Mukherjee, who was speaking at the inauguration of a national conference on "Towards Peace, Harmony and Happiness: Transition to transformation" here, stressed the need for maintaining the delicate balance of power between institutions and the state, as provided in the Constitution.
Correctives, he said, have to come from within these institutions to restore their credibility.
"Our Constitution provides a delicate balance of power between various institutions of the state. This balance has to be maintained," he said at the event organised by Pranab Mukherjee Foundation and the Centre for Research in Rural Development (CRRID).
In the last 70 years, the former president said, the country has established a successful parliamentary democracy, an independent judiciary and strong institutions such as the Election Commission, Comptroller and Auditor General, Central Vigilance Commission and the Central Information Commission that sustain and support our democratic structure.
The country needs a Parliament that debates, discusses and decides, and not disrupt, a judiciary that gives justice without delay and a leadership that is committed to the nation and those values that made us a great civilization, Mukherjee asserted.
We need a state that inspires confidence among people in its ability to surmount challenges before us, he said.
"In the recent past, these institutions have come under severe strain and their credibility is being questioned. There is widespread cynicism and disillusionment with the governance and functioning of these institutions. To restore this credibility, the correctives have to come from within.
"Institutions are a mirror of national character. To save our democracy, these institutions must win back the trust of the people, without any delay," he said.
His remarks come in the wake of the recent strain between the RBI and the government.
In Mukherjee's view, peace and harmony prevail when a nation celebrates pluralism, practices tolerance and promotes goodwill among diverse communities.
"The land which gave the world the concept of 'Vasudhaiva Kutumbakam' (the world is one) and the civilizational ethos of tolerance, acceptance, and forgiveness, is now in the news for rising levels of intolerance, manifestations of rage and infringement of human rights," he added.
"Harmony prevails when we resolve the man-nature conflict and achieve a balanced growth through sustainable lifestyles."
Peace and harmony, he asserted, prevail when the toxins of hatred, envy, jealousy and aggression are purged from our everyday lives.
According to the former president, for peaceful and harmonious social transformation, society must have the capacity to meet the basic human needs of its citizens, establish the building blocks that allow citizens and communities to enhance and sustain the quality of their lives and create the conditions for all individuals to reach their full potential.
"Where people are largely dependent on the governments for basic amenities, good governance has a vital role to play in such transformation," he said.
Mukherjee said the conference is being held at a time when the country is passing through a "difficult phase" with newspaper headlines a painful and a distressing experience as they only highlight violence, anger and hatred.
An inclusive public policy with poor implementation is of little value to society and the nation and the country's bureaucratic system "tends to work in silos leading to poor coordination and lack of teamwork", he said.
While policy formulation is critical, it is essential to pay focussed attention to policy implementation, he said.
"In the light of these facts, we all - the politicians, the academicians, the thought leaders, the opinion makers, the intellectuals and the civil society have to work together, to carve-out the path for a violence free transformation of the society towards peace, harmony and happiness," Mukherjee said.
Former union minister and BJP MP Murli Manohar Joshi also spoke on the occasion, stressing on the transformation towards creating a peaceful, harmonious and happy society.
He said the "world is one" and the concept of holistic universe where science and spirituality converge can lead to a better understanding of human relationships and goals of creating a peaceful, egalitarian, inclusive, non-violent and progressive world.