State-led women's empowerment initiatives are usually indifferent to the tensions between the processes of transformation they initiate at the grassroots and the intermediary support structures they create to sustain empowerment. Drawing on the experiences of Mahila Samakhya, a programme initiated by the Indian state in the late 1980s, we argue that the failure of the state to acknowledge the struggles of the intermediary layers to reconcile the social purpose of transformation with the economic logic underpinning organizational survival only leads to reinforcing a new form of ‘neo-liberal compatible’ governance. © 2019 John Wiley & Sons, Ltd.