Question

Examine the following statements about Financial Emergency under Article 360.

a. A Financial Emergency has been declared in India at least once since the Constitution came into force.

b. The President can issue directions to reserve all money bills passed by state legislatures for his consideration during a Financial Emergency.

• A. Statement a and b are correct
• B. Statement a is correct and b is wrong
• C. Statement b is correct and a is wrong
• D. Statement a and b are incorrect

Answer 1

Answer:

C. Statement b is correct and a is wrong

Financial Emergency (Article 360)

• The provision for Financial Emergency is enshrined in Article 360 of the Indian Constitution. It is a part of the emergency provisions contained in Part XVIII (Articles 352 to 360).

• The primary objective of this provision is to safeguard the financial stability or credit of India, or any part of its territory, when it is threatened.

Statement 'a' - Declaration Status:

• It is a crucial fact for competitive exams that a Financial Emergency has never been declared in India since the Constitution came into force on January 26, 1950.

• India has experienced National Emergency (Article 352) three times (1962, 1971, 1975) and President's Rule (Article 356) numerous times in various states, but never a Financial Emergency.

• This highlights the robustness of India's financial system or, perhaps, the political will to avoid such a drastic measure.

Statement 'b' - President's Powers during Financial Emergency:

• Statement 'b' is correct. During a Financial Emergency, the President gains significant powers over the financial administration of the states.

• Article 360(4)(a)(ii) specifically empowers the President to issue directions requiring the reservation of all money bills or other bills to which the provisions of Article 207 apply (i.e., financial bills) passed by the state legislature for his consideration.

• This provision ensures central control over state finances to address the financial crisis effectively.

Key Aspects and Effects of Financial Emergency:

• Grounds for Declaration: If the President is satisfied that a situation has arisen whereby the financial stability or credit of India or any part of its territory is threatened.

• Parliamentary Approval: A proclamation of Financial Emergency must be approved by both Houses of Parliament within two months from the date of its issue.

• Simple Majority: Approval requires a simple majority of members present and voting in both Houses.

• Duration: Once approved, it continues indefinitely until revoked by the President. There is no maximum period prescribed for its operation, nor does it require repeated parliamentary approval for its continuation.

• Revocation: The President can revoke a Financial Emergency at any time by a subsequent proclamation, without parliamentary approval.

• Impact on Union and States: The executive authority of the Union extends to giving directions to any state to observe such canons of financial propriety as may be specified in the directions.

• Salary Reductions: The President can issue directions for the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of the Union, including the judges of the Supreme Court and the High Courts.

• Similarly, directions can be issued for the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a state.

• Financial Bills of States: All money bills or other financial bills passed by the state legislature can be reserved for the President's consideration, as stated in option 'b'.