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Definition of FEMA 2000 FEMA 2000 means Foreign exchange management Act 2000. Foreign exchange management act 2000 is very helpful law for development of foreign exchange market in India. It was passed in 1999 and came into effect from June 1, 2000 to entire country. After this foreign exchange regulation act ( FERA ) 1973 197 3 was closed . FEMA was most suitable for India corporate sector  instead of FERA because alm a lmost ost all strict regulations of FERA were removed in FEMA . Objectives of FEMA 1. Main objective of apply FEMA is to reduce the restriction on foreign exchange . Now , any offense in foreign exchange will w ill be civil offense not criminal offense . 2. This law's main objective is to increase the flow of foreign exchange in India. Now , under this law , you can bring foreign currency in India without any legal barrier . Provision /Rules / Regulation of FEMA 1. Provision regarding dealing in foreign exchange :According to section 3 of FEMA 2000 ," only authorized person under the govt. terms can deal in foreign exchange in India . " 2. Provision regarding holding of foreign exchange :According to section 4 of FEMA 2000, " All persons which are provided pro vided authority only can hold or purchase foreign exchange in India or outside India." 3.Provision regarding current account transactions :According to section 5 of FEMA 2000 ," There is no restriction restriction regarding sale or o r deal foreign exchange , if it it is a current account transaction ." The following transaction are deemed current account transactions under FEMA :a) Expenses in connection with foreign travel , education and medical care of parents , spouse and children ( Any body now can send the foreign currency in India for above expenses under  current account )  b) Payment due as interest on loan c) Payment due under short term loan for business . 4. Provision regarding capital account transactions :Under section six ," RBI will fix the limit limit of foreign exchange transactions relating to capital account after discussion with Indian govt. " RBI can restrict following :a) transfer of foreign security by Indian resident .  b) transfer of foreign security by Indian resident which is now outside India . c) transfer of immovable property . 5. Provision regarding export of goods and services :According to section 7 of FEMA 2000 , " It is the duty of exporter to declare the true and correct detail of goods which , he have to sell the market outside o utside India and must send complete co mplete report to RBI .  RBI can make particular requirement for any exporter .  RBI can also make rules and regulations for realization of amount earned from foreign coun try. 6. Provision regarding authorised persons :RBI can authorize any body who can deal in money exchange or off shore transaction and foreign exchange .

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has to follow the rules and guidelines of RBI . RBI can revoke the authorisation granted to any person at any time in public interest . If authorized person will be done contravention the rules of RBI , he will be liable to pay up to Rs. 10000 penalty and Rs. 2000 for every day during which such contravention continue . 7.

Provision regarding contravention and penalties :Section 13 to 15 If any body or person contravenes the rules and regulation of FEMA 2000 or RBI direction , he will be liable to a penalty three times of sum involved in contravent ion . If contravention will continue , then he will pay upto Rs. 5000 per day during the time of  contravention . 8. Provision regarding adjucation and appeal :According to section 18, " Central govt. can appoint adjudicating authority who can give the punishment of civil imprisonment of maximum s ix months if case is less than one crore . If demanded value is more than one crore then punishment of imprisonment may  be of three years . the person can appeal to special director against the decisions of  adjudicating officer . He can also appeal in appellate tribunal and also in high court with the sixty days of communication of order . Sr.No. Point 1 Emphasis 2




FERA FEMA On regulation of foreign On management of foreign exchange exchange Foreign exchange reserves With the improvement in Situation  positions was not foreign exchange reserves satisfactory for that stringent such stringent controls are controls were required on the not required now. use of foreign exchange Permission  Need to take permission of   No need for seeking the RBI in connection with  permission of RBI in remittances involving connection with external trade remittances involving external trade except section3 relates to dealing in foreign exchange Restrictions These restrictions on drawals Section 5, it removes all of foreign exchange for the the restrictions on drawals  purpose current account of foreign exchange for  transactions the papoose of current account transactions Violations of FEMA Violations of  Violations of FERA was treated as criminal offence treated as civil offence Rules and burden of proof was on removes the threat of  the guilty imprisonment compared their illegal acts by paying a fine (not too high)

FISCAL POLICY Defination of Fiscal Policy: Fiscal policy is an additional method to determine public revenue and public expenditure. In the recent years importance of fiscal policy has increased due to economic fluctuations. Fiscal policy is an important instrument in the modern time. According to Arther Simithies fiscal policy is a policy under which government uses its expenditure and revenue programme to produce desirable effects and avoid undesirable effects on the national i ncome, production and employment. Objectives of fiscal policy: The objectives of fiscal policy may be regarded as follows; 1. To achieve desirable price level: The stability of general prices is necessary for economic stability. The maintenance of a desirable price level has good effects on production, employment and national income. Fiscal policy should be used to remove; fluctuations in price level so that ideal level is maintained. 2. To Achieve desirable consumption level: A desirable consumption level is important for political, social and economic consideration. Consumption can be affected by expenditure and tax policies of the government. Fiscal policy should be used to increase welfare of the economy through consumption level. 3. To Achieve desirable employment level: The efficient employment level is most important in determining the living standardof the people. It is necessary for political stability and for maximization ofproduction. Fiscal policy should achieve this level. 4. To achieve desirable income distribution: The distribution of income determines the type of economic activities the amount of savings. In this way, it is related to prices, consumption and employment. Income distribution should be equal to the most possible degree. Fiscal policy can achieve equality in distribution of income. 5. Increase in capital formation: In under-developed countries deficiency of capital is the main reason for under-development. Large amounts are required for industry and economic development. Fiscal policy can divert resources and increase capital. 6. Degree of inflation: In under-developed countries, a degree of inflation is required for economic development. After a limit, inflationary be used to get rid of this situation.

Instruments of Fiscal Policy: 1. Public expenditure

2. Taxes 3. Public debts The above mentioned instruments are used by the public authorities to achieve desirable level of  production, consumption and National Income. During inflationary trend more and more taxes are levied on the community. In this way, purchasing power of the people can be decreased and desirable price level is achieved. During inflation public expenditure is decreased so that all in production may decrease high prices and increase the value of money. During deflationary period taxes are reduced and public expenditure is increased. In this way incentives to invest are increased and national income begins to rise. For economic development public debts are necessary. In under developed countries, due to insufficient resources economic development is not possible. Public loans are drawn internally and externally. The above mentioned methods are called budgetary policy of the government. This policy can increase national income, production level and maintain full employment level.

Techniques of Fiscal Policy

1. Taxation Policy

By amendment in Indian tax law 1961, government of India has power to make new taxation  policy according to the current Indian economic situation. Either government can increase the tax rate or decrease exemption for collecting more tax for previous year income. 2. Public expenditure policy

Public expenditure policy is very useful to reduce the government expenditure. Government divides total expenditures into two major categories o ne is development expenditure and other is non development expenditure. With this policy, government encourages only development expenditure and tries to reduce non development expenditure. 3. Deficit financing policy

If above two equipment does not work to create balance in government budget, government can get loan from central bank to adjust deficiency or deficit. For this RBI has to issue new currency notes. But this decision should be taken very carefully because increasing trend of deficit financing will decrease the value of currency in world market and it will increase the prices of  commodities in commodity market. 4. Seigniorage

Seigniorage is also technique to take benefits by issuing new notes and it is important role to make fiscal policy. 5. Public Debt Policy

Public debt means, loan is taken by government to fulfill government expenditures. Government should make this policy very seriously. If there any other source, then government should use to  pay government expenditure or reducing expenditure is better than taking loan. Sometime, under  the pressure of foreign creditor , government of India has to take many decisions which are against public interest. So, government o f India¶s minister should live in simple life and t hink  high. They should use internet for doing all work. With this, India can save Rs. 500,000 per  month/ per minister for travelling expenditure.

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