Modric was a surprise omission from the 23-man shortlist for the coveted award, having starred for Real Madrid this calendar year as they won the Copa del Rey and Champions League.
The 29-year-old was, however, recognised as La Liga's top defensive midfielder on Monday night.
"La Liga is the league where midfielders run the game and he was voted best midfielder," Bilic said of his compatriot to Sportske Novosti.
"He definitely deserved to make the 23-man shortlist. His lack of PR is the only reason that he missed out. He is humble and modest.
"But he will never win the Ballon d'Or because players like Cristiano Ronaldo, Lionel Messi, Zlatan Ibrahimovic, Arjen Robben and Franck Ribery are predestined to win it.
"Luka deserved to be nominated, though. Maybe he didn't have a good World Cup, but he won the Champions League.
"I'm not saying he is Madrid's best player, but he is their second-most important player behind Ronaldo. In his position, Modric is the best in the world."