India's new government has unveiled a budget it says can revive growth, even while curbing borrowing, after the longest slowdown in a quarter of a century.

Finance Minister Arun Jaitley pledged on Thursday to adhere to the "daunting" budget deficit target - 4.1 percent of gross domestic product for this fiscal year - that the government inherited from its predecessor.

"Fiscal prudence is of paramount importance. We cannot leave behind a legacy of debt for our future generations," Jaitley said.

He said that the budget deficit would be reduced to 3.6 percent in the following two fiscal years.

Prime Minister Narendra Modi's government, in office for less than two months, said that it would raise caps on foreign investment in the defence and insurance sectors, and launch a tax reform to unify India's 29 federal states into a common market.

Limits on foreign investment in defence and insurance ventures have been raised to 49 percent and 26 percent respectively.

Delivering his maiden budget, the finance minister told parliament that India's 1.2 billion people were "exasperated" after two years of economic growth below five percent.

The finance minister outlined the broad strokes of the plan, which he said would be a departure from the "mere populism and wasteful expenditure" that has dragged down Asia's third-largest economy.

He said that the government would overhaul subsidies to be "more targeted" but gave no details.

Modi, 63, won a landslide general election victory in May with a pledge to create jobs for the 1 million people who enter India's workforce every month.

He has since warned that "bitter medicine" is needed to nurse the economy back to health from high inflation and the worst slowdown since free-market reforms in the early 1990s unleashed an era of rapid growth.

Source: Reuters And AP