Budget 2026 will determine whether India’s modernised cooperatives remain scheme conduits or evolve into competitive local institutions

Cooperatives have re-emerged as a central pillar of India’s agricultural strategy, particularly for small and marginal farmers who rely on collective mechanisms for credit, inputs and market access. The Economic Survey 2025–26 documents an ambitious attempt to modernise this legacy institution—transforming Primary Agricultural Credit Societies (PACS) and cooperative banks into decentralised, multipurpose platforms capable of supporting rural livelihoods, financial inclusion and agri-value chain integration.

The scale of the push is unprecedented. Nearly 68,000 PACS are being computerised, over 54,000 have been onboarded onto ERP systems, and more than 43,000 are already live. Model bye-laws now permit PACS to diversify into over 25 activities, ranging from input supply and storage to processing, fuel retail and delivery of public services. By March 2025, more than 18,000 new multipurpose cooperatives had been registered across panchayats, alongside parallel expansion in dairy and fisheries cooperatives.

Budget 2026, however, faces a different question from earlier years: how to convert institutional scale into economic performance.

The Core Risk: Institutional Proliferation Without Commercial Depth

The Survey’s data underline that physical and digital expansion has outpaced governance and capability building. While computerisation improves transparency, it does not automatically translate into viable business models. Many PACS remain heavily dependent on credit-linked income and government-linked transactions, with limited experience in competitive procurement, marketing, or processing.

The policy risk is that PACS become administratively modern but commercially weak—digitised conduits for schemes rather than self-sustaining rural enterprises. This is particularly salient as PACS are now expected to operate in competitive domains such as fertiliser retail, storage, processing and service delivery, where margins, working capital management and professional decision-making matter.

What Budget 2026 Should Offer: From Infrastructure to Incentives

Budget 2026 must therefore pivot from enabling presence to driving performance.

First, capital support must become conditional on viable business plans. Rather than uniform grants, future budgetary support should prioritise PACS that demonstrate revenue diversification, linkage with FPOs, or participation in value-added activities such as storage, grading or processing. This would shift incentives from mere registration to economic sustainability.

Second, Budget 2026 should explicitly fund professionalisation. The establishment of Tribhuvan Sahkari University signals intent, but its impact will depend on whether PACS and cooperative banks can attract trained managers, accountants and technologists. Targeted support for hiring professional CEOs or shared management services across clusters of PACS could materially improve outcomes.

Third, integration—not duplication—should guide cooperative expansion. With FPOs, SHGs and private agri-enterprises operating in the same rural spaces, Budget 2026 should encourage functional linkages rather than parallel structures. PACS can act as local infrastructure hubs—providing storage, logistics and last-mile finance—while FPOs focus on aggregation and market negotiation.

Decentralised Storage: A Test Case for Cooperative Capability

The decentralised grain storage initiative illustrates both opportunity and risk. Positioning PACS as post-harvest nodes can reduce wastage and logistics costs, but only if inventory management, pricing and turnover are commercially disciplined. Budget 2026 should treat such initiatives as pilots with clear performance metrics, not entitlement-driven rollouts.

The Strategic Choice Ahead

The Economic Survey makes clear that cooperatives are being repositioned as instruments of rural transformation, not relics of administered agriculture. Budget 2026 must now complete that transition by embedding accountability, professional management and commercial incentives into cooperative reform. Without this shift, scale will remain a headline achievement rather than a productivity gain.

If done right, cooperatives can anchor a more competitive and inclusive farm economy. If not, Budget 2026 risks financing institutions that are visible everywhere but effective nowhere.