varying in size,
from I to 2 hectare and marginal farmers owning farms in size below one
hectare, constitute 73% of the total number of the farmers. Thus, Indian villages
are complex in nature and are facing a lot of problems, viz. poverty,
unemployment, low productivity, population explosion, and wrong policies of
the government. These are briefly discussed here.

A. Poverty
Poverty is a social phenomenon which denotes that a section of the society is
notable to fulfill even its basic necessities of life. In order to determine the extent
of poverty, the concept of poverty line has been used by many economists. They
have determined the poverty line by minimum nutritional levels for subsistence,
and then estimated the cost of minimum diet on the basis of per capita

B. Unemployment
Unemployment is a situation when a person is able and willing to work, does not
get a suitable employment opportunity and hence is denied access to a source of
income. It is a predominant feature of all backward and developing countries.

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C. Low productivity
India has to feed nearly 15% of the world population from 2.4% of the land.
Population growth rate is very high but our food grain production does not
correspond to the rate of population growth. A vast majority of the farmers own
even less than 2 ha of land and such farms are very uneconomical. The
potentialities of irrigation, improvement of land and use of machines are not
fully utilized. Most of the farmers cannot even afford improved farm inputs,
irrigation and machines and therefore, farm productivity is very low in India.

D. Pressure of population
Since 1921 there has indeed been a rapid growth of population which further
accelerated after ii/dependence. The 1981-86 period added 81.9 million with an
average increase of 16.4 million per year.

The population is increasing at a fast rate though the availability of land is limited
and employment opportunities are increasing at a snail's pace. Because of the
population pressure on land, more people are associated with farming than
actually necessary. As a result the per capita productivity and income from
farming is very low.

E. Wrong policies of government
Adequate attention has not been paid by the government towards agricultural
and rural development. Most of the agricultural and rural development policies
are misguided and ill-conceived, their formulation being done by the people
lacking even the basic knowledge of agriculture and rural problems. That is why
the contribution of agriculture in national economy has decreased from 49.6% to

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Cooperatives have demonstrated that they can contribute to economic and
social development. Though the value which cooperatives contribute to society
may differ depending on their individual objectives, they stand to play a vital role
in finding solutions to unemployment and promoting other much need skills.
They ensure their members are in a better position to meet their everyday
needs, especially in rural areas where jobs are scarce and basic services are

Co-operatives in India have emerged as the largest institution in the world. There
are 2.88 lakh co-operatives having 11.5 crores people within their fold. In 1983-
84, they disbursed Rs 2900 crores as agricultural credit. The value of agricultural
produce marketed has witnessed an increase from Rs 169 crores to over Rs 2400
crores. There are 2352 organized co-operative agricultural processing units out
of which 1929 have been installed. Co-operatives have handled 34% of total
fertilizer consumption and account for 55% of sugarcane marketed! And
processed in the country. They have also marketed about 25% of cotton
production, 28% wheat procurement and 24% of paddy procurement in the

The above statistical figures reveal satisfactory progress of co-operatives in
expanding their activities for the ultimate promotion of rural development. Co-
operatives also provide infrastructure support for most of the schemes listed
above. A community would be organized at each focal point to provide services
like credit, input, essential consumer goods, etc. Co- operatives are also evolved
to organize agro-service centres providing a package of facilities to the farmers.
The ultimate aim and objective of the cooperatives should be for ameliorating
the socio-economic condition of the farming community.

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The structural set up of each co-operative differs from each other. The style of
functioning, administration, infrastructure, staff pattern and legal framework are
not the same in all the co- operatives. But each one has its own role in bringing
about the socio-economic development of people in the community. Role of
different co-operatives for the rural upliftment is discussed below.

A. Credit Provision

Agriculture is an important enterprise like other industries which requires
capital. Due to the uncertain nature of agriculture, its small unit production,
scattered operations, low returns, high rates of rent and limited scope of
employment, a large portion of cultivation, from sowing to marketing of
produce, cannot be managed without resorting to borrowings. Co-operative
organizations have been recognized as the best institution for providing credit to
the farmer because they satisfy the important criteria of sound agricultural
credit. The main thrusts of agricultural credit facility through co-operative
institutions are:

1) Absolute closeness of lender and borrower;
2) Complete security to the lender as regards the little of the property
3) Thorough safety and facility to the borrower; and
4) It is positive, productive and thrift creating instead of negative,
unproductive and dangerously facile.

According to the economist Nicholson this credit facility shall educate, discipline
and guide the borrower. It will also teach the lessons of self-help and mutual-
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Credit societies do not merely provide cheap credit but also promote the
facilities of saving, encourage banking deposits, inculcate the true objects, uses
and limits of credit.

B. Agricultural Needs Supplies

The development of the modern scientific agricultural methods brings the
cultivator to depend on outside supply of farm inputs for his agricultural
operations. The supplies of these inputs can be organized by co-operative
societies, called service co-operatives. So the primary objective of these societies
is to support the farmer by supplying the basic inputs which are necessary for his
production. Thus, the service cooperatives have the following functions:

1) To arrange the supply of farm requirements including improved seeds,
fertilizers, agricultural equipments, pesticides, etc;
2) To maintain and supply agricultural machinery on hire;
3) To provide short term loans to farmers;
4) To provide essential household needs; and
5) To encourage thrift and savings among the members.

Apart from these functions some service societies are being encouraged in
supplying water for irrigation, activities related to prevent the soil erosion
improvement and maintenance of livestock breeds and pasture land etc. Thus,
these service co- operatives have great impact on farmer's socio-economic

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Following are some of their advantages.

1) Timely supply of farm inputs.
2) Keep the prices of essential agricultural supplies at a reasonable rate.
3) Supply goods and services of proper type.
4) Standard and quality of the inputs are maintained.

Agricultural supplies can also be organized through cooperative buying rings.
These rings collect orders from members and distribute them from door to door.
These organizations are beneficial in the sense the administrative cost is reduced
to the minimum since society does not require to employ any paid staff or to
construct go downs. Secondly, after the whole day labour in the farm farmer
does not need to go for his commodities. It will relieve him a lot from physical
and mental constraints. Finally this society has a significant role to improve the
condition of farmer. It minimizes his labour and energy. These co-operatives
have been stepping up their operations in the distribution of agricultural inputs
and have achieved significant progress.

C. Irrigation Facilities Provision

Agriculture in India is mainly dependent on the monsoon. Since rainfall in India is
of uncertain nature, government has made efforts to provide artificial sources of
irrigation such as canals, tanks, wells and the utilization of sub-soil water. Still
conditions have not improved to the ex tent of making agriculture self-sufficient.
Therefore, realizing the significance, cultivators, in India, have also organized co-
operative societies for providing irrigational facilities for agricultural operations.
These co-operatives have achieved appreciable success in West Bengal, Tamil
Nadu, Uttar Pradesh, Maharashtra, Gujarat and Punjab. Besides providing
irrigational facilities to their members these societies have been advancing loans
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and developing mutual confidence and goodwill among the members. These
societies undertake the construction and repairs of irrigation work, recovery of
irrigation charges, etc. In hilly and mountainous regions, small water streams are
canalized by the joint labour of the members of the societies.

Lack of irrigation is one of the major hurdles of Indian agriculture. Individual
efforts to the above mentioned activities are very difficult, but through co-
operative efforts, if it can be re- established it would change the rural situation
to prosperity.

D. Co-operative Farming

India is a land of small holdings. According to 1981 report, nearly half of them are
marginal and sub-marginal (below 1.0 hectare), about 19% small (from 1.0 to 2.0
hectares); 15% semi-medium (from 2.0 to 4.0 hectares); 11 % medium (4 to 10
hectares) and 4% large (10.00 hectares and above). Besides, every year
operational holdings are being marginalized. So, such small units of cultivation
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reflect serious imbalance in the man-land ratio which is the primary cause of
setting in traditionalism in farming, misallocation and improper utilization of
human and other resources, low marginal productivity of labour and land,
indebtedness, etc. In this situation, introducing co-operative farming is the
alternative to ensure effective measure for expansion of production,
improvement of techniques, rational utilization of land and most desirable
allocation of the manpower resource. A well-planned and judicious combination
of re- sources, necessary for agricultural production such as land, labour, farming
equipment, livestock, irrigation, seeds, manure, finance, storage facilities,
transport and marketing and technical knowledge can lead to economic
cultivation through co-operative farming.
Co-operative farming society is a voluntary organization based on ideals of self-
help and mutual aid. The objectives of these societies have effect on rural
development. Following are some of them:

1) To secure increased agricultural production through pooling of land and
joint cultivation;
2) To undertake improved techniques in agriculture and agro- based
industries, so as to make proper utilization of land, manpower, cattle,
knowledge and skill of farmers;
3) To provide suitable and scientific crop planning and rotation of crops to
the members; and
4) To secure increased and regular employment for the members.

In some states, societies have been organized for the benefit of depressed
classes and landless labourers. The members of these societies undertake
clearance of jungles, laying of roads, digging of wells, erection of houses, etc.
besides cultivating the land (eg. Tamil Nadu).
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E. Marketing Techniques

Marketing is a comprehensive term covering a large number of functions in
bringing the goods from the producer to the consumer. Agricultural marketing is
one of the manifold problems which have direct bearing upon the prosperity of
the cultivator. Agricultural marketing includes handling of product at the farm,
initial processing, grading, packing, etc. These functions are taken by farmers
themselves while other functions are performed by persons having specialized
knowledge, commonly known as middlemen who charge quite high for their
In order to cross these hurdles, marketing of agricultural produce has been
undertaken jointly by the farmers through the organization of co-operative
societies which-

-- Provides efficient marketing services at convenient places;
-- Increases the income of the farmer through better return for their produce;
-- Stabilizes the prices of farm produce; and
-- Keeps the margin of profit low for them and explore better markets.

In fact co-operative marketing may be considered as a process of marketing of
produce by a marketing society consisting of producers themselves. Co-operative
marketing helps the rural development in the following ways.

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1) Co-operative marketing can largely reduce malpractices present in the old
system of marketing.

2) It can help in reducing the price spread between the producer and the
consumer by avoiding the middleman engaged in collection, financing,
grading, storing, sale and transportation of agricultural produce.

3) The promoti9 of co-operative marketing is an essential pre-requisite for
large scale expansion of co-operative credit because they are correlated.

4) The marketing system integrated in a co-operative manner would perform
functions of assembling, grading, pooling, processing, storage and
transportation, insurance, financing, selling, etc.

5) Co-operative structure in marketing system strengthens the bargaining
power of producers.

6) Co-operative sales societies also educate the cultivators in the production
and preparation for market of their produce and would provide sufficient
volume of produce to make efficient grading possible.

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There have been no large-scale assessment studies of the impact on rural
development of co-operatives across various sectors in India. What we have are
small scale sample surveys conducted by scholars and research institutes to
assess the impact of selected co-operatives, mostly milk, sugar, and credit
cooperatives, on various dimensions of rural development such as income,
employment, and access to health care and education. Now, we will attempt to
determine the impact of co-operatives on rural development with special
reference to milk and sugar co-operatives.

1) Impact by Milk Co-operatives

Milk is recognized as one of the most valuable articles of human diet, being both
a nutritive and a protective food. Cooperative effort is essential in milk supply
because most of the milk is produced in rural areas, while the profitable market
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for it exists largely in urban areas. Moreover, milk is produced in small quantities
by small farmers with one or two cows. Dairy Cooperative helps the farmers and
consequently in rural development through the components mentioned below.

i. Suitable transport facilities and availability of veterinary services in the
rural areas become more organized.
ii. Processing and marketing of cattle feed, fodder and milk will generate
iii. A link between producer and consumer is established. This minimizes the
unnecessary expenses.
iv. Cross-bred cattle can be maintained and this will raise the economic
condition of the people.

2) Impact by Stock Breeding Co-operatives
The co-operative cattle societies are formed by farmers, who willingly join
together to take advantage of the technical advice on breeding of their cattle.
These societies have a great impact on rural development because the state
governments help these societies for selecting improved breeds of cattle and
supplying bulls in sufficient numbers to a locality. Government also finances
these societies for the purchase of superior cattle. The primary village co-
operatives should acquire grazing lands on lease and allow their members to
graze their cattle on them with a payment of stipulated charges per animal.

3) Impact by Fisheries Co-operatives
Development of fishery industry offers big opportunity for exploitation of fishery
resources of coastal as well as inland water. Fisheries cooperatives are the
organisation of fishermen formed with the specific purpose of improving their
economic condition through improved collection, rationalization of the
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distribution system and stabilization of prices. Fisheries co- operatives help in the
following ways.

a) They undertake grading, preservation, storage, transport and processing
of fish thus ensuring that fishermen get reasonable profit.

b) They supply inputs such as nets, ropes, oil fishing, tables, mechanized
boats, etc.

c) Society also regulates fish markets where fair prices should be ensured.

By the end of June 1986, in India there were 7,754 fisheries Co-operatives having
6,74,121 members. Their paid capital was around Rs 870 lakh and working
capital Rs 4242 lakh.

4) Impact by Poultry Co-operatives
Development of poultry activities in the Co-operative sector has been recognised
as an important programme for benefiting small farmers. The great advantage of
this co-operative is that it can help small farmers and landless labourer to adopt
modem poultry farming as an income generating scheme.

By the end of June 1986"thelotal poultry co-operatives in India were about 1604
with 94,913 memberships. The paid capital of these co-operatives was Rs 182
lakh and working capital was Rs 948 lakh.

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5) Distribution of Consumer Articles through Co-operatives
A consumer's Co-operative society is a voluntary organisation of consumers
organized to obtain their requirements of consumer goods and services on terms
of great advantage to them. The objective of a consumer store is to serve its
members and customers with goods required by them for household
consumption. Consumer society plays an important role in rural development. Its
functions are mentioned below:

1. Consumer's cooperatives in rural areas enable the farmers to secure essential
supplies of household needs at fair prices;

2. Services rendered by these cooperatives help the consumers to get out of the
clutches of moneylender who is often the shopkeeper himself;

3. The quality or quantity of the consumer goods is also up, to standard; and

4. Middlemen's exploitation is avoided.

6) Promotion of Small Scale Industrial Co-operatives

A small scale industrial co-operative is an organisation of people with small
means or resources, especially small craftsmen, and skilled workers who carryon
production in their cottages on a small scale.

The cottage and small scale industry has a significant role in Indian economy. The
manifold benefits of the small scale industrial co-operatives are:

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1. They have the potential to generate income;

2. They can give employment to the rural people;

3. The capital of the co-operatives is smaller in investment; and

4. Finally it improves the economic condition of the weaker section of the

These co-operatives have been organized with two objectives namely (i) social
and (ii) economical. From social point of view, these cooperatives safeguard the
interest of the poorer I section of the community against the atrocities and
exploitation of the capitalists. From economic point of view, they generate new
income, increase employment opportunities, augment productive capacity of the
country and enhance competitive ability of the poor section of the society.

Numerous cooperatives are working on small scale basis. Some of them are
mentioned below.

i. Khadi co-operatives
ii. Weaver's co-operatives
iii. Coir co-operatives
iv. Pottery co-operatives
v. Palm gur co-operatives

Some of these societies have been organized at the national level also such as All
India Handicrafts Board, All India Khadi & Village Industries Board, Coir board,
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All these co-operative societies have a direct link with rural development. The
entire community is benefited by the organization of small scale industrial co-

7) Education and Training through Co-operatives

Many of the Indian co-operatives are failure mainly be- cause of the inadequate
education and training to the co-operative staff as well as to the people. If the
co-operative movement is to take root in India, the members in its fold should be
fully conversant with the principles and practices of cooperation. The ignorance
about the principles, aims and methods of the movement has been the greatest
hurdle in the success of the movement.

Education and training are correlated and interdependent. Education develops
mental faculties and increases knowledge, while training shapes and levels it. Co-
operative education and training influence the rural life in the following manner.

1. It creates and sustains faith in the co-operation ideology and inculcates the
spirit of self-help and self-reliance.

2. It helps in creation of right type of leadership with foresight and ability to lead
masses on right path.

3. It broadens the knowledge, intellect and builds up the character.

4. It develops certain moral and social values along with cultural qualities.

5. It develops skill and ability of the trainees.
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Today, economic power has been captured by a small minority. But it has
acquired this power only by accumulating the productive power of others. Their
capital is simply the accumulated labour of a millions of working people, in a
monetized form. It is this productive power that is the real capital and it is this
power that latently resides in every worker.
In a compelling set of essays written between 1915 and 1940, Rabindranath
Tagore articulated a social vision where exploitation would give way to a just,
humane, collectively owned economy. At the core of his thought was the
cooperative principle. Why cooperatives again? Have they not been tried and
have failed?
Well, so have big banks and large corporations. Yet they continue undiminished.
The reason they do so with such impunity is that alternatives are hard to come
by. With the financial crisis on the one hand, and the (predictable) collapse of the
system of micro credit on the other, the need to identify alternative forms of
ownership is greater than ever before.

Today our villages are half-dead. If we imagine we can just/ continue to live,
that would be a mistake. The dying can pull/ the living only towards death
- Rabindranath Tagore (from The Neglected Villages, 1934)

In India, the experience with the century-old cooperative movement has been
mixed. There are some stunning successes: Amul, for one. There are others, too,
where cooperatives have proved transformational for the marginalized. The
problems are also well-known: abuse, politicization, excessive dependence on
the state, and so on.
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But these are mere symptoms. The real disease lies elsewhere. There is little
understanding, much less acceptance, of the cooperative principle and its
potential. It is yet to enter the core of our social vision, leave alone public policy.
Those spaces are dominated, ever more aggressively, by the competitive
principle, the scepter of efficiency' and private gain. This is why India can
emerge as one of the top wealth-generators even as 93 per cent of its working
citizens toil in the informal sector. That 93 per cent contributes almost half of
India's fast-growing GDP.
But it has no say over the way that growth is generated or any voice to claim a
fairer distribution of the wealth it produces. The same goes for the majority that
survives on the agrarian economy.

Reviving rural India
I am deeply sceptical about the solutions proposed by the elite such as charity
or moral enlightenment of the wealthy. These were like putting out a raging fire
by blowing at it. Instead, ethical models of production, i.e., the Co-operatives
need to be implemented!
Ordinary people, whose work constituted what was the real capital,' could
only do so if they collectively owned that capital.'
This would ensure that the produce is also collectively owned, and that all
producers have a say in determining their share of value in the product of their
The typical small farmer, indebted and impoverished, was much in need of such
a structure.
Imagine if all of our small farmers farmed their land collectively, stored their
produce in a common facility and sold them through a common mechanism...
Only then can we prevent profiteering; only then can the farmer recoup the
legitimate value of their labour.
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Without such mechanisms, the farmer would never be able to effectively
exercise the right to his land, even if he held the title. Structural conditions
would make him powerless. Under these circumstances, giving the small farmer
the legal right to land was no more than giving him the right to commit suicide.'

The Economics of Co-operatives
Indeed, in the cooperative principle, there is scope and the possibility of
challenging power, of altering power relations. Ordinary people, whose work
constituted what was the real capital,' could only do so if they collectively
owned that capital.'
Many economists may well reject this as the misplaced idealism of an ill-
informed poet. But it will resonate readily with the struggles for producer-
ownership in the world today.
As the clout of agri-business grows, food inflation rises, and informal work
becomes the norm, challenging dominant structures of ownership. And power is
the central challenge of these movements.
In India, no amount of tinkering can make growth inclusive,' unless people have
a say in how that growth is driven.
Take the case of cotton textiles, a boom sector that has seen much growth. But
has it really benefited those who have produced that growth? The cotton
growers, for instance the largest single group within the 200,000 farmers who
have taken their own lives in the past decade? Or the millions of women who
work the long shifts in export factories?

Even worse, the drive for profits constantly pits the growers and workers against
one another. When, at the peak of the cotton crisis, cotton farmers received
price support from the government, export sector workers were threatened with
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job losses because cotton had become too expensive.' (Ironically, the worst off
among the cotton growers did not even benefit from price support.)
As long as prices are globally determined, we are told, not much can be done to
save those at the bottom.

The co-operative form of organization provides an effective means to achieve
this objective. It facilitates organization of decentralized economic units and, at
the same time, enables such units to enjoy the economics of large scale
production. In the rural areas these production units are small, numerous and
scattered. Individually, it is very difficult to give economic support to all these
small units. By providing institutional structure for organizing the dispersed units
and through emphasis on distributive justice, the co-operative form of
organization renders it possible to have economic development with the actual
participation of small producers and workers which ultimately leads to the
development of rural India.

The choice is not between textbook theories. The lessons of everyday life have
been stark. The choice is between two different worlds: one driven by hyper-
profit and mass distress, the other holding out the promise of shared prosperity
and well-being Co-operatives.