This is a great question! Since it also implies that why we are poor and west is rich - Robert lucas won Noble prize by raising this question (why we are rich and they are poor?).
In my opinion roots goes to thousands years of monarchy system, they did not establish educational institutions in the sub-continent. Therefore, we find illetrate people even today as education was not the priority, could not be inculcated in the mindset.
After education system, I think legal system is not very supportive for innovation. The case of weak implementation of copyrights is the key point here. Innovations need reward and protection. Since, a person put efforts to innovate something or develop some idea and (s)he would not receive proper reward, instead many other people enjoy copying his/her innovation, then who will put efforts in such a thankless job.
Moin Khan