In his Independence Day-eve address to the nation, he referred to bigotry and noted that an increasingly turbulent international environment has sparked off rising dangers "in our region and beyond".
"Though an ancient civilisation, India is a modern nation with modern dreams. Intolerance and violence is a betrayal of the letter and spirit of democracy.
"Those who believe in the poison drip of inflammatory provocation do not understand India's values or even its present political impulses. Indians know that progress, economic or social, is difficult without peace," Mukherjee said.
The President's remarks assume significance in the context of rising incidents of communal violence in the country.
He recalled Maratha king Shivaji's letter to Aurangzeb when he imposed 'jizya'. He told the emperor that Shah Jehan, Jehangir and Akbar could also have levied this tax "but they did not give place to bigotry in their hearts, as they considered all men, high and low, created by God to be examples of the nature of diverse creeds and temperaments".
Mukherjee said the 17th century epistle of Shivaji carries a message, which is universal. It must become a living testament that guides our behaviour today.
"We can least afford to forget this message at a time when an increasingly turbulent international environment has sparked off rising dangers in our region and beyond, some clearly visible, and some crawling out of the debris of unprecedented turmoil," he said.
The President noted that across parts of Asia and Africa, attempts are being made by radical militias to redraw the maps of nations to create a geography for theocratic ideology.
"India will feel the heat of blowback, particularly as it represents the values that reject extremism in all its manifestations. India is a beacon of democracy, equilibrium, inter-and-intra faith harmony.
"We must defend our secular fabric with vigour. Our security and foreign policies must combine the steel of strength with the velvet of diplomacy even as we persuade the like-minded as well as the hesitant to recognise the substantial dangers that breed within indifference", Mukherjee said.
Talking about good governance, he said India needs creative thinking in governance that enables fast track development and ensures social harmony. "The nation has to be placed above partisan impulses. The people come first."
In a democracy, the President said, the power of good governance has to be exercised within the framework of the Constitution through the institutions of the state.
"With the passage of time and changes in the eco-system, distortions do appear making some institutions dysfunctional. When one institution does not function in the manner expected of it, phenomenon of overreach sets in.
"While some new institutions might become necessary, the real solution lies in re-inventing and restoring the existing ones to serve the purpose of effective government," he said.
Mukherjee said good governance was critically dependent on rule of law, participatory decision-making, transparency, responsiveness, accountability, equity and inclusiveness.
"It calls for wider involvement of the civil society in the political process. It calls for deeper engagement of the youth with the institutions of democracy. It calls for quick dispensation of justice to the people. It calls for ethical and responsible behaviour from the media," he said.
Mukherjee said a country of India's size, heterogeneity and complexity calls for culture-specific governance models calls for taking a responsive administration to the door step of every hut and habitation in the land.
The President also touched the issue of poverty saying the decisive challenge of our times is to end the curse of poverty.
Though poverty has come down in last six decades from over 60 per cent to less than 30 per cent, he said even then, nearly one-third of population still lives below the poverty line.
"Poverty is not a mere statistic. Poverty has a face, which becomes unbearable when it scars the visage of a child. The poor cannot, and will not, wait for yet another generation to see the very essentials of life - food, shelter, education and employment - being denied to them. The benefits from economic development must percolate down to the poorest of the poor," he said.
Referring to the current economic situation, he said though the growth rate was subdued at below 5 per cent during the last two years, there was a "sense renewed vigour and optimism in the air.
"Signs of revival are visible. Our external sector has strengthened. Fiscal consolidation measures are beginning to show results. Notwithstanding occasional spurts, inflation has started moderating," he said adding food prices still remain a matter of serious concern.