2003 General Studies, all questions

UPSC Prelims 2003 · General Studies

Question 58: Economy and Social Development

Which one of the following statements is correct with reference to FEMA in India?

aThe Foreign Exchange Regulation Act (FERA), was replaced by Foreign Exchange Management Act (FEMA) in the year 2001
bFERA was given a sunset clause of one year till 31st May 2002 to enable Enforcement Directorate to complete the investigation of pending issues
cUnder FEMA, violation of foreign exchange rules has ceased to be a criminal offence
dAs per the new dispensation, Enforcement Directorate can arrest and prosecute the people for the violation of foreign exchange rules

AnswerThe answer is (c).

FEMA replaced FERA with effect from 1 June 2000, and its main change is that a violation of foreign exchange rules is a civil matter dealt with by penalties, not a criminal offence with arrest and prosecution. FERA was given a sunset clause of two years, to 31 May 2002, so that pending cases could be completed. So the statements about 2001, a one-year sunset and the ED's power to arrest and prosecute are wrong.

Why each option is right or wrong
  • (a) FEMA came into force on 1 June 2000, not in 2001.
  • (b) The sunset clause for FERA cases was two years, not one.
  • (c) Correct: violations under FEMA are civil, not criminal, offences.
  • (d) Under FEMA the ED imposes penalties; the old FERA power to arrest and prosecute for violations is gone.

Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2003, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.