FERA stands for Foreign Exchange Regulation Act, which was a legislation enacted in India in 1973 to regulate the foreign exchange transactions and investments in the country. The act was passed by the Indian Parliament in 1973 and came into effect on January 1, 1974.

Objectives of FERA:

The main objectives of FERA were:

1. To regulate and control foreign exchange transactions: FERA aimed to regulate and control the flow of foreign exchange into and out of India to prevent unauthorised transactions and maintain the balance of payments.
2. To curb capital flight: The act aimed to curb the practice of Indian citizens and companies transferring their funds abroad without permission, which was a major concern during the economic crisis of the 1960s and 1970s.
3. To promote foreign investment: FERA aimed to attract foreign investment into India by providing a framework for foreign investors to operate in the country.
4. To prevent money laundering: The act aimed to prevent the use of foreign exchange for illegal activities such as money laundering.

Key provisions of FERA:

1. Registration of Indian citizens and companies: All Indian citizens and companies were required to register with the Reserve Bank of India (RBI) under FERA if they had any assets or investments abroad.
2. Declaration of assets: Registered persons were required to declare their assets and investments abroad.
3. Permission for foreign exchange transactions: All foreign exchange transactions required permission from the RBI, except for certain transactions permitted under the act.
4. Restrictions on outward remittances: The act imposed restrictions on outward remittances, including restrictions on the amount that could be taken out of the country.
5. Penalty for non-compliance: Failure to comply with the provisions of FERA attracted penalties and even imprisonment.

Challenges faced by FERA:

1. Complexity: The act was complex and difficult to implement, leading to delays and difficulties in obtaining permissions.
2. Bureaucratic hurdles: The registration process was lengthy and involved multiple layers of bureaucracy, leading to frustration among Indian citizens and companies.
3. Lack of transparency: The act did not provide sufficient transparency in terms of decision-making processes and procedures, leading to allegations of corruption.
4. Impact on trade and investment: FERA was criticized for restricting trade and investment in India, particularly in the 1980s when India was trying to liberalize its economy.

FERA was a complex legislation that aimed to regulate foreign exchange transactions and investments in India. While it had its objectives, it faced several challenges, including complexity, bureaucratic hurdles, lack of transparency, and restrictions on trade and investment. Its repeal led to the introduction of FEMA, which has simplified procedures, provided greater flexibility, and harmonized Indian regulations with international standards.