"The neighbouring country has lost the strength to fight a conventional war, but continues to engage in the proxy war of terrorism," he said while addressing troops of Army and the Indian Air Force on his maiden trip to Leh and Ladakh.
The Prime Minister said the Indian armed forces were suffering more casualties from terrorism than from war.
Noting that this is a global problem, the Prime Minister said all humanitarian forces of the world should unite to fight it.
The Prime Minister's comments came close on the heels of militants attacking a BSF convoy at Pampore in South Kashmir's Pulwama district, leaving eight personnel including an officer injured.
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Modi, who is on a second trip to Jammu and Kashmir in two months, said India was committed to strong armed forces, well-equipped with modern arms and technology.
The jawans should be assured that the entire country supports them, he stressed.
The Prime Minister said soldiers remain undeterred inspite of the many negatives and struggles that their families face in day-to-day life and this energy and sense of duty inspires him and, therefore, he keeps visiting jawans on the border to seek inspiration.
He also told the defence personnel that the government is committed to making India self-reliant in defence manufacturing.
Citing the Kargil infiltration, about which the first information was given by a shepherd named Tashi Namgyal, he said the country's armed forces deployed in border areas are well-connected with the people who live there.
Modi interacted with the troops and wrote in the visitor's book that peace and security are a pre-requisite for development.
During his day's hectic schedule, the Prime Minister inaugurated Nimoo Bazgo hydro-electric project and Leh-Kargil-Srinagar transmission system.
"Corruption is troubling us. People are angry. I assure that we will fight corruption and work with all those against graft. Corruption has ruined the country. I promise that we will fight against corruption with full might," he said.