FINANCIAL EMERGENCY

The Indian Constitution consists of three types of emergencies which are:

• Article 352 which is National Emergency.
• President’s Rule in a State comes under Article 356.
• Financial Emergency which comes under Article 360.

Financial Emergency is when the President of India is convinced that there is financial instability or debt of India/any part of India is jeopardized. The President of India can call for a Financial Emergency with the cooperation and support of the Council Ministers. Till now Financial Emergency has never been declared in India.

Who can Impose Financial Emergency?

The President of India is the person who can declare a financial emergency in India if he is convinced that India is financially unstable or there is a threat to the credit of India or its territory, but it can be inspected by the Supreme Court of India. According to the 44th Constitutional Amendment Act of 1978 which states that Supreme Court can review the decision of imposing a Financial Emergency in India.

Approval of the Parliament

The promulgation of Financial Emergency in India should be approved by both the Lok Sabha and the Rajya Sabha within two months of its issuance. 

After the approval from both Lok Sabha and Rajya Sabha, the financial emergency is imposed, till the time it is nullified. This suggests two things:

• Parliament’s repeated approval is not needed to continue Financial Emergency.
• Financial Emergency in India will continue as long as it is not revoked, hence no maximum time limit.

A decision of approving the promulgation of Financial Emergency is passed by the houses by a vote of the majority.

It can be revoked anytime by the President of India without the approval of The Parliament.

Consequences of Financial Emergency

There are a few consequences or aftermath of imposing Financial Emergency such as:

• After the approval of the financial emergency, the administrative powers of the Central Government expanded and now it has the power to give financial orders to states on its own.
• The money bills and financial bills, which have come up for President’s consideration can be reserved.
• The President has the right to order the states to reduce the salary of government employees.
• The President has the right to reduce the salaries of the Central Government officers which are even composed of Supreme Court and High Court Judges.

Hence, in the situation of Financial Emergency in India, the powers of the Centre broaden over the State in terms of Finance.

The Financial Crisis of 1991

In 1991 a serious financial crisis arose, but even at that time, Financial Emergency was not declared. It was the most serious financial crisis that occurred in India. In the 1980s there were compelling and increasing financial imbalances. The total financial deficits of the Centre and the State increased dangerously. This situation was tackled not by imposing Financial Emergency, but by restructuring and depreciating the Indian Rupee.

Covid-19 Crisis

When the lockdown started in March 2020, a writ petition was filed by the Centre for Accountability and Systemic Change (CASC) in the form of a PIL, demanding the declaration of a Financial Emergency in India due to the Covid-19 pandemic. The plea was rejected because the law states that the President needs to be convinced to impose a Financial Emergency. The power is in the hands of The President and the Supreme court can only analyse such petitions.

Why is Financial Emergency Not Appropriate?

The Central Government gets more power in financial matters over the State Government when a financial emergency is imposed, which is a threat to the financial dominance of the state which is against the federal character of India. This can also lead to the President’s dictatorship.

Conclusion

Such provisions were introduced to preserve the dignity of the Indian Constitution. The motive behind the article is to protect the constitution in all scenarios. It helps to improve the functioning of the Central Government in such difficult situations. The President is the head of the country hence he is empowered with such duties to help safeguard the constitution and the people of India. Emergencies come with a lot of responsibilities and drawbacks, and our constitution is prepared for all the circumstances. As seen in many scenarios such as the great depression of the 1930’s Financial Emergency can help in reviving the economy.