The scheme is intended to help businesses get access to loans until March next year so they can ride out the crisis, prevent layoffs and avoid an economic slowdown.

"The proposed credit guarantee scheme is a major step to help businesses... and the airline sector, to ensure their additional working capital needs," a government statement said.

"It will also promote uninterrupted domestic production and maintain the resilience of the ecosystem," it said.

The proposal was approved by a meeting of Prime Minister Narendra Modi's cabinet on Tuesday.

The credit line will operate for five years for most businesses and seven years for airlines, the statement said.

The war has piled pressure on the Indian economy, which is heavily dependent on oil and liquefied petroleum gas from the Middle East, and has clouded India's economic growth outlook.

Most of the credit guarantee, $26.79 billion, is intended for a wide range of businesses.

Another $525 million is also set aside for airlines, many of which have cut domestic and international flights in recent weeks because of rising aviation fuel prices.

The World Bank has projected India's economic growth to be a moderate 6.6 percent for the current financial year, slightly lower than before the Middle East War.