The government on Tuesday announced that it will provide Rs 100 crore (Rs 1 billion) as seed money for setting up the India Inclusive Innovation Fund to promote new ideas.

"With permission of Prime Minister, I propose to make an initial contribution of Rs 100 crore to kickstart the India Inclusive Innovation Fund (IIIF)...I expect that IIIF will be a global leader in pioneering low cost innovation," Finance Minister Pranab Mukherjee said while releasing the first report of National Innovation Council.

The NInC, a body to promote new ideas for inclusive development was set up last year in August by the government.

Prime Minister Manmohan Singh said the country needs creativity and innovation to address the problems of poverty, health and environment.

"We have made innovations in areas such as space technology, atomic energy and automobiles. But innovation in our country has focused mostly on the needs of the rich and not adequately on solving problems of the poor. We wish to change this state of affairs," Singh said while releasing a report of the Innovation Council of India.

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Noting that innovation has a critical role to play in India's growth and development, the Prime Minister said, "The set of challenges that we as a nation face is not only diverse, but also unique. It is only through creativity and innovation, by coming up with novel solutions appropriate to Indian context, that we can meet these challenges effectively."

The country, he added, was currently witnessing innovation in rights-based delivery through the Right to Work, Right to Information and Right to Education, while a Right to Food Security was on the anvil.

Innovation, Singh said, can be "a game changer to move from incremental change to radical change. And therefore, it is our resolve to build an enabling environment for innovation to flourish."

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Mukherjee said, however, that the creation of the fund alone would not address the problems of a large section of society.

"Venture capital does not cater to solving the problems of bottom of the population. Our government is committed to give them their due opportunity," Mukherjee said.

Eventually NInC will create IIIF with corpus of Rs 5,000 crore (Rs 50 billion) in phases. The corpus will be used to back enterprises developing innovative solution for customers who lie in the 'bottom 500 million' in Indian society.

However, IIIF will operate as a 'for-profit' entity with a focus on social investment. NInC is likely to start operating the fund after accumulating Rs 500 crore in kitty.

India's diversity, Singh said, is an advantage and innovation will happen if people with diverse talent come together for a common endeavour.

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Pointing out that venture capital funds do not cater to solving problems of the poor, Mukherjee said, "I propose to make an initial contribution of Rs 100 crore to kickstart the Indian Innovation Fund... The fund will pioneer low-cost innovation."

Recalling the tradition of innovation in the country, Singh said, "We were the first to realise the vision of universities at Nalanda and Takhshila. Our freedom struggle that we won without arms was a social innovation in peaceful resistance."

Singh also welcomed the initiative of the council to set up a "meta-university" -- a collaborative platform where a network of universities would offer students the opportunity to pursue various disciplines of study.

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Innovation, Mukherjee stressed, could significantly help in raising productivity of the informal sector, which suffers from various problems.

"Our informal sector, where the majority of our workforce employed has low productivity and low skilled activities... They could benefit from innovation if they would exploit the existing knowledge base, including product design and connectivity with markets," the Finance Minister said.

The government has taken various initiatives like tax concessions for encouraging scientific research, he said, adding that the first multi-disciplinary meta-university will be rolled out in 2012.