The mildly expansionary 2004/05 budget, first unveiled last month, allocated some $2.5 billion in new spending on health, education and rural sectors, betting on higher growth and increased foreign investment to provide the extra money.
But its decision to raise foreign direct investment (FDI) limits in the cash-guzzling telecom, insurance and aviation sectors has met strong protests from key communist allies, prompting the Congress-led government to reconsider its position.
"The government assured the left parties that these issues (concerns about hikes in foreign limits) were under active consideration," Finance Minister Palaniappan Chidambaram told reporters after meeting coalition partners late on Wednesday.
Analysts said the government was likely to go slow on its decision to raise investment caps in telecoms and insurance due to the opposition from the communist parties.