Dedicating the first of the Kolkata Class guided missile destroyers to the nation, he said military might was the biggest deterrent to war.
"Fighting a war and winning it has now become less difficult these days. But a modern military, armed with state of the art weaponry alone is a guarantee against war. When we are capable, no one can dare challenge us," Modi said addressing naval officers and sailors at the Naval Dockyard here after commissioning the warship.
"When people have a sense of our military capability, nobody will ever dare to cast an evil eye on our nation," he said, describing INS Kolkata as proof of India's intellectual prowess.
Stressing the importance of maritime security in fast expanding global trade and commerce, the Prime Minister said India, with its vast coastline, was playing a major role in it.
"In the coming days, INS Kolkata will inspire confidence to those involved in maritime trade. INS Kolkata is also a great communication platform and will be useful in securing India's trade interests at sea," he said.
"To ensure that India emerges even stronger, to ensure that our jawans don't feel there is something wanting in our capabilities vis-a-vis other countries in protecting our nation, the government wants to modernise the defence forces," he said.
Referring to the decision of allowing 49 per cent FDI in defence, Modi said his government had made several provisions in the budget for defence offset to bring in global technology in the defence sector. World's best arms and equipment manufacturers would be invited to set up facilities in India and in coming years the country shall become self-reliant in defence production, he said.
"Instead of having to import even small things (military hardware), we want India to become an exporter of these equipment over the next few years," he said.
"In the changing world, it is not only the military might but also 'buddhi bal' (intellectual prowess) which is important. The launch of the destroyer is proof of India's intellectual capability," he added.
Referring to India's naval capabilities built over the ages, the PM said,"As I stand on Maharashtra's shores and speak of the navy, it is but natural to be reminded of Chhatrapati Shivaji. His was the first contribution to the conceptualisation and rise of the navy as means to secure India's maritime interests."
Defence Minister Arun Jaitley congratulated the Navy on the commissioning of INS Kolkata.
The warship, constructed by the Mazagon Dockyards Limited, has been designed by Navy's design bureau. The 6,800 tonne warship is a technology demonstrator and will showcase a giant leap in indigenous shipbuilding technology.
The Prime Minister had dedicated India's largest warship INS Vikramaditya to the nation in June in his first outing after taking charge.
INS Kolkata will be a part of the Kolkata Class destroyers of the Indian Navy which will include follow-on ships by the name of INS Kochi and INS Chennai respectively.
The keel of the warship was laid down in September 2003 and the ship was launched in 2006. Its original commissioning was planned in 2010 but there were delays.
The ship had also suffered a mishap during the trial phase when a Navy officer lost his life during an incident in the fire-fighting equipment of the vessel.
The warship was, however, commissioned today without its main air defence weapon which protects the vessel from aerial attacks.
The Long Range-Surface to Air Missile (LR-SAM) is under development in a joint venture between India and Israel and is expected to complete its trials in September and would then be available for deployment on board the warship, Rear Admiral AB Singh had said recently.
He said the 6,800-tonne warship will have close-in weapon systems and chaffes to provide protection along with its two main guns.
The LR-SAM is the main air defence weapon of the naval warships in future but the programme has been delayed due to technical glitches.
Navy officials said the four rear motors of the missile system have been sent to Israel for testing but have been stuck in transit in South Korea due to the on-going conflict in West Asia.
The motors have now been recalled and would be sent to Israel at a later date, they said.
The warship will also not have a towed array sonar as the DRDO is developing it indigenously and the first project trials failed, the Navy officials said.
The INS Kolkata would be deployed in the Western Fleet under the Navy's Western Command.
Maharashtra Governor K Sankaranarayanan, Chief Minister Prithviraj Chavan, Chief of Naval Staff Admiral R K Dhowan, National Security Advisor Ajit Doval, Defence Secretary R K Mathur, and senior officers of the Army, Navy and Air Force were present at the commissioning of the warship.