At an event here, he said honest businessmen are being encouraged through steps like the Goods and Services Tax (GST) and Bankruptcy law.
He said the confidence of investors towards India has gone up across the world.
He said the government was eyeing double-digit growth for the country and expressed confidence that it would be achieved "despite all the challenges".
Modi was addressing an event organised by the Bohra Muslim community to mark the martyrdom of Imam Hussain, the grandson of Prophet Mohammad.
The 'Ashara Mubaraka' programme was held at the Saifee Mosque where Modi shared dais with the Bohra community's spiritual head Syedna Mufaddal Saifuddin.
The Bohra community is a sect within Shia Islam known for trading and business acumen.
In his address, the prime minister spoke about his government's initiatives like rollout of GST, 'Make-in-India' programme and 'Swachh Bharat Abhiyan' (cleanliness campaign).
He said the members of the Bohra community took maximum advantage of these initiatives as they are known to carry out their trade and business world over with honesty.
"They (Bohras) have set an example for other people (with their honest trade dealings)," he said.
At the same time, he added, "all five fingers of a hand are not equal. Some people consider fraud as business."
He did not make any specific reference but the comment assumes significance as it comes against the backdrop of alleged scams and loan-default cases involving businessmen Nirav Modi and Mehul Choksi and Vijay Mallya.
"In the last four years, our government has been able to deliver a clear message that the business should be done within the purview of the rules and laws," the prime minister said.
"Honest businessmen are being encouraged through steps like GST and Bankruptcy law," Modi said.
Referring to the 'Make-in-India' programme, he said, "the confidence of investors across the world has increased in India. The production of mobiles phones, vehicles and other goods is increasing due to the record investment."
He said that in the last quarter of the current fiscal, the country has achieved the growth rate of more than eight percent.
"We are eying the double-digit (growth). I believe that the country can reach to the goal despite all the challenges," the prime minister said.
Talking about the 'Swachh Bharat Abhiyan', he said an unprecedented campaign towards cleanliness has been seen across the country and he looked forward to see the country being declared 'open-defecation free'.
"When I became the prime minister four years back, there were toilets in 40 per cent households. We can think of difficulties faced by our mothers and sisters. Now, the households having toilets have reached 90 per cent within a short span of time," he said.
The prime minister also said that his government has given priority to health and nutrition sectors and that it was being done for the first time in the country's history.
The facilities of cheap treatment and medicines are being expanded exponentially, he added.
He said the 'Ayushman Bharat Scheme' (national health protection scheme) has emerged like a panacea for nearly 50 crore people of poor sections of the country, which is almost equal to the entire population of Europe.
Modi also said that the government is working to provide a house to every homeless poor in the country by 2022. Under this scheme, more than one crore people have been given the houses so far, he said.