NEW DELHI (AFP) - India's cabinet on Friday approved a controversial move to create a new state in the southeast, a decision that has sparked political divisions in the country ahead of spring elections.

The planned new Telangana state would be carved out of the impoverished, drought-prone, mainly tribal state of Andhra Pradesh, which supporters say has been neglected by successive state governments.

But wealthier regions of Andhra Pradesh, home to IT giants including Google and Microsoft have strongly opposed the split because they say it would create economic upheaval.

Under the division, the existing state capital of Hyderabad, an economic showcase for its high-tech industry, would be in the planned Telangana state.

"I don't think either of the two states will be handicapped or economically impoverished (by this decision)," Congress spokesman Sanjay Jha told news channel NDTV after the cabinet's approval.

The ruling Congress party bowed to the longstanding demand for the new state last July, triggering violent protests in Andhra Pradesh by opponents of the move.

Three federal ministers tendered their resignations in protest.

The resignations highlighted divisions in an already fractious Congress party that threaten to undermine its performance in national elections due by May 2014.

Telangana now needs parliamentary clearance to become India's 29th state.

But recent parliament sessions have been disrupted by Telangana supporters and opponents over what is viewed as a political hot potato.

Observers say plans for Telangana were made by the Congress government in hopes of winning votes in the region, but warn the move may backfire amid the intensifying political battle in Andhra Pradesh.

Opponents of the carve-up say development money has poured into Telangana in recent years.

The Congress has denied seeking any political advantage from splitting the state, insisting it is only fulfilling a long-standing pledge.

Andhra Pradesh, created in 1956, was India's first state to be set up on grounds of a shared language and laid down a precedent for establishing states along linguistic lines.

India last redrew its internal boundaries in 2000, with the creation of three new states in economically deprived areas in the northern half of the country.

Critics say the step could open a "Pandora's box" of demands for statehood by other regional groups in ethnically diverse India, which also has a host of separatist movements.