Cooperatives, NABARD and the hegemony of capital— Part 1

The first part of this three-part series examines the historical context of cooperative societies in India before jumping into the realities of the post-pandemic world where the rich are getting richer and the poor (agriculturists) are getting poorer.  

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Prologue

"A cooperative is an association of women and men who come together to form a jointly owned, democratically controlled enterprise where generating profit is only part of the story. 

"Cooperatives put people before profit. They also help their members achieve their shared social, cultural and economic aspirations. A cooperative is a social enterprise that promotes peace and democracy." 

— FAO in Agricultural Cooperatives: Key to Feeding the World on the occasion of World Food Day, 16 October 2012

ACCORDING to the United Nations, there are seven basic principles on which the entire edifice of any cooperative should be made to stand. 

These are the updated version of Rochdale Principles of cooperatives and include: 

i) Voluntary and open membership; ii) Democratic member control; iii) Member economic participation; iv) Autonomy and independence; v) Education, training and information; vi) Cooperation among cooperatives; vii) Concern for community.

Viewed in this background, one can broadly say that cooperatives throughout the world have traversed a long and eventful journey spanning over two centuries since the pathbreaking work of Rochdale society of equitable pioneers.

The society comprised 30 British working men who began a pioneering work to organise modern cooperative stores to save them from the brunt of abject poverty during the period of the Industrial Revolution of Britain in 1844.

The Rochdale Pioneers ably demonstrated that well-organised cooperatives not only contribute to the survival of people as a result of back-breaking price rise, but they also forced the market to behave.

Also read: Why is the ED knocking at the doors of Kerala cooperative banks?

In the above sense, cooperatives were and have been great effective weapons for the common people to fight out the attack of capital on their lives. Today, when the world has advanced in many directions with unprecedented growth of productive power with the effective harnessing of science and technology, the basic issue of the economic divide of capitalist society remains unchanged.

Markets, fueled by asymmetric information, serve only the interest of the few who have amassed astronomical wealth, thereby contributing to increasing poverty of a very large majority of the population in every country.

The global financial crisis of 2008 onwards and the recent Covid pandemic with its demonstrated fall-out to further accentuate the class division and inequality in every capitalist society have pricked the bloated balloon of the make-belief world of neo-liberalism that capitalism can be crisis-free and equitable! 

Also read: In Pandemic, India's Super Rich Get Richer by 35% While Common People Suffer the Most

Cooperatives through the lens of the economic philosophy of Rabindranath Tagore

Among the great social thinkers of India, who had very deep engagements with socio-economic problems in pre-independent India with a roadmap for future in mind, was Rabindranath Tagore. He was a genius who was never tired of experiments with truth, basing himself firmly on progressive principles.

Here, let us peep into the principal features of the rural development strategy and philosophy of Tagore as shaped by him in the late nineteenth and early twentieth century. This has been mirrored in a number of his unparalleled write-ups such as Palli Prakriti (Nature of the Village), Atma Shakti (Self Empowerment), Samabayneeti (Co-operative Policy), Rasiar Chithi (Letters from Russia), Ghare Baire (Home and the World).

His speeches in some conferences like at the Provincial Conference at Nator (1897), Provincial Conference of Pabna Congress (1908), and from Pitrismriti (Memoirs of my Father) written by his son Rathindranath Tagore, popularly known as 'Rathithakur', also highlight his philosophies.

We all find it really amazing that in conformity with his other spheres of deep interest in several branches of literature, where he made a revolutionary contribution, Tagore's vision sprouting in rural development, rural credit and cooperation was far ahead of the traditional approach practised by other national leaders of his time.

Also read: Democracy subverted: What Oliver Stone's JFK tells us about nationalism, national security, big corporations and the Deep State

If we flag the principal contours of Tagore's thought and views, we find they were almost wholly based upon real-life experiences of rural economy and rural indebtedness arising out of the peasantry's almost total dependence on village money lenders and zamindars (land owners) in the context of the 'free market' trade imposed by the British on Indian peasantry. 

Together, the free market and the indebtedness broke the backbone of Indian, especially Bengali, agriculture and peasantry in pre-independent India that led to the Great Bengal Famine of 1943, in which more than three million poor people perished in undivided Bengal.

Though he did not live up to that point of history to witness the fallout of the barbaric British colonial rule in 1943, Tagore, nevertheless, acquired his first-hand experience of this pathetic state of pre-independent Indian/Bengali agriculture and destitution associated with it during his tenure as a manager of the family estate at Shilaidaha (Kustia), Shajadpur (Pabna) and Patisar (Rajshahi) in what is now Bangladesh.

Sowing the seed for rural development

In a brilliant analysis in his famous article on cooperative policy (Samabayneeti) Tagore wonderfully noted how the asymmetry between the relative power of capital and wages of labour asphyxiates democracy even in the context of the US.

He penned, "But where there is a serious gulf between capital and wages, there is every possibility that democracy will get distorted at every step. This is because the vector of all power is money.

"Where there are differences in earnings, the power of the State will not flow down to all subjects equally. Therefore, in the United States, in running of state and administration, one gets introduced to the power of money at every stage.

"In that country, money builds public opinion, the tyranny perpetrated by money-power pulverises everything inimical to the interest of the rich. This cannot be called the autonomy of the people. Because of this, the principal tool by which we can ensure adequate freedom and democracy as an asset for all is to collate peoples' power for earning money.

"Only in this case, the wealth in the form of money will not get concentrated in the hands of one individual or of a class; then the right to enjoy the power of money, now the exclusive property of the rich and billionaires, will get spread to all. 

"A time when many people get to learn to convert their individual power into collective wealth through the intermediation of cooperatives, then it can be said that the foundation of true human freedom and democracy is laid down." ('Samabayneeti', Rabindranath Tagore, Collected Works, Visva Bharati Publications, 125th birth centenary collection, Vol. 14).

Also read: Karl Marx: March Ye Workers, and the World Shall be Free!

Tagore believed that access to credit is a right to the poor. He took initiative to establish a 'Krishi Bank' at Shilaidaha in 1894 and one in Patisar in 1905. The main objective of these was to liberate the poor farmers from the terrifying dragnet of moneylenders.

Rabindranath arranged the seed (venture) capital for the bank from his friends and relatives. After winning the Nobel Prize in 1913, Rabindranath donated the prize money to his school in Shantiniketan and invested the fund (₹1,80,000) in the Patisar Krishi Bank. This significantly uplifted the capacity of the bank to extend more credit to the peasants at lower rates of interest.

Thus, well ahead of many of his contemporaries, Tagore could visualise the importance of rural credit and other cooperatives and took positive steps to implement the same.

Tagore also ushered in micro-credit programmes to finance rural development activities on cooperative basis (through the formation of cooperative societies) even before establishing the bank.

He inspired the poor farmers to build up the habit of small savings. Farmers of neighbouring villages were required to subscribe to the cooperative credit society. Funds raised were given back as loans at low interests to needy farmers.

Tagore introduced such small cooperative initiatives both in Shilaidaha and Patisar. Apart from this, microcredit was also provided for the development of various cottage industries.

Role of the cooperative credit institutions in the midst of crisis in Indian agriculture

We all are aware that the country is passing through severe agrarian distress for quite some time that got accentuated especially during the Covid pandemic.

Though agriculture was the only well-performing sector of the economy during the pandemic in terms of growth, the real architects of such growth, viz., our farmers, are not rewarded appropriately.

This was evident when the three anti-people farm laws were enacted, paving the way towards 'corporatisation of agriculture'. This would have had a telling effect on the entire edifice of Indian agriculture including the adjunct financial sector such as NABARD.

Also read: Indian polity: The story of two transitions

Their entire character and mandate would have undergone a total change had these laws not been withdrawn due to the tremendous fight back of our farming community cutting across political affiliations.

Globally, the effects of the pandemic on the already highly unequal wealth and income distribution in capitalist economies, including in India, have been disastrous, with the rich and wealthy reaping full benefits of the pandemic as evident from several official and authentic publications.

For example, the Reserve Bank of India (RBI)'s Annual Report of 2021–22 has observed the following while reflecting on the prospects of the economy in 2022–23, "[T]he near-term outlook is fluid, rapidly evolving and extremely uncertain. It will likely have bearing on long-term prospects, including exacerbating the scars of the pandemic, by de-globalisation, financial fragmentation and by setting back the initiatives towards climate change."

A 2022 report by Oxfam, the Britain-founded conglomeration of non-governmental organisations, titled Profiting from Pain, has highlighted a more revealing picture of global inequality.

In the last 24 months of the pandemic, 573 new billionaires were created world over, of which, 62 were created in the global food sector, and 40 in the pharma sector. Every 30 hours in the last two years, one billionaire was created; and every 33 hours, one million people were pushed down into the hell of absolute poverty.

To sum up in the language of Mr Bucher, Director of Oxfam, "Billionaires' fortunes have not increased because they are now smarter or working harder. Workers are working harder, for less pay and in worse conditions.

"The super-rich have rigged the system with impunity for decades and they are now reaping the benefits. They have seized a shocking amount of the world's wealth as a result of privatisation and monopolies, gutting regulation and workers' rights while stashing their cash in tax havens— all with the complicity of governments."

The situation in India is nothing but a reflection of what is being played out globally under neoliberalism. RBI's Annual Report, 2022–23, has this telling observation on the state of economy of India: "Amidst strong global headwinds, the Indian economy is expected to have recorded a growth of 7 percent in real gross domestic product (GDP) in 2022–23.

"A sustained recovery in discretionary spending, particularly in contact-intensive services, restoration of consumer confidence, high festival season spending after two consecutive years of Covid-induced isolation and the government's thrust on capex provided impetus to the growth momentum.

"In the second half of the year, however, the pace of year-on-year growth moderated because of unfavourable base effects, weakening private consumption demand caused by high inflation, slowdown in export growth and sustained input cost pressures."

India's gross value added (GVA) growth at constant prices is estimated at 7 percent in the fiscal year (FY) 2023. While the growth of the industry sector moderated to 2.4 percent in the FY 2023, compared to 10.5 percent growth in the FY 2022, the agriculture and allied sector registered a robust growth of 4 percent in FY 2023.

Also read: A call to the RBI to be transparent

The manufacturing sector, which contributes 80 percent to the industry sector, has grown by just 1.3 percent, slowing down the sector as a whole. The services sector, accounting for 53.8 percent of the Indian economy, has grown by 9.6 percent in FY 2022 and maintained its pace of growth at 9.5 percent in FY 2023.

The growth of Indian agriculture and allied sector GVA has been on a roller-coaster ride since FY 2018, clocking a growth rate of 6.5 percent in FY 2018, nosediving to only 3.2 percent in FY 2019, then jumping up to 5.1 percent in FY 2020, only to nosedive again to 3.3 percent in FY 2021, 3.5 percent in FY 2022 and now to 4 percent in FY 2023.

However, the real stakeholders in agriculture— farmers, especially small and marginal farmers— have been facing increasing distress with dwindling minimum support price (MSP) behind major crops except paddy, wheat and a few other cash crops (that too not at a desired level following the Swaminathan Commission Report of C2+50 percent), distress sale, increasing migration to cities, growing poverty, and huge unemployment and underemployment in the agriculture and allied sectors.

This distress has led to suicides by thousands of hapless farmers in the country, with nearly 11,000 farmer suicides in 2021 alone, according to National Crime Records Bureau data.

Agri-credit with focus on cooperatives

If one takes a brief review of the trends of agri-credit since the launching of neo-liberal economic policy in India, a few distinct features can be flagged off: 

1) A sharp rise of big ticket loans of the size of ₹1 crore and above, which touched 22 percent of the amount outstanding under total agri-credit advanced by commercial banks in 2018, increasing from around 6 percent of the total agri-credit in 1990.

(2) The share of small and marginal farmers (despite having a sub-target of 8 percent within 18 percent direct credit to agriculture introduced in 2016) is only 45 percent of total agri-credit.

Also read: The Seeds of Debt: Are Loan Waivers a Solution for Credit Crisis in Indian Agriculture?

(3) The agri-credit given to corporate farmers was brought under the ambit of 'priority sector' in 2007. 

(4) Though the banks were discouraged by the RBI policy tools to give agri-credit to corporate farmers exceeding ₹2 crore from 2016 onwards (with agri-credit exceeding ₹2 crore to corporate farmers no longer qualifying as part of indirect agricultural credit and priority sector), the limit of ₹2 crore itself is big enough compared to average farm loan size of farmers, especially small and marginal farmers. 

(5) Despite the RBI policy, introduced in 2011, that mandates banks to open at least 25 percent of their new branches in unbanked rural centres, the total number of rural banking outlets have drastically come down from 1,900,523 in December 2021 to 1,734,658 in December 2022.

If one looks at the annual reports of RBI in 2021–22 and 2022–23, she will find a shocking display of the state of affairs going on in the agri-credit sector.

Take the example of credit disbursed through the Kisan Credit Card (KCC) system. The number of operative KCCs has gone down drastically, from 306.96 lakh in 2020–21 to 268.71 lakh in 2021–22, to slightly increase to 283 lakh in 2022–23.

Read Part 2 here.

Read Part 3 here.