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"Asian central banks left to shore up economies as governments stay mute"

Asia's central bankers are being forced to juggle their day jobs with what their governments have failed to do - steeling their economies for the hard times. Now hat economic rocks are emerging as the tide of the Federal's easy cash recedes, central banks are having to step in, detouring from their price and financial stability mandates, to shore up weak economies.

India and Indonesia were first in the firing line of investors last year when the Fed's plans to scale back its $85 billion in monthly cash injections started to take shape. Both took emergency steps, intervened in markets and raised interest rates to shore up battered currencies.

Since then the Fed has started winding down its stimulus in earnest, putting emerging markets on the back foot once again as investors look to target the most vulnerable economies.

So what has Government done?

Critics say many governments have done too little to remove barriers to domestic and foreign business investment, cut red tape, upgrade infrastructure and develop deep, well-functioning financial markets when the region was flush with cheap money.

Indonesian and Indian authorities have improved their defences against rapid outflows but their governments have failed to tackle supply bottlenecks and market rigidities that fuel inflation and limit room for policy manoeuvre, economists say. Both face national elections this year that could lead to populist measures and further delay reforms.

There are also some signs of change. India is embarking on an ambitious monetary policy overhaul that would make it harder for the government to lean on the central bank, while the government has curbed gold imports and while the government has secured $34 billion in overseas financing to try to close its current account deficit.

Indonesia's ban on ore exports drew fire, but it is a sign Jakarta at least recognises the need to reduce its reliance on raw commodities exports. It has also taken steps to shore up public finances.

Still, central bank efforts can easily unravel once elections are in motion.

"As elections are looming in many emerging countries this year, no matter how central banks tighten policy to control inflation, their governments are tempted to loosen fiscal policy, offsetting central banks' efforts.