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
Copper italics in this answer — like this — are the key facts. Each one is unpacked in the Facts & figures rail.
Introduction
Part XVIII of the Constitution provides three emergencies. The financial emergency under Article 360 is the least used: it has never been proclaimed, yet it is the sharpest Union tool against a collapse of credit or fiscal stability. The circumstances are narrow; the consequences, once the proclamation stays in force, reach State budgets and even judicial salaries.
Body
Circumstances for proclamation
- Article 360(1) allows the President to proclaim a financial emergency if satisfied that a situation has arisen whereby the financial stability or credit of India, or of any part of its territory, is threatened.
- The satisfaction is executive, but it is not a free political slogan: it must relate to stability or credit, not to ordinary Budget disagreement or a State’s refusal to follow a Union scheme.
- After the Constitution (Forty-fourth Amendment) Act, 1978, a proclamation under Article 360, like other emergency proclamations, is open to the idea of judicial review of the existence of relevant material, in the spirit of cases such as S.R. Bommai on related emergency power.
- Article 360(2) and (3) require the proclamation to be laid before each House of Parliament; it ceases after two months unless both Houses approve it by resolution.
- Once approved, it continues until the President revokes it; unlike Article 352, there is no six-month re-approval cycle written into Article 360.
- A new House of the People, if the Lok Sabha is dissolved during the two-month window, gets a short extra period to approve, on the same pattern as other emergency clauses.
Consequences while the declaration remains in force
- The Union may give directions to any State to observe such canons of financial propriety as may be specified, which is a temporary rewriting of ordinary federal fiscal autonomy under Articles 266 and 283.
- The President may issue directions for the reduction of salaries and allowances of all or any class of persons serving the Union, including the judges of the Supreme Court and the High Courts, which shows how deep the clause cuts into Articles 125 and 221 protections for the limited period of the emergency.
- All Money Bills and other Bills to which Article 207 applies, passing through a State legislature, may be reserved for the consideration of the President after they are passed; State taxing and spending legislation then waits on Union assent.
- Directions can require a State to reduce salaries of persons serving in connection with the affairs of the State, so the emergency is not only a Delhi pay cut.
- The proclamation does not dissolve State legislatures by itself, unlike the typical use of Article 356; it is a fiscal leash, not President’s Rule.
- Fundamental rights under Article 19 are not suspended by Article 360 the way Article 358 operates during a proclamation under Article 352; the financial emergency is a money-and-federalism device.
Why the clause has stayed unused
- India has used IMF programmes, Finance Commission awards, FRBM-type laws, and Article 360’s shadow rather than the proclamation itself.
- A live Article 360 would be read as a political stigma on both the Union’s management and the States’ credit; that political cost is the practical check.
Way forward
- 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.
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
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.
Quick related
Students also ask
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Explain the salient features of the constitution(One Hundred and First Amendment) Act, 2016. Do you think it is efficacious enough 'to remove cascading effect of taxes and provide for common national market for goods and services'? (250 words).
Next question on this syllabus topic (2017 · Q11). View answer →
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Has a financial emergency ever been declared in India?
No. Article 360 has remained unused even in severe Balance-of-Payments and fiscal-stress years.
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Does Article 360 suspend Article 19 like a national emergency?
No. Article 358 is tied to Article 352. A financial emergency works through directions, salary cuts and reservation of State financial Bills.
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