Government needs a startup mindset, merely making rules isn't enough: Economic Survey

The government needs to play an entrepreneurial role, taking smart risks in emerging areas rather than merely making the rules, the Economic Survey 2025-26 said, pitching for an overhaul of government’s role and bureaucracy's mindset. It added that the private sector needs to acknowledge that India’s ascent will not only be commercial but will also have geopolitical implications.

The survey said policymaking should be centred around an entrepreneurial spirit, with the government taking the lead in situations of uncertainty, shaping the economic trajectory. It said the government must be a problem-solving innovator and risk taker.

Under such an approach, the state acts before certainty emerges, structures risk rather than avoiding it, learns systematically from experimentation, and corrects course without paralysis, it said. The survey added that this has already begun in practice, for example in the creation of mission-mode platforms in semiconductors and green hydrogen, and in state-level deregulation compacts that replace inspection-based control with trust-based compliance.

The suggestion is significant as the survey is exploring ways of unlocking India’s economic growth potential by addressing legacy structural issues at a time of geopolitical uncertainty and global supply-chain disruptions.

“The principal strategic risk for India is less about any single external shock and more about a mindset that downplays structural discontinuities. Avoiding this risk is possible,” the survey said while proposing the idea of the ‘entrepreneurial state'.

It went to explain, however, that this should not be misunderstood. “It does not imply the commercialisation of the state, such as state capitalism, nor does it suggest a privileging of private interests.” It does not mean creating a state that replaces markets, but one that is willing to experiment, take calculated risks, absorb failures, and dynamically reallocate support, it added.

Rishi Shah, partner and economic advisory services leader at Grant Thornton Bharat, said, “An entrepreneurial state is quick on its feet—willing to act before certainty emerges, embrace the unconventional, and look for opportunity in periods of flux, much like a successful entrepreneur would."

“As global relationships fragment and economic structures reset, such a state relies less on control and more on smart deregulation, stronger execution capacity, and institutional learning. By shaping markets, structuring risk, and correcting course swiftly, it focuses on delivering durable economic value and resilience for its people,” he added.

Uncertain times

This approach is especially critical in an environment where policy is made under uncertainty, outcomes cannot be known in advance, and mistakes cannot always be reversed without cost, the survey said, citing the East Asian experience.

It pointed out that this approach has some distinct features. One is outcome-oriented bureaucracy, under which officials are evaluated on results, not on how well they follow the rules. Under this approach, errors are acceptable but stagnation isn't.

These features are conspicuously absent in systems where industrial policy has failed, the survey said. “Where bureaucracy is punished for honest failure, risk aversion dominates. Where support cannot be withdrawn, inefficiency is entrenched. In such systems, institutions respond to uncertainty not by learning and adapting, but by avoiding action altogether, weakening state capacity over time,” it said.

“The East Asian experience does not offer a ready-made template for India. But it does offer a clear message that industrial policy has a far better chance of success with institutional reform,” it noted.

The survey also called for sustained deregulation and argued for the private sector and citizens to take an active role in development, saying the state alone cannot pull the chariot of economic and social progress.