remaining tenure would prefer not taking stern action and recognizing npas. they might indeed prefer transferring any problems to their successor. investors in bank shares, at least initially, do not welcome disclosures of loan losses. and depositors, knowing the government stands fully behind public sector banks, are rightly unperturbed by the quality of bank balance sheets. so it is easy to ignore the problem of loan losses and hope it somehow goes away, much as it is easy to ignore moderately high inflation. but as with inflation, loan losses have a tendency to increase. the lesson from other countries is that by the time losses get too big to ignore, they are too late to manage, and the system is in crisis. as with inflation, it is the task of the central bank to press for bank clean up earlier, when few amongst the public support the central bank ’ s activism. fortunately, after an initial reluctance, banks have entered the spirit of the cleanup and some have gone beyond what was demanded of them. the stock market, after reacting negatively initially early this year, has been more supportive of public sector bank stock prices, probably reflecting the belief the cleanup is good over the medium term. promoters are selling assets and paying up, and new asset reconstruction companies are being started to buy assets. to restore bank balance sheets to health, it is important this process be taken to its logical conclusion. criticism of the central bank using arguments unsupported by evidence is not just an indian phenomenon. the bank of england was criticized for laying out the economic costs of brexit, the ecb has been criticized for doing too much to restore health to troubled peripheral economy financial sectors, and the fed is under fire for departing from the taylor rule. criticism comes with the territory, and central banks need to make the case for their policies. at the same time, it is important that governments around the world look beyond sometimes uninformed and motivated public criticism and protect the independence of their central bank to act. that is essential for stable sustainable growth. bis central bankers ’ speeches

indians get richer, there are some structural shifts in consumption patterns that are reflected in higher prices for favored items. it would not be appropriate to ignore these structural shifts and the need for associated supply responses. it is heartening that after years of high pulse inflation, we are seeing a strong attempt by the government to encourage pulse cultivation, and early sowing patterns suggest possible significant increases in pulse production. why do arguments persist despite contrary evidence? why is the debate uninfluenced by the data? why is it that as we seem to be bringing inflation under control, public voices to abandon the fight are loud? i don ’ t know for sure but let me hazard a guess ; is it possible the political economy of inflation is different from the received wisdom we were taught in class as students? and are there parallels to the political economy of bank cleanup? specifically, despite all the public commentary against inflation and its pernicious effect on the weaker sections of society, there seems to be surprisingly little anxiety in public commentary about inflation so long as it stays in the high single digits. industrialists welcome negative real rates of interest for obvious reasons. many middle class savers value the high nominal interest rates on their fixed deposits, not realizing that their principal is eroding significantly every year. the keynesian economist is happy because monetary policy is extremely accommodative. the analysts cheer every cut in interest rates because markets are assumed to have a pavlovian positive response to them. even the poor are inured to their fate of seeing real incomes erode, and are only aggrieved when the price of some food staple sky - rockets. interestingly, short term spikes in food staples are not really controllable by monetary policy, which then leads to the incorrect generalization that since monetary cannot control the politically most important aspects of inflation, it cannot control inflation in general. with no powerful and vocal political constituency getting agitated about generalized inflation so long as it is only moderately high, opponents of disinflationary policies are free to frame the debate as they wish. the persuasive way is to claim that interest rates are hurting growth. the argument is hard to refute because there is always some sympathetic borrower who is paying seemingly excessive rates. the high prevailing borrowing rate of some small borrower – say 15 percent today – is held out as exhibit a of the central bank ’ s inconsiderate policies, never mind that the rate charged includes the policy rate