A Study on Performance of Foreign Exchange Management Act 1999
Author : Nithila P and Dr. MD Chinnu
Abstract :
The Foreign Exchange Management Act (FEMA), 1999, was introduced to replace the more rigid Foreign Exchange Regulation Act (FERA) and to create a system that supports India’s growing role in the global economy. This study looks at FEMA’s background, objectives, and functioning, focusing on how it has shaped foreign exchange management and foreign investment in India. While the Act has helped open India’s doors to investments from around the globe and supported economic growth, it also faces practical hurdles such as complex compliance requirements, overlapping roles of regulatory bodies, and uncertainty around new areas like digital currencies. Using a doctrinal approach, the research reviews rules, enforcement mechanisms, effects, objectives and functions, supported by judicial decisions that illustrate FEMA’s impact. The study finds that FEMA has made foreign exchange regulation less restrictive by shifting from criminal to civil penalties, yet challenges remain in ensuring consistency and clarity. It argues that simplifying compliance, improving coordination, and updating the law to accommodate developing areas would benefit both businesses and policymakers. By doing so, FEMA can continue to play a vital role in strengthening India’s economic position while maintaining financial stability in a rapidly changing global environment.
Keywords :
FEMA 1999, Foreign Exchange, Globalisation, Current Account, Capital Account, Foreign Investment, Regulatory Framework, Indian Economy.
