Abstract

The paper examines the evolution of foreign exchange regulation in India, tracing the transition from the restrictive Foreign Exchange Regulation Act (FERA) of 1973 to the more liberal Foreign Exchange Management Act (FEMA) of 1999. The paper analyses the objectives, provisions, and implications of these acts on India’s economic policies, enabling greater integration with the global economy. Additionally, the paper investigates the phenomenon and historical background of smuggling activities in India, covering various periods and regimes, and demonstrating the impact of smuggling on the country’s foreign exchange reserves and economic stability. The paper underscores the role of smuggling in depleting foreign exchange reserves, skewing economic indicators, and affecting government revenue through evasion of taxes and import duties. The paper also outlines the measures adopted by India to curb smuggling, such as enhanced customs enforcement, technological innovations, stringent laws, and international cooperation initiatives. Despite the challenges, the paper acknowledges the intricacy of smuggling and the government’s continuing efforts to reduce its negative effects on foreign exchange and the overall economy.

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