Question
What do you mean by exchange control? Explain various provisions related to regulation and management of foreign exchange under FEMA Act, 1999.
Answer :
Word Count : 1076
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Skip in 10
Exchange control refers to the governmental policies and regulations that manage and regulate the buying, selling, and transfer of foreign currencies. These controls are typically implemented to stabilize the country’s economy, control inflation, and ensure that the country’s foreign exchange reserves remain sufficient for imports and debt servicing. Exchange control can take the form of restricting the flow of foreign currency, limiting the amount that can be purchased or sold, or controlling the rates at which foreign exchange can be exchanged. In India, the Foreign Exchange Management Act (FEMA) of 1999 replaced the Foreign Exchange Regulation Act (FERA) of 1973, bringing in a more liberalized and less restrictive framework for managing foreign exchange. The key objective of FEMA is to facilitate external trade and payments and promote the orderly development and maintenance of the foreign exchange market in India. FEMA recognizes the importance of foreign exchange and lays down provisions for the regulation of foreign exchange transactions, ensuring transparency and consistency in the Indian market. Under FEMA, foreign exchange transactions are regulated primarily by the Reserve Bank of India (RBI) and the Ministry of Finance. The Act provides a structure that helps to ease the flow of foreign currency into the country while keeping a check on its outflow. The primary provisions under FEMA related to the regulation and management of foreign exchange include: 1. Current Account Transactions: FEMA differentiates between current account transactions and capital account transactions. A current account transaction refers to any transaction related to trade in goods and services, such as imports, exports, interest payments, dividends, remittances, and other such payments. According to the provisions of FEMA, current account transactions are allowed freely, provided they are in line with the norms laid down by the Reserve Bank of India and the Government of India. 2. Capital Account Transactions: These transactions refer to the movement of capital in and out of the country, such as investments, loans, and equity capital,
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