The Foreign Exchange Management Act, 1999 (FEMA) is an act of the Parliament of India” to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments.
If there are too many dollars in Indian Market or if there are too less Rupees in the Indian market, then Exchange Rates will change. (based on Supply-Demand principles).
If there are fluctuations like today 1$= 49 Rs. And after 15 days, 1$=47 Rs. This is normal healthy fluctuation but if there is sudden drastic change like in 15 days, 1$=100 Rs. that means bad guys are not playing by the rules. So to prevent such things, we’ve certain Laws.
Foreign Exchange Regulation Act of 1973 (FERA) (repealed in 2000.)
Foreign Exchange Management Act (FEMA),1999