Finance Minister Arun Jaitley said he planned to double the income of struggling farmers in the next five years.
Having overtaken China as the world’s fastest-growing economy, India is seen as a bright spot in the global economy.
But it has been hit by slowing global demand and severe droughts affecting rural areas.
“We are grateful to our farmers for being the backbone of the country’s food security,” Mr Jaitley said of India’s estimated 120 million farmers.
“We need… to give back to our farmers a sense of income security.”
He said the government had allocated $12.7bn (£9.15bn) for “rural development as a whole”.
Analysts say Mr Jaitley has announced increased spending on rural economy, health and social sectors with an eye on boosting his party’s prospects in the coming state elections.
They include a pledge to set up 89 projects for irrigation, doubling investments in rural roads to help farmers get produce to market, getting cooking gas to millions of poor households and funds for women entrepreneurs from underprivileged families.
The government would raise spending on a massive rural employment scheme, a crop insurance programme and increasing rural access to the Internet.
It would also work to ensure all the country’s villages had electricity within two years, Mr Jaitley said.
He said the government would achieve its goal of cutting the fiscal deficit to 3.5% of gross domestic product (GDP) for 2016-17 from 3.9% the year before.
Since coming to power in 2014, Mr Modi has promised to improve business and investor climate in the country with tax reforms and major infrastructure projects.
That policy has been criticised by the opposition as being too business-friendly and coming at the expense of social spending and welfare projects.
The country’s huge rural population has been hit by severe droughts and recent regional elections have shown dwindling support for Mr Modi.
With crucial elections in largely agricultural states like West Bengal and Uttar Pradesh due this year and next, the government is under pressure to address the rural economy.
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