Modi's trip is meant to raise India's profile in energy, trade and investment in Africa, where China's presence has been strong.
Modi said, "the completion of 100-million dollar water supply augmentation project for Dar-es-Salaam is a good achievement".
India and Tanzania signed several agreements, including a loan of $92 million (nearly Rs 612.1 crore) for water projects in Tanzania's semi-autonomous Zanzibar islands. "And I am using this forum to welcome the Indian business community, to think of Tanzania when they want to invest in Africa", he told the Indian businessmen.
Addressing a joint point press meet with Tanzanian President Magufuli here, Mr Modi announced that both countries had agreed to deepen overall defence and security partnership especially in maritime domain.
The Prime Minister said education, vocational training and skill development were other areas of priority in which India was willing to offer all assistance.
The Islamic State, which has been carrying out brutal attacks in various corners of the world, is expanding its base and India and the African countries need to put in place a strong and multi-pronged mechanism to tackle the threat. Both the leaders played the wooden drums for a minute after the Prime Minister was accorded a ceremonial welcome at the State House here. The PM's meeting the "Solar Mamas" who are trained in Rajasthan was also an occasion to strengthen the informal ties with Africa.
Prime Minister Narendra Modi on Monday held talks with Kenyan President Uhuru Kenyatta on a wide range of issues aimed at boosting ties in the African continent, particularly in the economic sphere.
At a banquet hosted in his honour by President Magufuli, he described the Indian community as an important link between the two countries.
Speaking on his second day official visit to the east African nation, Modi said the loan will finance water projects in the country.
India's two-way trade with Tanzania stands at around $3 billion and Indian investments in Tanzania also stand around $3 billion. Modi, on the other hand, visited countries to the East and South that are located on the Indian Ocean.