Financial Emergency ( Article 360 )

Provisions have been made in the Constitution for dealing with extraordinary situations that may threaten the peace, security, stability and governance of the country or a part thereof. There are three types of extraordinary or crisis situations that are envisaged –

  1. first, when there is a war or external aggression has been committed or there is threat of the same, or if internal disturbances amounting to armed rebellion take place;
  2. second, when it becomes impossible for the government of a State to be carried on in accordance with the Constitution; and
  3. third, if the credit or financial stability of the country is threatened.

In each case the President may issue a proclamation with varying consequences.


Financial Emergency

The third type of Emergency is Financial Emergency provided under Article 360. It provides that if the President is satisfied that the financial stability or credit of India or any of its part is in danger, he may declare a state of Financial Emergency.

Like the other two types of emergencies ( National Emergency & President’s Rule ), it has also to be approved by the Parliament. It must be approved by both Houses of Parliament within two months.

Financial Emergency can operate as long as the situation demands and may be revoked by a subsequent proclamation.


Effects Of Financial Emergency

The proclamation of Financial Emergency may have the following consequences –

  • The Union Government may give direction to any of the States regarding financial matters.
  • The President may ask the States to reduce the salaries and allowances of all or any class of persons in government service.
  • The President may ask the States to reserve all the money bills for the consideration of the Parliament after they have been passed by the State Legislature.
  • The President may also give directions for the reduction of salaries and allowances of the Central Government employees including the Judges of the Supreme Court and the High Courts.


So far, fortunately, financial emergency has never been proclaimed.





Bibliography : NIOS – Political Science  &  quora article

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