The ties were further strained after Nepal chose to join China's One Belt One Road amid India's concerns that the Chinese initiative would harm its strategic and economic interests.
Modi said India's contribution to the development of the Himalayan neighbour would continue.
"India stands ready to expand cooperation with Nepal as per Nepal's priorities". So much so that Nepal is likely to give contracts to Chinese companies for several hydropower projects.
This was announced by the Prime Minister post his meeting with his Nepali counterpart KPS Oli, who is on a two-day visit here. And Oli himself is aware that the relationship can not afford any more brinkmanship from Nepal as well.
The 135-day blockade from September 20, 2015, at the Raxaul-Birgunj check post - which accounts for about 70 per cent of supplies to Nepal from India - had soured bilateral relations, already strained by the big brother attitude India showed earlier in the year by making a big display of its relief work during the Nepal natural disaster.
"Relations between neighbours are different from those of others. We seek to foster relations with neighbours and all friendly countries around the world, based on justice, sovereign equality, mutual respect and benefits", he said.
It was a visit aimed at repairing the trust deficit, leading in turn, to a reset in ties between India and Nepal. We are geographically located in the centre.
After the ceremonial welcome at Rashtrapati Bhavan and the wreath laying ceremony at Rajghat on Saturday, the two sides held delegation-level talks at Hyderabad House.
Modi also said that he and Oli have agreed to develop inland waterways for the movement of cargo, which would provide additional access for Nepal to Indian seaports. Only that can ensure that Kathmandu will not permit itself to be used by others to prejudice India's security interests across the open India-Nepal border.
In 2016, Oli had accused India of breaking up a fragile coalition he was heading and forcing him to quit. We aim at improving waterways and railways with Nepal.
Oli said the new Constitution of Nepal was the result of decades of struggle and sacrifice by the people of the country and reflects their collective aspiration. "Today we reviewed the progress in various such connectivity projects".
Since then, New Delhi has been trying to keep Nepal within its sphere of influence, and is even said to have cobbled a coalition that ousted Oli from power.