India's government has begun introducing a cheap British-built tablet computer to its schools and universities, saying its aim is to deliver modern technology to the countryside to help lift villagers out of poverty.

The computer, called Aakash, or "sky" in Hindi, is the latest in a series of "world's cheapest" innovations in India that include a 750 rupee (£10) water purifier and 100,000 rupee (£1,300) compact Nano cars and open-heart surgery operations.

The London-based company Datawind, which won a four-way tender to build the tablets, is selling them to the Indian government for about £30 (2,290 rupees) each; subsidies from the government will reduce that to about 1,700 rupees for students and teachers.

In comparison, the cheapest Apple iPad tablet costs £399 in the UK and $499 in the US, while Amazon's recently announced Kindle Fire will sell for $199 in the US.

Datawind says it can make about 100,000 units a month at the moment, though that is not nearly enough to meet India's hope of getting its 220 million children online.

The tablet has an 18cm (7in) screen, and uses a version of Google's Android operating system (though not using Google's services such as Maps).

The first tranche in the pilot programme will, if successful, be expanded to 1m units, and Alia Khan, the vice-president of UK operations, said the company hopes in future to sell versions to government in India and through shops in India and the UK.

India's human resources development minister, Kapil Sibal, called the announcement a message to all children of the world.

"This is not just for us. This is for all of you who are disempowered," he said. "This is for all those who live on the fringes of society."

Despite India's burgeoning technology industry and decades of robust economic growth, hundreds of thousands of citizens still have no electricity, let alone access to computers and information via the internet that could help farmers improve yields, business startups reach clients, or students qualify for university.

The launch, attended by hundreds of students, some selected to help train others across the country in the tablet's use, followed five years of efforts to design a $10 computer that could bridge the country's vast digital divide.

"People laughed, people called us lunatics," ministry official NK Sinha said. "They said we are taking the nation for a ride."

Although the $10 goal was not achieved, the Aakash has a colour screen and provides word processing, web browsing and video conferencing.

The Android 2.2-based device has two USB ports and 256 megabytes of RAM, and a touch-sensitive resistive screen. More expensive versions using "capacitative" screens, as found on more expensive tablets such as the iPad and Kindle, may become available later.

Despite hopes for a solar-powered version – important for India's energy-starved hinterlands – no such option is currently available.

Both Sibal and Datawind's chief executive, Suneet Singh Tuli, called for competition to improve the product and drive prices down further.

"The intent is to start a price war. Let it start," Tuli said, inviting others to do the job better and break technological ground while still making a commercially viable product.

As for the $10 goal, "let's dream and go in that direction. Let's start with that target and see what happens," he said.

Students at the launch were well briefed on the goal of providing tablets for the poor, although most in attendance already had access to computers at home or in their schools.

"A person learns quite fast when they have a computer at home," said Shashank Kumar, 21, a computer engineering student from Jodhpur, Bihar, who was one of five people selected in his northern state to travel to villages and demonstrate the device. "In just a few years people can even become hackers."

India, after raising literacy to about 78% from 12% when British rule ended, is now focusing on higher education with a 2020 goal of 30% enrolment. Today, only 7% of Indians graduate from high school.

"To every child in India, I carry this message. Aim for the sky and beyond. There is nothing holding you back," Sibal said, before distributing about 650 of the tablets to the students.