32 BRITISH INDIA - CO-OPERATION AND ASSOCIATION 



(b) Loans from Government. 



In 1912, Government loans represented less than 5 per cent, of the total 

 working capital of the Rural societies. The relative importance of such 

 loans has diminished rapidly, and all connected with the co-operative move- 

 ment in India regard this as a matter for congratulation. 



It is admitted, however, that a certain amount of State aid may be 

 welcome or even necessary' in districts where co-operative credit is still in 

 the experimental stage. The granting of Government loans in such cases 

 increases confidence, and, as no interest has to be paid on them for the first 

 few years, the societies are enabled to build up a reserve fund and to 

 strengthen their position generally. It is held, too, that any so- 

 ciety which fails to do so, and which is unable to meet promptly each 

 instalment of the Government loan as it falls due, should either be re-organ- 

 ized or dissolved. In any case, repayment of the loans is insisted upon, 

 the Registrars being fully alive to the danger of perpetuating weak societies 

 by granding them exemptions. 



The loans to co-operative societies consist in part of agricultural loans 

 {taccavi) granted to districts for a variety of objects (including the relief 

 of distress and the purchase of seed and cattle) , and in part of loans made 

 against equivalent deposits by members. The Registrar for the Punjab 

 is of opinion that the granting of taccavi loans to societies obscures the objects 

 of co-operation, and it is not difficult to realize that his criticism ma}^ be well 

 founded. The whole aim of the co-operative movement in India is to enable 

 the cultivater to rise, through his own efforts, to a position of economic 

 independence, and thus free himself of the necessity of having to accept 

 any assistance from Government ; and while Government loans continue to 

 be administered by the societies themselves, it may well be that this aim 

 is to some extent obscured. There is besides a natural tendency to regard 

 an advance of capital from Government as of the nature of a gift or dole, 

 rather than as a business loan. 



The general opinion of the Registrars may be illustrated by an extract 

 from the report of the Registrar for Assam, who says : 



" I propose for the future to do without Government loans as far as 

 possible. ]\Iembers are inclined to regard such loans as doles made by Govern- 

 ment, in the recover}'- of which Government alone is interested, rather than 

 as a matter of business to be personally supervised. The condition of an 

 equivalent deposit b}^ members of the society has proved a temptation to 

 fraud. And as capital can invariably be obtained from a Central or Urban 

 Bank at 9 per cent., Government loans are no longer essentially necessary." 



These loans, as we have already said, serve a useful purpose in carrying 

 new societies through the first few years of their existence and enabling 

 them to accumulate a reserve fund ; but the Registrars now prefer, wherever 

 possible, that even new societies should dispense with any assistance and 

 build up a reserve fund by charging a slightly higher rate of interest to 

 members for the first few vears. 



