Question

Consider the following statements with reference to the Financial Emergency under Article 360:

1. Unlike President's Rule, once a proclamation of Financial Emergency is approved by Parliament, it continues indefinitely without the need for repeated parliamentary approval.

2. During a Financial Emergency, the President can direct the reduction of salaries and allowances of all persons serving the Union, including the judges of the Supreme Court and High Courts.

3. India has declared a Financial Emergency on three separate occasions, primarily linked to global economic downturns.

Which of the statements given above is/are correct?

• A. 1 only
• B. 1 and 2 only
• C. 2 and 3 only
• D. 1, 2 and 3

Answer 1

Answer:

B. 1 and 2 only

Understanding Financial Emergency (Article 360)

• The provision for Financial Emergency is enshrined in Article 360 of the Indian Constitution. It allows the President to declare such an emergency if he is satisfied that the financial stability or credit of India, or any part of its territory, is threatened.
• This provision was borrowed from the Government of India Act, 1935, where it was known as 'financial provisions in cases of grave emergency'.
• The objective of this provision is to safeguard the financial stability and credit of India in times of severe economic distress.

Approval and Duration

• A proclamation declaring a Financial Emergency must be approved by both Houses of Parliament within two months from the date of its issue.
• If the Lok Sabha is dissolved within this two-month period, or before its approval, the proclamation remains valid for 30 days from the first sitting of the newly constituted Lok Sabha, provided the Rajya Sabha has already approved it.
• Crucially, once approved by Parliament, a proclamation of Financial Emergency continues indefinitely until it is revoked by the President. Unlike National Emergency (Article 352) or President's Rule (Article 356), there is no maximum period prescribed for its operation, nor does it require repeated parliamentary approval for its continuance.

Powers Exercised During Financial Emergency

• During a Financial Emergency, the Union executive's authority extends to giving directions to any State to observe specific canons of financial propriety.
• The President can direct the reduction of salaries and allowances of all or any class of persons serving the Union. This power specifically includes the judges of the Supreme Court and the High Courts, highlighting the far-reaching nature of this emergency provision.
• The President can also direct the reduction of salaries and allowances of persons serving the States.
• All Money Bills or other financial bills passed by the State Legislature are required to be reserved for the consideration of the President.

Historical Context

• It is a significant fact for competitive examinations that India has never declared a Financial Emergency under Article 360 to date.
• Despite facing various economic challenges and crises, such as the balance of payments crisis in 1991, the government has managed such situations through other economic reforms and measures without invoking Article 360.