What is Financial Emergency?

The USA has declared the COVID-19 outbreak as the National Emergency and people are anticipating that due to the huge economic impact of coronavirus India may declare a Financial Emergency.

There are 3 types of emergencies under the Indian Constitution:
1. Article 352- National Emergency.
2. Article 356-Emergency in the state (President’s rule).
3. Article 360- Financial Emergency.

Article 360 empowers the President of India to proclaim a Financial Emergency if he/she is satisfied that a situation has arisen whereby the financial stability or credit of India or of any part of the territory is threatened but the satisfaction of the President is not beyond judicial review and can be challenged in the court of law.

Procedure:

1. The proclamation declaring the Financial Emergency must be approved by both the house of the parliament within two months of the date of the issue of orders.

2. Once approved by the parliament, the Financial Emergency continues indefinitely till revoked, and there is no need for continuous parliamentary approval.

3. Resolution approving the proclamation of Financial Emergency can be passed by a simple majority by either house of the parliament.

4. If Lok Sabha is dissolved Rajya Sabha can approve it but Lok Sabha has to approve it within 30 days of first sitting after it has been reconstituted.

Effects of Financial Emergency:

1. The centre may ask the states to follow a basic set of rules and regulations prescribed for the financial transactions/ decisions.

2. The money bills or financial bills of the state can be asked for the President's approval.

3. The President may issue directions for the reduction of salaries and allowances of all state or central employees as well as the Supreme Court and the High Court judges

The centre acquires the full control over the states in financial matters during the Financial Emergency.


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