Modi's plans would help households with an annual income of less than $11,000, the Press Trust of India news agency reported. The change would require a change to the constitution, which caps the number of reserved jobs and college places at 50 percent. The plans were approved by Modi's cabinet on Monday. They require approval from both houses of parliament.
Modi's Hindu nationalist Bharatiya Janata Party (BJP) swept to power in 2014, but late last year it suffered painful defeats in three key state elections to the opposition Congress party led by Rahul Gandhi, scion of the Nehru-Gandhi dynasty. Abhishek Singhvi, a Congress spokesman, said on Twitter that the latest move was an "election gimmick" and "proof positive" of Modi's "fear" of losing power in the vote, which is due to take place by May.
Caste-based quotas are meant to provide equal opportunities for India's poorest and most marginalised groups. Nearly one in four Indians still lives on less than $1.25 a day.
Demands for quotas for highly sought-after government jobs and university places have escalated in recent years as unemployment has risen and conditions in rural areas have worsened.