NEW DELHI--India's finance minister walked the tightrope Thursday, raising social welfare spending to please voters ahead of upcoming elections but reducing subsidies and increasing taxes -- especially for the rich -- to try and stave off downgrade threats from ratings agencies.

Presenting the federal budget for the year starting April 1, P. Chidambaram also tried to ease fears that the government would stray from its recent push to improve its finances, saying he intends to stick with the government's fiscal deficit aim of...