In a joint media address with visiting Indonesian President Joko Widodo, Modi said the two nations share the value of "democracy, diversity and social harmony" and have nurtured "strong bonds of business and culture".
"Indonesia is one of our most valued partners in our Act East policy. We have shared economic and strategic interests. We have agreed to prioritise defence and security cooperation," the Prime Minister said after the two countries signed a host of agreements at Hyderabad House here.
He said "combating terrorism, organised crime, drugs and human trafficking" were high on the agenda of his talks with Widodo.
Widodo is on a two-day state visit to India that began on Monday. He was earlier accorded a ceremonial welcome at the forecourt of Rashtrapati Bhawan here.