"Our region is blessed to have given to the world the invaluable gift of Buddha and his teachings," he said, pointing out the significance of the "shared heritage" between the people of both nations.
PM Modi said he believes that India and Sri Lanka were at a moment of great opportunity in their relationship. Explaining how Sri Lanka contributed to revive Buddhism in India, he said "you took us back to our own roots."
"The friendship between India and Sri Lanka was etched in time by the 'Great Master'... As close neighbours, our relationship spreads across many layers. It draws its strength as much through our interconnected values of Buddhism as it does from the limitless possibilities of our shared future. Ours is a friendship that lives in the hearts of our people and in the fabric of our societies," he said.
He reiterated India's commitment to the economic prosperity of "our Sri Lankan brothers and sisters".
"We will continue to invest in driving positive change and economic growth to deepen our development cooperation."
"You will find in India a friend and partner that will support your nation-building endeavours," he said.
"We believe that free flow of trade, investments, technology, and ideas across our borders will be to our mutual benefit. India's rapid growth can bring dividends for the entire region, especially in Sri Lanka," PM Modi said.
The Prime Minister stressed that the social and economic well-being of the Sri lankan people is linked with that of 1.25 billion Indians. "Because, whether it is on land or in the waters of the Indian Ocean, the security of our societies is indivisible."
His remarks about the Indian Ocean and security assume significance as the Chinese strive to make inroads into the island-nation. Sri Lanka is finalising a plan to lease 80 per cent of its Hambantota port to China for 99 years.
Yesterday, a top Sri Lankan defence official said that the Chinese had requested to dock its submarine at the Colombo harbour next week but the country refused it permission. A similar visit by two Chinese submarines in 2014 had invited strong protest from India, which said it undermined its security interests.
Later, while addressing the Tamil workers of the Sri Lankan tea industry, PM Modi said India will fully support "active steps" of the country to improve living conditions of Tamils of central Lanka. He said all the people of the two countries needed to strengthen, not separate, the threads of unity and harmony.
"Diversity calls for celebration and not confrontation. Sinhala and Tamil people and languages existed harmoniously," he said.
The Prime Minister also found a way to add his popular election programme 'Chai pe Charcha' in his address, saying it "is a mark of deep respect for dignity and integrity of honest labour."