Modi arrived in Singapore early Sunday to join a host of world leaders for the funeral of Lee, who died at the age of 91 on Monday after a long battle with pneumonia.
"The passing away of Lee Kuan Yew marks the end of an era. He was among the tallest leaders of our times," Modi said addressing the media.
"He was a global thinker, who saw things ahead of others. He was an advocate of economic progress, but also made tireless efforts to advance peace and stability in our region," he said.
"In India, we deeply valued his friendship and his support for the country's economic progress and global role."
Stating that Lee believed in India's potential "more than many of us did", the prime minister said: "India's relations with Singapore is one of our strongest relationships in the world and Singapore is a key pillar of India's Act East Policy."
"Personally, he was a source of inspiration for me. His achievements and thoughts give me confidence in the possibility of India's own transformation," the prime minister said.
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"The people of India share this nation's grief over the loss of its founding father and leader. We are observing a day of public mourning in India today in honour of the departed leader and the deep bonds of friendship that we share with Singapore."
Lee's funeral will be attended by Asian as well as world leaders, including former US president Bill Clinton, British Secretary of State William Hague, Australian Prime Minister Tony Abbott and Japanese Prime Minister Shinzo Abe.