The Interior Department budget, reflecting the priorities of Secretary James G. Watt, seeks increases in programs to aid development of public lands in the West and a continued moratorium on expanding national parks and wildlife refuges.

The dam-building Bureau of Reclamation would receive a 20 percent increase, from an appropriation of $810 million in fiscal 1983 to $974 million next year for major irrigation and power-generation programs such as the Central Arizona and Central Utah projects. Its budget for administration would rise by 30 percent.

But major water projects throughout the West are likely to encounter delays in 1983, Interior officials said.

Congress refused the agency's bid for a 25 percent increase in reclamation funds in the lame-duck session, holding the budget to 1982 levels.

The agency proposes eliminating grants for historic preservation and for state recreation programs, citing fiscal constraints, but has proposed more than $190 million, a 61.4 million increase, in assistance to state programs to reclaim abandoned strip mines.

Spending on Indian affairs would shrink slightly, including a $17 million reduction in educational programs. The department plans to close certain boarding schools located outside reservations, where officials say enrollment has declined. Meanwhile, small increases are proposed in programs designed to lure private business to reservations.

On the revenue side of the ledger, the administration has dramatically scaled back plans for selling public lands in the West as a way of helping to reduce the deficit.

After initial forecasts that Interior would sell more than $1 billion of land in 1984, the agency predicts sales of only $300 million. Officials said the Bureau of Land Management, owner of about 300 million acres of public lands, will probably sell about 250,000 acres in 1984, but specific parcels have not been identified.

The administration also has reduced Watt's optimistic forecast of $18 billion in revenues from offshore oil leasing to $11.8 billion, largely because of falling oil prices.

Interior proposes doubling the price of the permit for hunting migratory game birds, from $7.50 to $15, to raise money to buy 16,730 acres of wetlands for protected duck habitat. The proposal, which would require approval from Congress, is expected to encounter heavy resistance from hunters across the country.

In another money-raising effort, the agency plans to ask Congress for authority to raise entrance and user fees at national parks. The budget continues hefty appropriations for road construction and other improvements within national parks, and proposes an increase of $16 million for similar work in wildlife refuges.