Topic 05 of 6 · Chapter 13 · Indian Polity
Financial Emergency — Article 360
Grounds, procedure, effects, never been proclaimed in India, and comparison with other emergencies.
📋 In This Article
1. Grounds for Financial Emergency
Article 360 provides for Financial Emergency when the President is satisfied that the financial stability or credit of India or any part thereof is threatened.
💡 Key Idea: Financial Emergency is the least used emergency provision. It has never been proclaimed in India since the Constitution came into force in 1950. The 1991 economic crisis (when India pledged gold to IMF) was a near-miss, but Financial Emergency was not proclaimed.
2. Procedure
- President proclaims Financial Emergency
- Must be approved by both Houses of Parliament within 2 months
- Approval requires simple majority
- Once approved, continues indefinitely until revoked
- No maximum duration specified
3. Effects
- Centre can give directions to States on financial matters
- Centre can direct States to observe specified canons of financial propriety
- Centre can direct States to reduce salaries and allowances of all government servants (including HC judges)
- All money bills and financial bills passed by State Legislatures must be reserved for President’s consideration
- Centre can direct reduction of salaries of Union government servants
- Fundamental Rights are NOT suspended during Financial Emergency
⭐ Exam Fact: During Financial Emergency, the Centre can reduce salaries of HC judges — this is the only emergency where judicial salaries can be reduced. During National Emergency, judicial salaries cannot be reduced.
4. Never Proclaimed in India
Financial Emergency has never been proclaimed in India. The closest India came to a Financial Emergency was in 1991 when India faced a severe balance of payments crisis and had to pledge gold to the IMF. However, the government managed to stabilize the economy through economic reforms without proclaiming Financial Emergency.
5. Comparison of Three Emergencies
| Feature | National Emergency (352) | President’s Rule (356) | Financial Emergency (360) |
|---|---|---|---|
| Grounds | War, External Aggression, Armed Rebellion | Failure of constitutional machinery in State | Threat to financial stability of India |
| Parliamentary approval | Special majority; within 1 month | Simple majority; within 2 months | Simple majority; within 2 months |
| Duration | 6 months; extendable | Max 3 years | No maximum; continues until revoked |
| FR suspended? | Yes (Art. 19 auto; others by Art. 359) | No | No |
| Times proclaimed | 3 times (1962, 1971, 1975) | 100+ times | Never |
6. Key Points for Exam
🔑 Must-Remember Facts
- Financial Emergency: Article 360
- Grounds: Threat to financial stability or credit of India
- Parliamentary approval: Within 2 months; simple majority
- Duration: No maximum — continues until revoked
- FR during Financial Emergency: NOT suspended
- Financial Emergency: Never proclaimed in India
- During Financial Emergency: HC judges’ salaries can be reduced
- National Emergency: 3 times (1962, 1971, 1975)
- President’s Rule: 100+ times
- Financial Emergency: 0 times
Topic 05 of 6 · Chapter 13 · Indian Polity
Financial Emergency — Article 360
Grounds, procedure, effects, never been proclaimed in India, and comparison with other emergencies.
📋 In This Article
1. Grounds for Financial Emergency
Article 360 provides for Financial Emergency when the President is satisfied that the financial stability or credit of India or any part thereof is threatened.
💡 Key Idea: Financial Emergency is the least used emergency provision. It has never been proclaimed in India since the Constitution came into force in 1950. The 1991 economic crisis (when India pledged gold to IMF) was a near-miss, but Financial Emergency was not proclaimed.
2. Procedure
- President proclaims Financial Emergency
- Must be approved by both Houses of Parliament within 2 months
- Approval requires simple majority
- Once approved, continues indefinitely until revoked
- No maximum duration specified
3. Effects
- Centre can give directions to States on financial matters
- Centre can direct States to observe specified canons of financial propriety
- Centre can direct States to reduce salaries and allowances of all government servants (including HC judges)
- All money bills and financial bills passed by State Legislatures must be reserved for President’s consideration
- Centre can direct reduction of salaries of Union government servants
- Fundamental Rights are NOT suspended during Financial Emergency
⭐ Exam Fact: During Financial Emergency, the Centre can reduce salaries of HC judges — this is the only emergency where judicial salaries can be reduced. During National Emergency, judicial salaries cannot be reduced.
4. Never Proclaimed in India
Financial Emergency has never been proclaimed in India. The closest India came to a Financial Emergency was in 1991 when India faced a severe balance of payments crisis and had to pledge gold to the IMF. However, the government managed to stabilize the economy through economic reforms without proclaiming Financial Emergency.
5. Comparison of Three Emergencies
| Feature | National Emergency (352) | President’s Rule (356) | Financial Emergency (360) |
|---|---|---|---|
| Grounds | War, External Aggression, Armed Rebellion | Failure of constitutional machinery in State | Threat to financial stability of India |
| Parliamentary approval | Special majority; within 1 month | Simple majority; within 2 months | Simple majority; within 2 months |
| Duration | 6 months; extendable | Max 3 years | No maximum; continues until revoked |
| FR suspended? | Yes (Art. 19 auto; others by Art. 359) | No | No |
| Times proclaimed | 3 times (1962, 1971, 1975) | 100+ times | Never |
6. Key Points for Exam
🔑 Must-Remember Facts
- Financial Emergency: Article 360
- Grounds: Threat to financial stability or credit of India
- Parliamentary approval: Within 2 months; simple majority
- Duration: No maximum — continues until revoked
- FR during Financial Emergency: NOT suspended
- Financial Emergency: Never proclaimed in India
- During Financial Emergency: HC judges’ salaries can be reduced
- National Emergency: 3 times (1962, 1971, 1975)
- President’s Rule: 100+ times
- Financial Emergency: 0 times