The article reviews India’s current innovation potential and problems of its development which innovation policy is addressing. These are great structural disproportion: high level of IT-sector evolution and poorly innovated other sectors of economy - such as industry. These disproportions prevent solution of urgent socio-economic problems in India such as poverty and slow modernization. So it is quite important to examine the Indian innovation policy principles and their evolution in the context of the priorities that Indian government chooses. It is also important to determine factors that hamper realization of these priorities. On the other hand the article considers the examples of innovation police successful implementation. As India tries to follow China in its modernization efforts and to achieve the same success as this country it is useful to compare India’s innovation policy with China’s innovation policy to understand there common characteristics and unique features of Indian innovation policy. It is interesting that now India focuses on the same aim as China did many years ago. This is creation of modern industry that can compete with most developed countries’ industry. Previously Indian government believed that it would be enough to concentrate only on IT-sector but it led to disproportions mentioned above. India practically copied Chinese motto of innovation-industrial policy formulated as “Made in China 2025”. Prime Minister of India Narendra Mori declared recently “Make in India”. But innovation policy in India has its unique characteristics. One of them is “frugal” or economical innovation - in other words innovations for poor and specific inclusive innovations or including innovations initiated by the poorest stratum of the society.