I read this interesting article by Bernard on State of Inovation in India. I agree with him that lot have changed (improved) but still we have yet to see Google/Microsoft from here(IITs). As he mentioned one of the main reason is playing things safe.
The fundamental issue in India is the risk/reward equation. It is simply too easy for a young developer in India to get paid a lot by an outsourcing firm; then enjoy being headhunted every year for more money.
One more issue is difference between IITs and Stanford providing inovation to world. Important difference in giving good startups is because lack of implementation of ideas here in IITs. In IITs atleast some good projects (Mtech & Btech projects) are worth transforming into good business opportunities but they die as you pass out from there or after its being graded. I will agreed with comment made by Amit that
There are many socio economic reasons why young people in India hesitate to implement an innovative idea. Current trend of high paying jobs in MNCs will make entrepreneurship ever lesser attractive... especially in software.