"Der Aaye Durasta Aaye!! I welcome UK Govt's step for active engagement & strengthening relations with Guj. God is Great," Modi wrote on his Twitter account.
Loosely translated "Der Aaye Durasta Aaye" in English stands for "Better late than never".
The Chief Minister had also asked the British high commissioner to India to visit the state and meet him.
Minister of state in UK Foreign Office, Hugo Swire, in a press release said that "it will allow us to discuss a wide range of issues of mutual interest and to explore opportunities for closer cooperation".
Observers say that UK's latest attempt to build closer ties with Gujarat is a kind of "diplomatic coup" for Modi.
Gujarat Chief Minister has been internationally isolated after the 2002 riots in the state.
Members of BJP in New Delhi had also welcomed UK's move.
However, UK government release reminded Modi of the 2002 riots. It said that "we want to secure justice for the families of the British nationals who were killed in 2002. We want to support human rights and good governance in the state."
Human rights activists had been campaigning with the UK government to not allow Modi into the country for his alleged role in the killing of more than 1,000 Muslims in the riots of 2002. The US still doesn't grant Modi a visa on this count.
There were protests against Modi when he visited the UK in 2003 and a later visit was cancelled.