Regulation of foreign exchange transactions has a long history. For a newly independent nation trying to unshackle itself from foreign political and economic domination, the first legislation, The Foreign Exchange Regulation Act, 1947, was primarily concerned with regulation of inflow of foreign capital into India, increase in non-resident interest and deployment of imported capital. India faced an acute foreign exchange crisis in the 1960’s.
It may be recalled that perhaps the most critical use of foreign exchange at that time was for import of food grains; during most of 1960’s over seven per cent of food grain requirement had to be imported. In this backdrop, FERA, 1947 was replaced by Foreign Exchange Regulation Act, 1974.