The first Union budget by the government of Prime Minister Narendra Modi has come out strongly in support of India's high growth tech industry.

Minister of Finance Arun Jaitley announced a government fund of US$1.6 billion (INR 100 billion) for tech start-ups to be financed by equity and soft loans. Modi's government also said it supports a new era of software product innovation.

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This is the first time such a tech fund has been established by an Indian government.

Jaitley also revealed a wide range of initiatives to support the country's burgeoning tech sector.

Among these are a US$17 million Startup Village entrepreneurship scheme; setting-up national accelerators and incubators for startups; cheaper mobile phones, LCD and LED monitors under 19-inches; a US$1.2 billion fund to build 100 smart cities as satellite towns to existing cities and more rocket launches to orbit local and foreign satellites.

Jaitley said the government intended to place a special focus on software product startups. With the start-up fund, the government recognizes that small software services startups have different needs from their larger counterparts.

The encouraging government support for tech came a few weeks after the Indian Software Product Industry Round Table (iSPIRT), an industry think tank, held a series of meetings with Ravi Shankar Prasad, Union Minister for Ministry of Communications and Information Technology.

During the meeting, iSPIRT suggested establishing a US$830 million fund for tech startups similar to Israel's Yozma venture capital fund. iSPIRT told Prasad that India has the tech talent to overtake Israel in four years if India were to establish its own tech start-up fund.

Yozma, an Israel government initiative, created the Israeli venture capital market in 1993 through the formation of its first venture fund, Yozma I.

Tech analysts noted with satisfaction that the US$1.6 billion tech fund is almost twice the amount suggested by iSPIRT.

Sharad Sharma, a co-founder of iSPIRT, said the budget is a good first move. He noted that Jaitley has done well in his maiden budget revealed July 11 to recognize the "Software Product Industry (SPI)" as a distinct industry.

iSPIRT believes that this first step in giving SPI a big push plus recent assurances from Prasad give teeth to the Modi government's aim of making India a Product Nation.