The Indian Constitution lists three different types of emergencies, one of which is a financial emergency. The Indian Constitution recognises that there may be instances where economic harm results. As a result, Article 360 of the Indian Constitution permits the declaration of a financial emergency in the event of such an occurrence.
Financial crisis: Article 360
The President of India may issue a Proclamation of Financial Emergency in accordance with Article 360 of the Indian Constitution. This is if he believes that India’s financial stability or the financial stability of any portion of its territory is in danger. So, the President of India may declare an emergency to address the issue if a situation in the nation develops that causes an economic crisis. According to the 44th Amendment of 1978, the highest court has the authority to examine the declaration of a financial emergency.
The 44th Amendment of 1978 is commonly known as the Corrective Amendment.
The Indian Parliament consists of two houses, namely, the Lok Sabha and the Rajya Sabha.
In either House of Parliament, a Resolution approving the declaration of a financial emergency may only be passed by a simple majority. Without the consent of the legislature, the President has the right to revoke any declaration of a financial emergency at any time.
What is Article 360?
- Article 360 of the Indian Constitution grants the President the power to declare a financial emergency.
- Grounds for the declaration: If the President is convinced that a situation has developed that threatens India’s financial stability or credit, in whole or in part, then the declaration will be made.
- The president’s declaration of a financial emergency is final, conclusive, and cannot be contested in court on any grounds. This is in accordance to the 38th Amendment Act of 1975.
- The 44th Amendment Act of 1978 eliminated the clause added by the 38th Amendment Act of 1975. It suggested that the president’s satisfaction was subject to judicial review (i.e., could be contested in court).
Parliamentary Approval and its Duration
- A proclamation declaring a financial emergency must be approved by both Houses of Parliament (the Lok Sabha and the Rajya Sabha) within two months of its issuance.
- If such a proclamation is made while the Lok Sabha is already dissolved or if the proclamation is dissolved during the two-month period without approval. If the Rajya Sabha had approved it in the interim, the proclamation would then remain in effect until 30 days after the Lok Sabha’s first session following its reconstitution.
- The Financial Emergency remains in effect after receiving the blessing of both Houses of Parliament until it is revoked.
How to revoke a financial emergency?
The president may at any time revoke a Financial Emergency proclamation by issuing a new proclamation. The consent of Parliament is not required for such a proclamation.
Effects of Financial Emergency
Any State may receive instructions from the Union government to follow any financial propriety rules that may be outlined in the instructions.
The instructions might say:
- The President may direct the States to lower the salaries and benefits for all or any class of workers involved in the situation.
- After the State Legislature approves the money bills and other financial bills, they must be set aside for the President’s consideration.
- Additionally, the President has the authority to direct the reduction of salaries and benefits for all or any class of individuals working on Union business, including Supreme Court and High Court judges.
Criticism
- In times of financial emergency, the Union government gains total control over the States with regard to financial matters.
- The State’s financial independence is put in danger as a result of this.
- According to H N Kunzru, the financial emergency provisions pose a serious threat to the financial independence of the states.
Significance
- Dr. BR Ambedkar was one of the architects of the Constitution. He explained that the Constituent Assembly included the provisions for financial emergencies. This is because “this article more or less follows the National Recovery Act, 1933 of the United States. It gave the President power to make similar provisions in order to overcome the difficulties of the American people caused by the Great Depression of the 1930s.”
- Financial emergency provisions can easily avert situations like economic recession or any other financial crisis.
Consequences of a financial emergency
Following the Parliament’s approval of the emergency declaration, the Union takes full control of the nation’s financial affairs. Any state may receive financial instructions from the Union Government, and the President may ask the states to
- reduce pay and benefits for any or all classes of public employees.
- keep all money bills in reserve for Parliament to consider after the State Legislature has passed them.
- lower the compensation and benefits that central government employees receive, including judges of the Supreme Court and High Court.
Financial Emergency Subject to Judicial Review
The declaration of a financial emergency cannot be challenged in court under the 38th Amendment Act of 1975. The 44th amendment to the law was passed in 1978, allowing for the judicial review.
A few of the proclamation’s consequences have also been included. The Union Government may provide the state government with a financial solution to assist in resolving the financial issue. The president may even request that the state council reserve any type of currency. The salary reduction of government employees may be ordered by the President of India.
Conclusion
The intention behind these financial emergency provisions was to uphold the honour of the Constitution. Power amplification seeks to preserve the constitutional order rather than to undermine it. The National Government is more effective thanks to the Emergency Provisions. Protection of the nation is the Union’s responsibility.
In India, the law was never enforced. India went through a severe financial crisis in 1991 and fighting both starvation and war at the same time in 1965. Despite that, the country never even made an attempt to use the provisions. Declaring a financial emergency is bad for the country’s image. The President is therefore given emergency powers as the Federal Head in order to safeguard the federal structure of the Union of India.
According to Article 360, the president may issue a proclamation if he is satisfied that a situation has developed that puts India’s financial security, credit, or any part of India in jeopardy. The executive and legislative powers would be centralised in such a scenario. This article has never been invoked.
Read More: