India after a new government ordered the company to dilute its stake in its Indian unit as required by the Foreign Exchange Regulation Act (FERA). In 1993, the company (along with PepsiCo) returned after the introduction of India's Liberalization policy. Switch from FERA FERA did not succeed in restricting activities such as the expansion of Multinational Corporations. The concessions made to FERA in 1991-1993 showed that FERA was on the verge of becoming redundant. After the amendment of FERA in 1993, it was decided that the act would become the FEMA. This was done in order to relax the controls on foreign exchange in India. This led on to invention of beliefs among stakeholders that FEMA and FERA co-exist in present Indian scenario. FERA was repealed in 1998 by the government of Atal Bihari Vajpayee and replaced by the Foreign Exchange Management Act, which liberalised foreign exchange controls and restrictions on foreign investment. The buying and selling of foreign currency and other debt instruments by businesses, individuals and governments happens in the foreign exchange market. Apart from being very competitive, this market is also the largest and most liquid market in the world as well as in India. It constantly undergoes changes and innovations, which can either be beneficial to a country or expose them to greater risks. The management of foreign exchange market becomes necessary in order to mitigate and avoid the risks. Central banks would work towards an orderly functioning of the transactions which can also develop their foreign exchange market. Foreign Exchange Market Whether under FERA or FEMA’s control, the need for the management of foreign exchange is important. It is necessary to keep adequate amount of foreign exchange. FEMA served to make transactions for external trade and easier – transactions involving current account for external trade no longer required RBI’s permission. The deals in Foreign Exchange were to be ‘managed’ instead of ‘regulated’. The switch to FEMA shows the change on the part of the government in terms of for the capital. Fundamental principle Under FEMA, the general principle is that all current account transactions are permitted unless expressly prohibited and all Capital account transactions are prohibited unless expressly permitted. (see Sections 5 and 6 of FEMA) “Capital account transaction” means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of