The survey which was tabled in the Parliament on Friday by Finance Minister Nirmala Sitharaman also suggested that better connectivity of villages through tar roads would improve access to local markets and improve entrepreneurial activity.
"Measures to increase the literacy levels rapidly through the institution of more schools and colleges will spur entrepreneurship and consequently local wealth creation," the survey said.
Literacy and education in the district level foster local entrepreneurship significantly as per the Economic Survey. It said that the eastern part of India has the lowest literacy rate of about 59.6 per cent according to the census of 2011 and it is also the region in which new firm formation is the lowest.
"In fact, the impact of literacy on entrepreneurship is most pronounced when it is above 70 per cent."
It also advocated for privatization of education in line with privatisation of engineering colleges in the country for enhancement of education capacity.
"Following the successful contribution of privatization of engineering colleges to India's software exports, governments could also explore the privatization of education to augment education capacity at all levels of education."
The survey which reflects the economic health of the country said that policies that foster ease of doing business and flexible labour regulation foster should be undertaken, especially in the manufacturing sector.
As the manufacturing sector has the potential to create the maximum jobs, states must focus on enabling ease of doing business and flexible labour regulation to foster job creation.
Referring to the World Bank's "Data on Entrepreneurship", the survey said that India ranks third in number of new firms created. The World Bank data also shows that new firm creation has gone up dramatically in India since 2014, it said.
"While the number of new firms in the formal sector grew at a cumulative annual growth rate of 3.8 per cent from 2006-2014, the growth rate from 2014 to 2018 has been 12.2 per cent. As a result, from about 70,000 new firms created in 2014, the number has grown by about 80 per cent to about 1,24,000 new firms in 2018."
As per the survey prepared by the Chief Economic Advisor, going by India's new economic structure, where their is comparative advantage in the services sector, new firm creation in services is significantly higher than that in manufacturing, infrastructure or agriculture.
( With inputs from IANS )