Addressing a function here to commemorate the centenary celebrations of the Yogoda Satsanga Society of India (YSS), he said Yoga is the first step towards the journey of spirituality.
Modi said the world compares India on the basis of its population, GDP or employment rate, but the world has neither known nor recognised India for its spirituality.
"India's spirituality is its strength. But, it is unfortunate that some people link spirituality to religion. But both spirituality and religion are different," he said.
The YSS was founded in 1917 by Paramahansa.
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A special postage stamp to commemorate the occasion was also released by Modi.
Recalling the words of former President APJ Abdul Kalam who felt that India's spiritualness is its strength and this process should continue, he said that the spirituality of the country has been strengthened by India's sages and saints.
Modi's remarks come in the backdrop of a debate over the attempts by political parties to polarise society on the lines of religion especially during elections.
"Yoga is the entry point to spirituality. Yoga is the entrance point to one's spiritual journey. One should not consider it as the last point, as it is simply the entry gate to the spiritual world," he said.
"Once an individual develops an interest in Yoga and starts diligently practicing it, it will always remain a part of his or her life," he added.
The prime minister also recalled that the path shown by "Yogi ji" was not about "Mukti" (salvation) but "Antaryatra" (quest within).
Remembering the last words of Paramahansa, the prime minister said his teachings are so humane and full of compassion towards all.
Modi was later given a memento with the Yogi's last words inscribed on it, which speak about the strength of spirituality of his motherland.