The comments, made Sunday at the BRICS summit in the Indian city of Goa, were a not-so-implicit dig at Pakistan, which India accuses of using terrorist proxies to foment unrest in Kashmir.
"In South Asia and BIMSTEC [Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal], all nation states, barring one, are motivated to pursue a path of peace, development and economic prosperity for its people," Modi told an audience that included China's Xi Jinping and Russia's Vladimir Putin.
"Unfortunately, this country in India's neighborhood which embraces and radiates the darkness of terrorism. Terrorism has become its favorite child. And, the child in turn has come to define the fundamental character and nature of its parent," Modi said, according to prepared comments.
"The time for condemning the state sponsored terrorism is long gone. It is time to stand up and act, and act decisively. It is, therefore, imperative for BRICS and BIMSTEC to create a comprehensive response to secure our societies against the perpetrators of terror."
Pakistan responded by saying that India was "misleading" those at the summit about what is going on in the region.
"The Indian leadership is desperately trying to hide its brutalities in the Indian occupied Jammu and Kashmir, an internationally recognized dispute on the UNSC agenda, where innocent people are being killed and injured by the occupation forces daily with impunity," said Sartaj Aziz, the adviser to the Prime Minister on foreign affairs. Pakistan calls upon the international community and especially the BRICS Leaders to ask India to stop bloodshed of Kashmiris immediately, release Kashmiri Leaders and thousands of Kashmiris taken away forcibly with their fate unknown and address the humanitarian crisis, caused by India through creation of shortage of basic amenities.
The comments come as tensions in Kashmir have reached a low point not seen in nearly a decade, and an uptick in hawkish language toward Pakistan by many Indian leaders
In September, "Pakistan is a terrorist state and it should be identified and isolated as such," Rajnath Singh, India's home minister, tweeted last month.
Singh's comments came after more than a dozen Indian soldiers were killed in an attack on an army base in Indian-administered Kashmir. India said the militants responsible were carrying gear which had "Pakistani markings."
Sartaj Aziz, the foreign affairs adviser to Pakistan's Prime Minister, denied Pakistan was responsible for the attack, issuing a statement saying his country "categorically rejects the baseless and irresponsible accusations being leveled by senior officials in Prime Minister Modi's government."
However, India responded by carrying out what it called "surgical strikes" targeting terrorists along the de-facto border.
The Prime Minister's office said in a statement that the cabinet "joined the Prime Minister in completely rejecting the Indian claims of carrying out "surgical strikes."
The United Nations said it was "following this situation with great concern" and urged both sides to exercise restraint.