Balance of Payments — Policy Reforms

Entry	Year	Description	Impact
FEMA (Amendment) Act, 2015	2015	While not a full amendment to the core FEMA Act, significant changes and clarifications were introduced through various notifications and rules in 2015, particularly regarding Foreign Direct Investment (FDI) policy. These included easing norms for various sectors, simplifying procedures, and moving more sectors under the automatic route. The objective was to attract greater FDI, a crucial component of the Financial Account.	Increased FDI inflows, contributing to the financing of India's Current Account Deficit and bolstering foreign exchange reserves. It also aimed to improve India's ease of doing business and integrate it further into global supply chains.
Periodic Revisions to Liberalized Remittance Scheme (LRS)	Ongoing (e.g., 2007, 2013, 2015, 2023)	The LRS limit, initially USD 25,000 in 2004, has been periodically revised upwards (e.g., to USD 200,000 in 2007, then to USD 75,000 in 2013 during the taper tantrum, and subsequently to USD 250,000 in 2015). In 2023, there was a temporary move to include LRS under TCS, later rolled back for certain categories. These changes reflect the RBI's assessment of external sector conditions and its calibrated approach to capital account liberalization.	Directly influences capital outflows by resident individuals. Upward revisions signify greater confidence in external stability, while downward revisions or increased scrutiny (like TCS changes) indicate caution during periods of external vulnerability, impacting the Financial Account.
FEMA (Non-Debt Instruments) Rules, 2019	2019	These rules consolidated and streamlined the regulations governing foreign investment in India, particularly for equity instruments (FDI and FPI). They clarified definitions, entry routes, sectoral caps, and reporting requirements, replacing earlier regulations and circulars. This was a significant step towards simplifying the regulatory landscape for foreign investors.	Aimed at enhancing clarity and predictability for foreign investors, thereby facilitating greater and more stable capital inflows (FDI and FPI) into India. This directly impacts the Financial Account by making India a more attractive destination for global capital.