"Kenya is a valued friend and trusted partner of India," Modi said in a joint press statement with Kenyan President Uhuru Kenyatta following delegation-level talks between the two sides.
"The bonds between the two countries are long-standing and rich," he said.
The Prime Minister said the historical people-to-people ties between the two countries have provided a strong basis for a wide-ranging partnership which extended "from agriculture and health to developmental assistance, from trade and commerce to investment, from closer contact between our people to capacity building, from regular political consultations to defence and security cooperation".
"India is Kenya's largest trading partner and second largest investor here," he said. "But there is potential to achieve much more."
Modi said the economies of both countries would benefit by "further expansion of investment ties, a more diversified trade basket and nurturing greater intensity of commercial links".
On his part, Kenyatta said that both sides broached a whole number of critical issues in Monday's talks.
He said that India has promised to help in the area of health and would develop a cancer hospital in Kenya.
India would also help set up a pharmaceutical company in Kenya to manufacture life-saving drugs.
India is Kenya's largest trading partner, says Narendra Modi
"We are keen in exploiting ties in sports also -- India in terms of cricket, Kenya in terms of athletics," Kenyatta said.
Earlier on Monday, Modi laid a wreath at the mausoleum of Kenya's first President Jomo Kenyatta. Later in the day, the Prime Minister will visit the University of Nairobi and address students there. He will also attend an India-Kenya business summit.
After completing his engagements in Kenya, the Prime Minister will leave for India on Monday evening.
Modi arrived in Kenya from Tanzania on Sunday on the final leg of his four-nation Africa tour.
Soon after his arrival here, he addressed an Indian diaspora rally that was attended by over 20,000 people.
Kenya is home to around 80,000 people of Indian origin.
This is the first prime ministerial visit from India to Kenya in 35 years after the visit of then Prime Minister Indira Gandhi in 1981.
Apart from Kenya and Tanzania, Modi's five-day trip to Africa also took him to Mozambique and South Africa.