Under what circumstances can the Financial Emergency be proclaimed by the President of India? What consequences follow when such a declaration remains in force? (10) (150 words)

Financial Emergency under Article 360 addresses a situation where the financial stability or credit of India or any part is threatened.

• The President may proclaim it on the Union Cabinet’s written advice; Parliamentary approval is required within two months.
• It may extend indefinitely, subject to revocation by the President; unlike National Emergency, there is no maximum period or mandatory six-month renewal.
• The proclamation is subject to parliamentary control and judicial review for constitutional mala fides.

• The Union may direct States to observe specified canons of financial propriety and issue directions affecting money bills and other financial legislation.
• The President may require reduction of salaries and allowances of persons serving the Union or a State, including judges of the Supreme Court and High Courts.
• State budgets may be reserved for presidential consideration. Federal fiscal autonomy is therefore substantially constrained.

Article 360; Financial Emergency; financial propriety; parliamentary approval; federalism