Prime Minister Manmohan Singh urged business leaders on Wednesday to keep faith in his Congress-led government's efforts to improve a dire investment climate, without giving details of fresh steps to bring about a recovery in the sagging economy.
In a rare speech to the nation's top businessmen, Singh said the downturn that has dragged growth in Asia's third largest economy to a decade-low of around 5 percent was temporary and the mood among businessmen overly pessimistic.
"We must prove the prophets of gloom are wrong," Singh, a veteran economist, told a meeting of the Confederation of Indian Industry. "I would urge Indian industry to have faith in our determination and avoid getting swamped by a mood of negativism."
Singh launched a series of economic reforms late last year, but the economy is still struggling to refind momentum.
And with a national election due next year, the loss of support from Dravida Munnetra Kazhagam (DMK), a regional party based in Tamil Nadu, will hamper efforts by his minority government to introduce more measures that might be politically unpopular.
Singh acknowledged "bureaucratic inertia" and corruption were problems for investors, but said rates of economic growth above 8 percent were possible if government and industry worked together. The government is hopeful of annual economic growth as high as 6.7 percent this fiscal year.
Singh defended his government's economic track record, but the ruling Congress party has faced much criticism for policy drift during its two terms in office.
Investors have complained that while his government has promised much, India remains one of the hardest countries in the world to do business.
"Going by what happened in the last three years, we want elections. The sooner the better," billionaire Rahul Bajaj, said after Singh's speech. "We have suffered enough in the last three years."
Other business luminaries at the event included Adi Godrej, chairman of Godrej Industries, Kris Gopalakrishnan, co-founder of Indian information technology giant Infosys, and Sunil Mittal, chairman of India's top mobile phone operator, Bharti Airtel.
Singh said the government was carrying out a comprehensive review of its policy on foreign direct investment and was committed to reining in the fiscal deficit and keeping funds flowing to finance a record current account deficit that hit 6.7 percent in the December quarter.
The prime minister forecast the current account deficit would be 5 percent for the 2012/13 fiscal year, and would lower further in the current year. However, he said the reduction would be small and India will need to finance a higher than expected deficit "for a few years."
He did not lay out any specific policies, but promised fast action to fix shortages of fuel for power companies, one of the most thorny issues facing Indian businesses.
The speech met with scepticism in Indian financial markets.
"These are very big statements, and unfortunately they are not likely to be followed. The government's intent has been there, but the execution is missing," said Deven Choksey, managing director of KR Choksey Securities.
The government needed to act forcefully to reverse the slump and balance the macro-economy, Singh said, but he also called on industry to do more to revive investment, which is estimated to have hit a five-year-low in 2012/13.
"Government is not the prime driver of growth ... the driver of growth is private investment," he said.
The full effect of measures taken since last year to revise fuel subsidies and speed up clearances in infrastructure projects will be felt in the next few months, Singh said.
He said the government was also preparing to clear 31 oil blocks for production and exploration in the next two weeks.
Red tape and regulatory hurdles are often cited as obstacles to investing in India. The World Bank ranks India 132 in terms of "Ease of Doing Business."
Mixed economic data and weak capital investments offer little hope for a quick economic rebound.
While industrial output expanded for the first time in three months in January, infrastructure sector output shrank 2.5 percent in February. Manufacturing activity, too, slowed down in March on weak domestic and foreign demand.