Question

With reference to the proclamation of a Financial Emergency under Article 360, consider the following statements:

1. It must be approved by both Houses of Parliament within two months from its date of issue.

2. Once approved, it requires repeated parliamentary approval every six months for its continuation.

3. A proclamation of Financial Emergency has been declared only once in India, during the 1991 economic crisis.

Which of the statements given above is/are correct?

• A. 1 only
• B. 1 and 2 only
• C. 3 only
• D. None of the above

Answer 1

Answer:

A. 1 only

Financial Emergency (Article 360)

• Article 360 of the Indian Constitution empowers the President to declare a Financial Emergency if he is satisfied that a situation has arisen whereby the financial stability or credit of India or of any part of its territory is threatened.

• This provision was borrowed from the Government of India Act, 1935, which had a similar provision for financial emergency.

Parliamentary Approval and Duration

• A proclamation of 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 during this two-month period or before its approval, the proclamation survives until 30 days from the first sitting of the Lok Sabha after its reconstitution, provided the Rajya Sabha has approved it in the meantime.

• Once approved by both Houses, the Financial Emergency continues indefinitely until it is revoked by the President. There is no maximum period prescribed for its operation, and it does not require repeated parliamentary approval for its continuation, unlike a National Emergency or President's Rule.

Historical Context

• It is a crucial fact for competitive exams that a Financial Emergency under Article 360 has never been declared in India to date.

• Even during the severe economic crisis of 1991, India did not declare a Financial Emergency but instead initiated significant economic reforms (LPG reforms - Liberalisation, Privatisation, Globalisation).

Effects of a Financial Emergency

• During a Financial Emergency, 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 direction.

• The Union can direct states to reduce the salaries and allowances of all or any class of persons serving in connection with the affairs of the state, including the judges of the High Court.

• The President can direct 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 Court.

• All Money Bills or other financial Bills passed by the state legislature can be reserved for the consideration of the President.

Revocation of Financial Emergency

• A proclamation of Financial Emergency may be revoked by the President at any time by a subsequent proclamation. Such a proclamation does not require parliamentary approval.