Forex management in India

Forex management is one of the complex procedures to follow on by regulators around the world. The country like India where trade deficit has been the regular reflection of overseas trade and balance of payment is at negative side, the management of forex became challenging. Historically trading history started from batter system to punch mark coins and now at currency system. The central government in India has wide powers to control transactions in foreign exchange. Until 1992 all foreign investments in India and the repatriation of foreign capital required prior approval of the government. The Foreign-Exchange Regulation Act, which governs foreign investment, rarely allowed foreign majority holdings. However, a new foreign investment policy announced in July 1991 prescribed automatic approval for foreign investments in thirty-four industries designated high priority, up to an equity limit of 51 percent. Initially the government required that a company's automatic approval must rely on matching exports and dividend repatriation, but in May 1992 this requirement was lifted, except for low-priority sectors. In 1994 foreign and nonresident Indian investors were allowed to repatriate not only their profits but also their capital. Indian exporters are also free to use their export earnings as they see fit. However, transfer of capital abroad by Indian nationals is only permitted in special circumstances, such as emigration. Foreign exchange in India is automatically made available for imports for which import licenses are issue.

The main constrain in India’s rapid growth is the infrastructure bottleneck and lack of capital formation in the country. India has been the rider of Hindu growth rate since 1947,the trigger came after four decade after independence when country get the real freedom to grow with the legs of liberalization ,privatization and globalization opted by Rao Manmohan duo in early nineties. The new policy allowed the foreign direct investment, advent of new technology, public private participation backed by IT revolution in the country. The change of policy paid well in the form of improvement in Micro and Macro economic indicator like GDP growth, employment generation, infrastructure development, export and import growth, forex reserve, country rating, business confidence, governance, etc.