In his Independence Day address from the ramparts of the historic Red Fort, he also slammed violence in the name of faith, saying it was "not acceptable" and that communalism and casteism were a "poison" that would do no good to the country.
During his hour-long speech, Modi also asserted that India is capable of tackling any kind of security challenge, be it the sea or borders, a remark that assumes significance in view of the standoff with China in Doklam.
Addressing the nation for the fourth time from the Red Fort, he also spoke about his three-year-old government's achievements and the major decisions taken, particularly referring to the GST rollout and demonetisation.
He said national security is a priority for the government and there will be no soft approach towards terrorists or terrorism.
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He said only a handful of separatists were resorting to different tactics to create problems in the state but the government is committed to making Kashmir a paradise once again.
Modi said not only the Jammu and Kashmir government but the entire country is with the people of the state in helping them realise their dreams of development.
Modi referred to last year's surgical strikes on terror launch pads across the Line of Control (LoC) and said the world has realised the mettle of India's security forces.
He said India's stature in the world is rising and several countries are cooperating with India in fighting the menace of terrorism.
"It is clear that security of our country is our priority. Internal security is our priority. Be it sea or borders, be it cyber or space, India is capable of tackling every security challenge," he said amidst the standoff with China in Doklam, which he did not refer to directly.
India stands for peace, unity, and harmony, he said, adding "poison" of casteism and communalism will not help the nation.
"Violence in the name of faith is not acceptable in the country," Modi said while invoking Mahatma Gandhi and Lord Buddha.
"Bharat Jodo" (connect India) should be the slogan like "Bharat chhodo" (Quit India) was during the freedom struggle, he said.
He also referred to the issue of 'triple talaq', saying he paid regards to the women who had to lead a pitiable life because of it and had started a movement which has created an environment in the country against the practice.
He said abolition of inter-state check posts after the implementation of GST has reduced time for movement of goods by 30 per cent and saved thousands of crores of rupees.
Mentioning his resolve to curb black money, he said demonetisation of old Rs 500 and Rs 1,000 notes last November had helped bring over Rs 3 lakh crore of hereto unaccounted wealth into the banking system.
He said over Rs 1.75 lakh crore has been deposited in banks post note-ban and more than 18 lakh people with disproportionate income are under government scrutiny.
Modi also asked the countrymen to shed 'chalta hai' attitude and instead adopt an approach of 'badal sakta hai' (can change) for positive change.
Invoking Bal Gangadhar Tilak's slogan of swaraj (self- rule), he said now their motto should be 'suraj' (good governance) as he underlined his vision for a 'new India' by 2022.
In 'new India', he said, "Tantra se lok nahin, lok se tantra chalega (people would be the driving force behind the establishment rather than the other way around)." He lamented that democracy has been confined to ballots.
He emphasised that everyone is equal in the nation and together they can bring about a qualitative transformation.
Highlighting the problems in work culture, he said while the nation had the capability of sending 'mangalyaan' (Mars mission) in nine months, on the other hand, a rail track project had been pending for over four decades, leading to disappointment among the people over the situation.
He said his government has put the decision- making on the fast-track.
Also an India which will be free from terrorism, communalism, casteism, corruption and nepotism and an India which is clean and healthy, he said.