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This article evaluates the extent to which the legislative changes relating to foreign exchange that have taken place in India within the last few decades, and in particular after 1991, have made an impact on the presence of foreign firms in the economy. The data cover the period 1957–1958 to 2001–2002, and include the entire population of India’s corporate sector. In the period after reforms commenced in 1991, the number of foreign firms in India has increased very substantially. The transformation of the foreign exchange regulation act (FERA) to the foreign exchange management act (FEMA) in 1999 has had a positive effect in inducing foreign firms to India. The FEMA legislation simplifies the maze of controls, procedures and bureaucratic minutiae that have to be observed by all those undertaking to set up and operate a business in India. The changes in the legislative regimes make India attractive as an investment destination for foreign firms.
