DUE TO THE NATURE AND EXTENT OF SMUGGLING AND FOREIGN EXCHANGE RACKETEERING AND ITS IMPACT ON THE ECONOMIC LAWS AND AMENDED EXISTING LAWS TO PROVIDE HARSH PUNISHMENTS AND OTHER REMEDIAL MEASURES AGAINST SUCH OFFENSES. IN A DEVELOPING COUNTRY, IT IS ESSENTIAL TO CONSERVE SCARCE FOREIGN EXCHANGE TO PAY FOR IMPORTED GOODS. HOWEVER, THE RESULTANT DEARTH OF FOREIGN EXCHANGE, CREATES OPPORTUNITIES FOR ILLEGAL DEFLECTIONS OF FOREIGN CURRENCY. SUCH MANIPULATION CAN TAKE PLACE THROUGH TRADE CHANNELS USING SUCH PRACTICES AS OVER- AND UNDERINVOICING. UNDER PROVISIONS OF THE FOREIGN EXCHANGE REGULATIONS ACT, ADJUDICATION AND PROSECUTION OF SUCH CRIMES ARE THE RESPONSIBILITY OF THE DIRECTOR OF ENFORCEMENT. UNDER THE ACT, SUCH CRIMES ARE NONCOGNIZABLE AND IN ADDITION TO PENAL PROVISIONS, THE ACT PROVIDES FOR VARIOUS ADJUDICATION POWERS AND GRANTS. THE ACT ALSO GIVES SUCH POWERS AS SEARCH, SEIZURE, INTERROGATION, AND IMPOSITION OF FINES. INDIA HAS ENACTED SPECIFIC MEASURES TO ADDRESS THE PROBLEM OF SMUGGLING WHICH INCLUDES DRUG TRAFFICKING, HOARDING, AND BLACKMARKETING OF SCARCE FOOD ITEMS. THE ACTIVITIES OF THE INDIAN BANKING SYSTEM HAVE EXPANDED SINCE THE IMPOSITION OF GOVERNMENT CONTROLS AND THE NATIONALIZATION OF 14 MAJOR BANKS, BUT THESE NEW ACTIVITIES HAVE OPENED UP GREATER OPPORTUNITIES FOR FRAUD. THE COLLUSION OF INTERESTS AMONG THE INDUSTRIAL AND COMMERCIAL OWNERS AND GOVERNMENTS HAS NOT ONLY RESULTED IN BRIBERY AND CORRUPTION, BUT HAS UNDERMINED EFFORTS TO ATTACK THE PROBLEM THROUGH THE CRIMINAL JUSTICE SYSTEM. THE REFORMS WHICH HAVE BEEN ACTED CANNOT BE EFFECTIVE UNTIL THEY ARE IMPARTIALLY AND VIGOROUSLY ENFORCED. NO REFERENCES ARE PROVIDED. (KCP).