With a decisive electoral mandate in hand, the government needs to accelerate the process of "clearing overdue receivables" for the corporate sector and ensure revival of the economic growth momentum, top banker K V Kamath has said.
"We are now at a critical juncture in terms of the direction that our economy can take. The key priority is to ensure that GDP growth, which has come down from 8-9 per cent levels to sub-5 per cent level, does not slow down any further and indeed, begins to revive," he said.
In his annual communication to the shareholders of ICICI Bank, its chairman further said that a decisive mandate that has emerged from the general election results is a very positive development.
"With the worst of the slowdown and volatility behind us, and a clear runway for policy actions to harness India's potential, the economy is now seeing blue sky.
"The first set of actions could be to harvest the low-hanging fruit. The steps that had been initiated to clear the bottlenecks in the investment cycle, in terms of last mile clearances for projects, resolution of fuel issues in the power sector and clearing overdue receivables from government agencies to the corporate sector need to be accelerated.
"These steps alone would ease the stress on the corporate sector significantly and help to bring back confidence," Mr Kamath added.
The comments come at a time when the corporate sector is looking forward to revival in business sentiments on the back of a new government led by Prime Minister Narendra Modi with a clear majority taking charge.
In the recent years, the Indian economy and banking sector have faced significant challenges, while a sluggish business environment and moderation in economic growth witnessed in fiscal 2012-13 continued during 2013-14 as well.
Manufacturing and industrial growth remained weak and there was also a moderation in the services sector growth which had hitherto remained resilient to the weakness in the rest of the economy.
The challenge posed by the current account deficit was exacerbated due to global concerns over tapering of quantitative easing in the US, leading to capital flight from countries with high current account deficits.
This prompted domestic monetary policy action resulting in a sharp increase in interest rates.
"Corporate sector activity remained muted and expectations of seeing a revival in growth in fiscal 2014 proved to be optimistic," Mr Kamath said, while adding that there were some positive policy responses that alleviated the immediate pressure.