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Of the $35, which equates to INR 1500, INR 750 is government subsidy.

So it's really a $70 tablet. That's a lot more plausible given that you can already buy Chinese-built Android tablets for less than $100.

My calculation ($35 + half that) comes to a figure of about $50.

Your calculation is correct. If the tablet makes it to the retail market, it will cost around $50.

You are reading it wrong. It means that the end customer (student) will get it at 50% subsidy, which will be 17.5$

You're right. My bad.