Nearly all of the new measures have to be approved by Parliament, where support is questionable and the governing coalition controls only a minority of seats.
Nevertheless, the government appeared to be focused on keeping up the momentum created by measures announced last month aimed at bringing in foreign investment, strengthening the rupee and reversing the country's slowing economic growth.
Government officials told reporters before the Cabinet meeting Thursday evening that the decisions being made were crucial; TV news channels spent the day touting the proposals. In anticipation of the reforms, the benchmark Sensex index breached the 19,000 level for the first time in 15 months and the rupee rose above 52 to the dollar for the first time since April.
In the end, the Cabinet agreed to support raising the limit on foreign investment in insurance and pension funds from 26 to 49 per cent, Chidambaram said. Business leaders pushed for the increase to bring in a wave of foreign capital that could help the country increase investment in infrastructure and other needed projects.
The Cabinet also proposed modernizing India's outdated laws governing companies and competition.
The moves come as the government struggles to overcome a growing raft of corruption scandals, policy paralysis and months of bad economic news.
Last month, the Cabinet decided to allow huge multi-brand retailers such as Wal-Mart to own a majority state in retail outlets. It also allowed increased foreign investment in airlines and the broadcast industry.
The government also slightly eased concerns about its huge deficit by decreasing subsidies on diesel and cooking fuel. However, those decisions could be made by the Cabinet directly, and did not need the parliamentary approval required for Thursday's proposals.
Though an important coalition ally quit over the reforms and Prime Minister Manmohan Singh was left in charge of a minority coalition, the government showed that it could make a risky and decisive move without backing down.
"What really has changed over the last month or so is that the decision-making process has become much faster," said Samiran Chakraborty, head of research at Standard Chartered, a financial services company. "All these reforms are reinforcing the view that foreign investment is welcome in this country."
The government has been buoyed by the response to its moves, with business leaders expressing cautious optimism that the nation's policy logjam may have finally been broken.
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