India's  Finance Minister Nirmala Sitharaman
India's Finance Minister Nirmala Sitharaman Image Credit: ANI

New Delhi: India's government announced a 1.7 trillion rupee ($22.6 billion) stimulus package, as it stepped up its response to the coronavirus pandemic.

The measures will include cash transfers as well as steps on food security, Finance Minister Nirmala Sitharaman said in New Delhi Thursday. The package will benefit migrant workers, she said.

Asia's third-largest economy joins countries from the U.S. to Germany that have pledged spending to contain the economic fallout of the pandemic that's infected close to 500,000 people globally. India is on a total lockdown for three weeks from Wednesday in the world's biggest isolation effort, as Prime Minister Narendra Modi seeks to preven the virus from spreading locally.

The government will also provide an insurance cover of 5 million rupees to medical workers, Sitharaman said.

"If the government expands the fiscal deficit target by 1 percentage point, it will create $18 billion of spending on a net basis," Mahesh Nandurkar and Abhinav Sinha, analysts at Jefferies, wrote in a note before the measures were announced. The budget shortfall is targeted at 3.8% of gross domestic product in the current year and 3.5% in the year starting April 1.

The government earlier allowed companies to divert their philanthropy spending to support the virus fight, corralling more resources, and eased regulatory rules such as extending deadlines for filing tax returns and waiving penalty on companies for not holding board meetings for a certain period.

The central bank, which has been injecting dollar and rupee liquidity, is set to announce its interest rate decision next week.