India is to allow foreign companies to buy up privately-owned Indian banks and oil enterprises.
Prime Minister Vajpayee is riding high after recent talks in Pakistan
The cabinet agreed on Thursday to raise limits on foreign investment in the petroleum and banking sectors.
Foreign companies can now invest up to 100% in oil refineries and retail outlets, a government spokesman said.
It is the third set of economic reforms unveiled by the government ahead of general elections expected to be held in the coming months.
India's ruling coalition is pushing for an early poll on the back of a booming economy and a string of political and foreign policy successes.
However, some analysts say most of the measures have been announced with an eye on elections and will have little impact on the economy.
"Since state-owned oil companies continue to be protected, the latest measures have little meaning," economist Subrata Mandal told BBC News Online.
"Very few international companies have entered the retail market, where they were allowed 74% investment earlier, so they are unlikely to do so now," he added.
Foreign companies interested in investing in oil refineries and retail outlets can now do so without seeking permission from the government.
However, a 26% cap on foreign direct investment in state-owned oil companies, which dominate the sector, remains.
The limit on foreign investment in banks has been increased from 49% to 74%.
Analysts say the move will help foreign banks set up subsidiaries in one of the world's fastest growing economies, with a growth rate upwards of eight per cent.
But an expected increase in foreign investment in telecommunications has been deferred.
Rural call centres
The government also announced a series of measures to help farmers access information and technical knowledge.
BJP election flags during December's successful elections
Call centres are to be set up with toll free numbers and will be staffed by multilingual agricultural science graduates to help troubleshoot.
State-owned radio and television stations will also beam special "farmers news", Agriculture Minister Rajnath Singh said.
Last week the government announced a range of tax cuts which were seen as an attempt to woo the electorate before the general election.
The cuts cover air travel household goods, medicines, electronic items and income tax returns.
India's ruling Bharatiya Janata Party, which leads a coalition of 22 parties in the 545-seat parliament, has decided to dissolve parliament and hold general elections in the next few months.
The BJP has recently won key state elections and last week India and Pakistan agreed to begin talks after a two year standoff.
The economic growth, which soared to 8.4% in the last quarter of 2002, helped by good rains, is also motivating the party to call an early poll.
Observers believe the elections will be held in April or May.
They must be held by October at the latest.