NEW DELHI (AFP) - Prime Minister Narendra Modi urged authorities on Thursday (Oct 22) to build a modern, tech-savvy city, as he laid the foundation stone for the new capital of a state in southern India.

Hundreds of thousands of locals and dignitaries attended the elaborate ceremony to kickstart the building of Amaravati, the new capital of Andhra Pradesh, on former farmland on the banks of a river.

The city is needed after Andhra Pradesh was last year carved in two, forming the new state of Telangana, after an emotional campaign by locals stretching almost six decades.

Hyderabad, an IT hub home to giants Google and Microsoft, will serve as the capital of both states for the next decade until Amaravati is completed.

Modi praised the state government for seeking outside help to design the city, after Singapore government agencies developed master plans.

"Very few new cities have been formed in India since after our independence, so, sadly this idea still isn't discussed as much," Modi said at the ceremony broadcast on national television.

"We should take urbanisation as an opportunity and not a challenge for us. I hope that Amaravati becomes the leader in all aspects of smart, modern cities across India," he said as the crowd chanted the city's name.

After coming to power in May 2014, Modi's government announced ambitious plans to develop 100 so-called "smart cities" in a country where rapid urbanisation has left infrastructure struggling to cope.

On Thursday, soil and water collected from holy rivers, temples and mosques throughout India and from other countries was scattered on the site as prayers and other rituals were performed.

Campaigners argued for years that Telangana was needed because the Telugu-speaking region in Andhra Pradesh had long been neglected by successive state governments.

But other sections of Andhra Pradesh fiercely opposed the split, fearing it would trigger economic upheaval.