This paper intends to analyze the problems prospects of cooperative sector in India under free market. It is now, increasingly recognized that the co-operative system in India has the capacity and potentiality to neutralize the adverse effects emerging from the process of globalization. After economic liberalization under the new economic environment, cooperatives at all levels are making efforts to reorient their functions according to the market demands. The failure of the public sector in several cases is a worrisome trend. Privatization has also failed to make an impact in the rural areas. Therefore, there is great hope on the cooperative sector. The paper examines the causes of slow progress and highlights the emerging role and challenges of the cooperative sector. In comparison to the step-motherly treatment of the past, cooperatives are now, considered an important plank of development. The government is committed to cooperative development. The cooperatives have inherent advantages in tackling the problems of poverty alleviation, food security, and employment generation. Cooperatives are also, considered to have immense potential to deliver goods and services in areas where both the state and the private sector have failed. The paper focuses on several pitfalls and shortcomings like: poor infrastructure, lack of quality management, over-dependence on government, dormant membership, non-conduct of elections, lack of strong human resources policy, absence of professionalism, etc. It suggests evolving strong communication and public relations strategies, which can promote the concept of cooperation among the masses. It should also push forward by developing effective strategies to overcome existing weaknesses and for continuing growth of the sector. The paper assesses the future prospects of the cooperative sector of India.