Addressing Chief Ministers at a day-long meeting of the Inter-State Council, he asked the states to focus on intelligence sharing which will help the country stay "alert" and "updated" in countering internal security challenges.
In his concluding remarks, the Prime Minister touched on law and order and emphasised that both the Union and State governments in India cannot ignore what is happening across the world today.
The Prime Minister's statement comes in the wake of series of terror attacks in some countries, including in France.
The meeting, held after 10 years, saw several state Chief Ministers, including Punjab, ruled by Akali Dal-BJP coalition, were sharply critical of the Centre accusing it of "usurping" state's powers.
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The Prime Minister told the Chief Ministers that "we should focus on how we can make our country prepared to counter challenges to our internal security".
Modi said internal security cannot be strengthened until and unless the states and the Centre focus on sharing intelligence.
Chief Ministers of all states, Lieutenant Governors of Union Territories and several Union Ministers are members of the Inter-State Council.
The Prime Minister said the meeting of the Council would deliberate on internal security challenges and how to counter them and how states the states and the Centre can cooperate.
"With close cooperation, we will not only strengthen the Centre-State relations but make a better future for the citizens," he said.
Chief Ministers Akhilesh Yadav (UP) J Jayalalithaa (Tamil Nadu), Mehbooba Mufti (Jammu and Kashmir) and Siddaramaiah (Karnataka) did not participate in the meeting.
presence of police forces, and underscored the importance of a good CCTV network in curbing crime.
Modi said privately installed CCTVs are also extremely useful in this regard and also spoke of the importance of Inter-State Coordination to curb unlawful activities.
Speaking on the Punchhi Commission's recommendations, the Prime Minister said that the deliberations today marked a good beginning.
He said that discussions on the subject will continue, and as consensus evolves on the recommendations, the process of implementation will follow thereafter.
The Prime Minister expressed happiness at the near-total acceptance of Aadhaar as a tool to promote good governance and transparency. He said there are significant savings to the exchequer as a result of Aadhaar.
Badal said states were being reduced to "mere beggars" as their rights and authority were being "usurped" by the Centre in violation of the spirit of Constitution.
Bihar Chief Minister Nitish Kumar suggested that post of Governor be abolished, saying the existing federal democratic structure of the country does not warrant continuance of the gubernatorial post.
Kumar's remarks at the Inter-State Council meeting came against the backdrop of the Supreme Court's severe criticism of the Arunachal Pradesh Governor in a recent verdict and some opposition-ruled states accusing Governors of working politically at the Centre's behest.
Home Minister Rajnath Singh batted for close cooperation between states and the Centre, saying without it, development projects are bound to suffer.
Singh said the NDA government's main focus was to promote federalism--be it cooperative federalism or cooperative federalism through competitive federalism.
"We want that the Centre and states, through close and active cooperation and collaboration, formulate development- related policies and implement them.