The Prime Minister said while Rs 570 crore would be provided by the Centre for renovation of houses, Rs 175 crore will be given for start of immediate renovation work of six major hospitals across the state.
Modi said the grant of money for renovation of the hospitals would also cover immediate procurement of new equipments and machines.
The Prime Minister told reporters after meeting Chief Minister Omar Abdullah that he was "seriously considering" a demand made by people whose houses were damaged by the flood waters if the money for their renovation could be directly sent to their bank accounts.
Briefing reporters about the Prime Minister's visit, Union Home Secretary Anil Goswami said Modi also announced free replacement of books and notebooks to all the children upto primary and upper primary schools.
Goswami said the package announced by the Prime Minister today was not linked to the memorandum submitted by the state government seeking a special package of Rs 44,000 crore for rehabilitation of flood victims.
The Prime Minister also paid a surprise visit to Siachen to celebrate Diwali with soldiers posted at the world's highest battlefield and hailed the role of the armed forces in securing the country.
Before reaching here, he went to Siachen early in the morning and spent more than an hour with the soldiers at a base camp situated at a height of over 12,000 feet.
He praised their valour and courage, saying that 125 crore Indians could celebrate Diwali today, and go about their lives in comfort, because the jawans stood guard at the borders, prepared to make every sacrifice for the nation.
From the icy heights, he also extended Diwali greetings to President Pranab Mukherjee.
Modi told the jawans that he had come unannounced, and they may be surprised, but one does not need to announce arrival when coming to one's own family.
"I have specially come on the occasion of Diwali to be with you. I am aware how it feels like to spend Diwali with your family. The happiness is different, but you are so involved in the devotion of your motherland that family is spending Diwali somewhere else and you are somewhere else guarding the motherland," he said.
"My coming to this place will not fill the void of your family members, but as a representative of 125 crore people... After being with you I feel proud and satisfied," Modi told the jawans.
This is Modi's first Diwali as Prime Minister which he decided to spend on the 18,875 ft glacier with soldiers braving tough conditions.
He said the issue of armed forces was an "emotional subject" for him and his government was committed to built a National War Memorial.
"How many decades have passed without One Rank One Pension. It was in my destiny that One rank One pension has been fulfilled, and preparations were being made for a National War Memorial, that we could all be proud of. The government is committed to the cause," he said.
Talking about the hardships faced by the armed forces, especially in the tough terrain of Siachen, Modi said he was himself able to witness the precarious conditions the soldiers were working in while making his journey to the icy glacier.