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Financial Emergency (Article 360)

Article 360 outlines the constitutional provisions for declaring a Financial Emergency if the financial stability or credit of India is threatened.

1. Declaration and Approval

  • Grounds: 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.
  • Approval: Must be approved by both Houses of Parliament within 2 months of proclamation by a Simple Majority.

2. Severe Effects of Financial Emergency

Once declared, the Union Executive can exercise sweeping financial controls over the States:

  1. The Union can direct the States to observe specified canons of financial propriety.
  2. 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 State, and those serving the Union—including the Judges of the Supreme Court and the High Courts.
  3. All Money Bills or other Financial Bills passed by the State Legislatures must be reserved for the consideration of the President.

Note: A Financial Emergency has never been declared in the history of India, not even during the severe balance of payments crisis of 1991.