Q3 · UPSC Civil Services Mains 2018 · GS II · 10 marks · 4 min read

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

Topic: Indian Constitution. Syllabus: Indian Constitution — historical underpinnings, evolution, features, amendments, significant provisions and basic structure. Same official PYQ from year-wise 2018 and Indian Constitution.

Revision summary

Article 360 is triggered only by a threat to the financial stability or credit of India or any part of it. Parliament must approve the proclamation within two months; it then lasts until revoked. The Union can direct States on financial propriety and reduce salaries of Union and State servants, including judges. State Money Bills and related financial Bills may be reserved for the President. The clause has never been proclaimed; ordinary fiscal law is the first line of defence.

Model answer

Flow diagram

flowchart TD
  T[Threat to financial stability or credit] --> P[President Art 360]
  P --> H[Both Houses within two months]
  H --> D[Directions to States]
  H --> S[Salary cuts including judges]
  H --> M[State Money Bills reserved]

Conclusion

  • Keep Article 360 as a last-resort constitutional valve, and rely first on the FRBM architecture, GST Council discipline, and Finance Commission conditionality.
  • If ever used, Parliament should attach a clear fiscal correction plan and a sunset review, so a “until revoked” emergency does not become an indefinite Union tutelage over State Budgets.

The President may proclaim a financial emergency only when India’s financial stability or credit, or that of any part of the territory, is threatened, and Parliament must approve the proclamation within two months. While it lasts, the Union can dictate canons of propriety, cut even judicial salaries, and reserve State Money Bills — which is why the clause is drastic, and why it has never been used.

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