In this verse, the Apostle Paul reminds of our reason and motivation for Christian living. Because we have been forgiven in Christ, we forgive others. Because we have been loved, we love others. Because we have been shown grace, we give grace to others. The indicative empowers the imperative. As we are gripped by the truths of the Gospel (the indicative), we will be compelled to live out the imperatives (Godly living). Our absolute confidence in God's acceptance in Christ must serve as the motivation and empowerment to holiness.
Most Christians (myself included) often fall into the trap of trying to earn, prove or legitimize their acceptance or security with God by trying really really hard to live a Godly life. If I keep doing the right thing, then God will love me. This produces radical spiritual insecurity and ultimately comes from a lack of belief in the sufficiency of Christ's work. Rather, we need to be rooted in grace. When we are confident in our union with Christ, that neither life nor death, nor any powers of this earth can separate us from Christ, and that we are fully justified in Him, that Christ has removed all of our dirt, guilt, shame and vileness, and has given his righteousness, loveliness and heavenly acceptance, only then, will we be compelled to forgive others. God's grace is the only lasting motivation. Human strength and discipline will last for a season, but real sanctification has its roots in our union with Christ. The motivation and empowerment for real sanctification comes from the indicative, that God is 100% for us.