What is financial emergency ??

Financial emergency is a state of emergency imposed by the president when he is satisfied that a situation has arisen due to which the financial stability or credit of India or any part of its territory is threatened .

◆Financial emergency is one of the three emergency provisions given in our Constitution.

Articles 360 empowers president to proclaim financial emergency.

GROUNDS OF DECLARATION :

◆Situation of financial instability or threat to credit of the country .

"The 38th Amendment Act of 1975 made the satisfaction of the president in declaring a financial emergency final and non questionable in any court on any ground."

But this provision was subsequently deleted by the 44th Amendment Act of 1978 stating that the satisfaction of the president is not beyond judicial review .

PARLIAMENTARY APPROVAL AND DURATION:-

The proclamation declaring financial emergency must be approved by both houses of Parliament within two months from the date of its issue .

In case if the proclamation is issued at time when loksabha has been dissolved or the dissolution of the loksabha takes place during the period of two months without approving the proclamation ,then the proclamation survives untill 30 days from the first sitting of the Loksabha  after its reconstitution, provided the rajya sabha has in the meantime approved it.

REVOCATION OF FINACIAL EMERGENCY:-

Once approved by both the houses of the Parliament , the financial emergency continues indefinitely till it is revoked.

Now the question arises how it can be revoked ??

So the financial emergency can be removed by president anytime by a subsequent proclaimation ..Such a proclamation does not require the parliamentary approval .

●●Effects of financial emergency :-

The executive authorities of the centre extends ◆to directing any state to observe such canons of financial propriety as specified;

◆to directions as president may deem necessary and adequate for the purpose .

Any of these directions may include provisions like :

● reduction of salaries and allowances of all or any class of person serving in the state 

●the reservation of all money bill or other financial bills for the consideration of the president after they are passed by the legislature of the state .

The president may also issue direction of reduction of salaries and allowances of

 ●all or any class of person serving the Union 

And 

●the judges of supreme court and the high court 

During the financial emergency the centre acquires full control over the states in all financial matters .

While explaining the provisions of Financial Emergency, Dr B.R. Ambedkar states that this Article more or less on pattern of National Recovery Act of USA passed in 1932 which gave President the complete power over economic and financial matters to remove difficulties and these provisions are taken by USA after the Great Depression of 1930.

The Financial Emergency has never been imposed in any part of country, neither has Article 360 been used till now though there was a financial crisis in 1991.