He made the comments as Bangladesh Prime Minister Sheikh Hasina felicitated Indian heroes of the 1971 Bangladesh Liberation War against Pakistan and recalled their sacrifices at a special event here.
He said India's doors are always open for cooperation, but for that terrorism has to be shunned, a clear reference to Pakistan.
Referring to his famous slogan "Sabka Saath, Sabka Vikas" (eveybody's cooperation, everybody's development), Modi said it is not just restricted to India but also to the neighbouring countries as development of India is incomplete without the progress of the region.
"We truly think that citizens of all nations of the region progress and prosper. Our doors are open for cooperation, but for this terrorism has to be shunned," he said.
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"The thought, whose policymakers prefer terrorism over humanity, destruction over development, destruction over creation, backstabbing over trust, is the biggest challenge to the society and its economic development," he said.
Noting that 1,661 Indian soldiers had laid down their lives in the Bangladesh Liberation War, Modi said the Indian army's struggle in this cannot be forgotten.
Before the function, Modi and Hasina met and posed for photographs with Major Ashok Tara of 14 Guards who had rescued the family of Bangladesh founder Sheikh Mujibur Rahman from a house in Dhanmandi where they had been imprisoned by the Pakistani soldiers in 1971.
"The Indian army never shied away from its duty and set an example by following conventions of the war. Over 90,000 Prisoners of War were released safely after the 1971 war. The humane gesture shown by India is one of the biggest events in the century," Modi said.
The Prime Minister said the genocide by Pakistan in 1971 was undertaken to wipe out an entire generation of Bangladesh and every person who was proud of the idea of Bangladesh was eliminated.
"The purpose of this genocide was not just killing the innocents, but to uproot the idea of Bangladesh," he said.
"They fought together for the independence of Bangladesh. The story of their sacrifice will be remembered from generation to generation in our two countries," she said.
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