FERA is an important economic regulation that was in force in India. It stands for Foreign Exchange Regulation Act. Let’s understand what FERA was, its full form, objectives and why it was repealed.
What was FERA?
The Foreign Exchange Regulation Act or FERA was a law passed in 1973 by the Government of India. It imposed strict regulations and restrictions on certain kinds of foreign exchange transactions.
The main objectives of FERA were:
- Conserve India’s foreign exchange reserves
- Monitor and regulate the inflow and outflow of foreign exchange
- Restrict the use of foreign exchange only for approved purposes
Key Provisions of FERA:
- Mandatory licensing and approvals for foreign exchange transactions
- Limits on foreign travel and education expenses of Indian residents
- Restrictions on imports and exports in India
- Regulations on investment and operation of foreign companies in India
Reasons for FERA Repeal:
In the 1990s, India embraced globalization and liberalization policies. FERA’s restrictive stance was seen as detrimental to foreign investment and trade.
Hence, FERA was repealed and replaced by the more liberal Foreign Exchange Management Act (FEMA) in 1999.
FEMA shifted from criminalizing forex violations to imposing civil penalties. This facilitated easier foreign exchange transactions.
In summary, FERA represented the outdated restrictive regime while FEMA aligned to modern day liberal forex policies.