Accordingly, the Foreign Exchange Regulation Act (FERA) which formed the statutory basis for exchange control in India was repealed and replaced by the new Foreign Exchange Management Act (FEMA) with effect from June 2000. The philosophical approach has shifted from that of conservation of foreign exchange to one of facilitating trade and payments as well as developing orderly foreign exchange market.
This definitive shift in the objectives of foreign exchange management could be seen in the preamble to the new legislation. FEMA provided a de jure status to the shift in the policies with regard to the external sector reforms that began in 1990-91. Further and more importantly, FEMA has diluted the rigorous enforcement provisions which were the hallmark of the erstwhile legislation.