Entrepreneurial State Concept: Economic Survey 2025-26 Analysis
The Economic Survey 2025-26 introduces a powerful framework for reimagining state capacity in India: the concept of the entrepreneurial state. Drawing on the work of economist Mariana Mazzucato, the survey argues that India needs a state machinery that acts before certainty emerges, structures risk rather than avoiding it, and learns systematically from experimentation. This article explores what the entrepreneurial state means, why it matters for India, and how this concept is manifesting in practice.
What is the Entrepreneurial State?
The concept of the entrepreneurial state, as articulated by Mariana Mazzucato and adapted in the Economic Survey 2025-26, challenges conventional views of the state's role in economic development. Traditional views posit the state as either a passive regulator or an active but inefficient intervener. The entrepreneurial state offers a different model.
The survey clarifies what the entrepreneurial state is not. It is not commercialisation of the state or state capitalism. It does not suggest privileging private interests or turning government into a profit-seeking entity. These misconceptions must be dispelled upfront.
Rather, the entrepreneurial state refers to a deeper shift towards entrepreneurial policymaking under uncertainty. It describes a state that can act before certainty emerges, rather than waiting for clear outcomes before committing. It structures risk rather than avoids it, creating frameworks where experimentation can occur with managed downside. It learns systematically from experimentation, using feedback to improve rather than persisting with failed approaches. And it corrects course without paralysis, adapting to changing circumstances.
This approach recognises that in a rapidly changing world, waiting for certainty means missing opportunities. States that can take calculated bets, learn from outcomes, and adjust course gain advantages over those stuck in analysis paralysis.
Why India Needs an Entrepreneurial State
The Economic Survey 2025-26 makes the case for why India specifically needs this approach at this moment. The global environment described in the survey, with its three scenarios ranging from fragile continuity to systemic shocks, demands state capacity that can navigate uncertainty.
The survey notes that India must run a marathon and sprint simultaneously, or run a marathon as if it were a sprint. This metaphor captures the dual challenge of sustaining long-term development while responding to immediate pressures. Only an entrepreneurial state can manage this dual mandate.
Global manufacturing is anchored in China's scale and integrated industrial systems, which effectively determine the international cost and technology frontiers that no national tariff wall can override. Competing with this requires not just resources but smart, adaptive, risk-taking state action.
The geopolitical environment where trade policy is shaped by security and political considerations rather than efficiency alone further elevates the importance of state capacity. Navigating trade tensions, supply chain disruptions, and technological competition requires statecraft that traditional bureaucratic approaches cannot deliver.
Examples of the Entrepreneurial State in Practice
The Economic Survey 2025-26 identifies examples where India has already begun to demonstrate entrepreneurial state characteristics. These provide models that can be replicated and scaled.
Mission-mode platforms in semiconductors and green hydrogen exemplify the entrepreneurial approach. These missions involve government taking calculated bets on emerging technologies, providing incentives for private investment, and creating ecosystems where innovation can flourish. The outcomes are uncertain, but the potential rewards justify the risk.
The restructuring of public procurement to enable first-of-a-kind domestic innovation represents another example. Traditional procurement emphasized proven solutions from established suppliers. The new approach allows government to be an early customer for innovative products, helping domestic firms establish track records that enable subsequent commercial success.
State-level deregulation compacts that replace inspection-based control with trust-based compliance demonstrate entrepreneurial thinking applied to regulation. Rather than layering more controls, these approaches remove barriers while using data and outcomes-based monitoring to ensure objectives are met.
From Compliance to Capability
A key insight in the Economic Survey 2025-26 is the shift from compliance to capability as the state's orientation. The compliance-focused state checks whether rules are followed, often adding rules when problems emerge. This creates regulatory burden without necessarily improving outcomes.
The capability-focused state asks what outcomes are needed and works backwards to determine what state actions can enable those outcomes. This approach is more demanding intellectually but more effective practically.
The survey notes these are early signals of what an entrepreneurial state looks like when it moves from compliance to capability. This framing suggests that the transformation is underway but incomplete. Building on early successes to drive broader change is the challenge.
State Capacity: The Foundation
The entrepreneurial state requires strong state capacity as its foundation. A state that lacks basic administrative competence cannot take calculated risks effectively. The precondition for entrepreneurial policymaking is functioning institutions.
The Economic Survey 2025-26 discusses the importance of deeper system-level institutional capacity. This includes a capable state and a private sector that understands that this phase of India's rise is not merely commercial but also geopolitical in its implications.
Building state capacity involves human resources, including recruiting and retaining talented officials. It involves processes, enabling efficient decision-making without sacrificing accountability. It involves technology, using digital tools to enhance state effectiveness. And it involves culture, creating an environment where innovation and learning are valued.
Recent Economic Surveys have articulated a single, coherent architecture for India's next phase of growth involving multiple compacts linking the Union, the states, the private sector, academia and citizens. This cooperative federalism and multi-stakeholder approach is essential for state capacity building.
The Role of Deregulation
The Economic Survey 2025-26 highlights deregulation and smart regulation initiatives undertaken by states as providing ample grounds for optimism. Deregulation might seem contradictory to an activist state, but it is actually complementary.
The entrepreneurial state focuses energy on areas where state action creates value, such as risk-taking investments, coordination, and market creation. It withdraws from areas where state intervention adds cost without commensurate benefit, such as excessive licensing and redundant approvals.
The survey notes that deregulation initiatives signal that the state machinery is capable of reinventing itself and its mission, shifting from regulation and control to enabling. This reinvention is the essence of entrepreneurial transformation.
Sunset clauses on regulations force periodic review and renewal, preventing regulatory accumulation. Regulatory sandboxes allow experimentation with new approaches in contained environments before broader rollout. Outcome-based rather than process-based regulation focuses on what matters rather than how things are done.
The Private Sector and Citizens
The entrepreneurial state does not act alone. The Economic Survey 2025-26 emphasizes the compact between state and other actors. The private sector must understand its role is not merely commercial but also strategic. Citizens must engage as partners rather than just beneficiaries.
The private sector brings resources, efficiency, and innovation capacity that complement state capabilities. When the state creates enabling conditions, private investment flows into priority areas. The semiconductor mission exemplifies this, with government incentives attracting private investment that would not otherwise occur.
Citizens as partners means moving beyond beneficiary mentality to active participation in development. This includes citizen monitoring of public services, community involvement in local development, and civic engagement in policy formulation. Digital platforms enable this participation at scale.
Managing Risk: The Heart of Entrepreneurship
Risk management is central to the entrepreneurial state concept. Traditional bureaucracies are risk-averse because failures are punished while successes are expected. This asymmetry discourages initiative and innovation.
The entrepreneurial state structures risk rather than avoids it. This means creating frameworks where some failures are expected and acceptable as part of learning. Portfolio approaches spread risk across multiple initiatives so that individual failures do not doom overall strategy.
Exit strategies allow discontinuation of initiatives that are not working without stigma. Too often, government programmes persist long after their utility has ended because admitting failure seems unacceptable. The entrepreneurial state normalises ending what does not work.
Learning from failure requires honest evaluation and institutional memory. When a programme does not achieve its objectives, understanding why prevents repetition of mistakes. Documentation and knowledge management capture lessons for future application.
Implications for Policy Making
The entrepreneurial state concept has practical implications for how policy is made and implemented. Policy design becomes more iterative, with pilot testing before scale-up. Implementation is more adaptive, with real-time feedback enabling adjustment.
Data and evaluation become central to entrepreneurial policymaking. The survey's discussion of improved statistical systems and real-time monitoring enables evidence-based course correction. Without data, learning is impossible.
Horizontal coordination across ministries becomes essential because modern challenges do not respect departmental boundaries. Climate change, for example, involves environment, energy, industry, agriculture, and foreign affairs. The entrepreneurial state breaks silos to enable integrated response.
Decentralisation allows local experimentation and adaptation. What works in one state or district may not work elsewhere. The entrepreneurial state encourages local innovation while sharing lessons across jurisdictions.
UPSC Relevance: Governance and State Capacity
The entrepreneurial state concept is relevant for multiple UPSC areas:
- GS-II: Governance, administration, public policy
- GS-IV: Ethics in administration, decision making
- Essay: State and development, governance reform
- Optional subjects: Public Administration concepts
Practice MCQs on Entrepreneurial State - Economic Survey 2025-26
Q1. According to Economic Survey 2025-26, the entrepreneurial state:
(a) Refers to commercialisation of government
(b) Means state capitalism
(c) Is about entrepreneurial policymaking under uncertainty
(d) Privileges private interests
Answer: (c) Refers to entrepreneurial policymaking under uncertainty
Q2. The concept of entrepreneurial state is associated with economist:
(a) Adam Smith
(b) John Maynard Keynes
(c) Mariana Mazzucato
(d) Milton Friedman
Answer: (c) Mariana Mazzucato
Q3. Examples of entrepreneurial state in India mentioned in Economic Survey 2025-26 include:
(a) Nationalisation of banks
(b) Mission-mode platforms in semiconductors and green hydrogen
(c) Increased licensing requirements
(d) Elimination of private sector
Answer: (b) Mission-mode platforms in semiconductors and green hydrogen
Q4. The shift from compliance to capability means:
(a) Ignoring rules
(b) Focusing on outcomes rather than just rule-following
(c) Eliminating accountability
(d) Privatising all functions
Answer: (b) Focusing on outcomes rather than just rule-following
Q5. State-level deregulation initiatives are described as showing:
(a) State failure
(b) Reduced governance
(c) State machinery reinventing itself
(d) Privatisation agenda
Answer: (c) State machinery is capable of reinventing itself and its mission
Conclusion
The Economic Survey 2025-26's articulation of the entrepreneurial state concept provides a powerful framework for reimagining governance in India. Moving beyond sterile debates about state versus market, this concept focuses on the quality and orientation of state action. A state that takes calculated risks, learns from outcomes, and enables rather than controls is what India needs to navigate an uncertain global environment while achieving development goals. The examples already visible in mission-mode platforms and deregulation initiatives show the path; scaling these approaches across governance is the challenge ahead. For UPSC aspirants, understanding this conceptual framework provides a sophisticated lens for analyzing governance questions across the examination.