Financial Emergency in India

Financial Emergency in India

What do you mean by emergencies under the Indian constitution? How many types of emergencies are there?

Financial Emergency in India can be defined as a sudden action taken by the public authorities with respect to the powers authorities to take. The Indian constitution provides for the provisions which deal with emergencies contained under part XVIII from article 352 to Article 360 that enable the Central government with wide powers to come up with effective measures to curb uncontrollable situations.

This is considered to safeguard the sovereignty and integrity and democratic political system.

Under financial emergency in India, legislative and executive control is taken by the Central government and allows suspending the fundamental freedoms of the citizens.

There are basically three types of emergencies recognized under Indian constitution and they are-

  1. National emergency
  2. State emergency
  3. Financial emergency

 It was claimed by Dr. Ambedkar in one of the cases namely Gulam Sarwar V. Union of India stated the position of unitary state would be converted if the Indian federation came into emergency in India.

What is meant by a financial emergency in India?

The president has been empowered under article 360 for the proclamation of financial emergency in India if at a point he gets satisfied that an unstable situation has come because of which there has been a threatened towards the financial stability of India and economic crises have been arisen.

The consequences may arise under financial emergency in India that the central government gets the power to reduce or cut the salaries and allowances of the employees of centre and state government which include judges of the court. The financial or money bill that will be under the budget of the states will be required for getting the approval of the President.

Both the houses of the parliament have give approval upon the proclamation within 2 months of its issuance.

The executive authority of the union gives direction to any state to look over certain miss-happenings, or financial proprietary and such other directions to which the president thinks fit and finds necessary. The directions can include a reduction in salaries or allowances of the persons who are serving for the state. Also, the president can go for giving direction for a reduction in salaries who are serving on the seat of judges of Supreme Court or high courts.

When the financial emergency in India is declared? When it was declared in India?

When the Lok Sabha is dissolved or during the dissolution of Lok sabha for the period of  2 months where the proclamation has not been approved yet when the financial emergency in India has been issued, such proclamation sustains until 30 days of the first sitting of the Lok Sabha after once it is formed, but the Rajya sabha has to approve it during such proclamation of emergency.

Such proclamation will continue to be in operation once approved by both the houses of parliament until and unless it gets revokes.

Period of financial emergency in India can be attained by following the steps-

  1. The cabinet is of the suggestion of recommending the financial emergency.
  2. The Rajya sabha ratifies the financial emergency.
  3. The President dissolves the Lok Sabha on the recommendation by the prime
  4. There is a dissolution of Lok sabha by the president.

Financial emergency was not imposed or declared in India but a phase came where the situation was likely to be declared as a financial emergency during Prime Minister Chandra Shekhar followed by the finance minister Dr. Manmohan Singh but refrained by selling of the gold assets of India. The Supreme Court had adjourned the petition to issue the directions to the government for declaration of national financial emergency in India under article 360 in the phase of corona pandemic. The said petition would be taken up for the hearing only after once the court gets resume for it working.

Financial Emergency in India

What are the effects of the proclamation of financial emergency in India?

  • The powers of executive authority are widened in respect of financial matters of the states.
  • Effect on the reduction of salaries and allowances of the persons who are serving in the states.
  • The Reservations of financial bills or money bills are put up for consideration once they are passed by the state legislature.
  • The effect is also on the reduction of salaries of the judges of the Supreme Court and high courts as per the directions issued by the president for such reduction.

What are the situations where the financial emergency in India can be invoked?

The following are the lists situations where the central government can invoke financial emergency in India and they are-

  • An increase in fiscal deficit
  • An increase in the current account deficit
  • When there is a reduction in the gross domestic production
  • There is a reduction in credit ratings of the country
  • If there is a doubt on the financial stability of the country.
  • When  reduction takes place in the value of an Indian currency
  • If a country suffers an economic slowdown

What is the process of invoking the financial emergency?

Financial emergency in India shall be invoked by bringing order in both the houses of the parliament and for the approval of the order, it shall have more than 50 % vote in favor of such order. It should be approved within 2 months of its initiation. If such order has been issued at the time during when the house of parliament has been dissolved, the house before the expiration of 30 days from the next session shall approve such order of invoking of the financial emergency.

What are the effects of the proclamation of financial emergency in India on fundamental rights?

The legislature of the state has permitted or allowed the union to be part of the promulgation regarding financial matters that have been approved by the legislature. Also, it has the power to take control over taxation and budgetary revenue processes.

The power has been given to the union to decide upon the suspension of fundamental rights given in the Indian constitution under the provisions from article 12 to article 35.

 The rights are as follows-

The rights that are recognized as constitutional remedies shall also be suspended.

If any citizen feels that his right has been unlawfully suspended and is not able to exercise his right can challenge his suspension of rights.

How can financial emergencies in India be criticized?

Emergency provision was criticized by some of the members in the constituent assembly on following grounds-

  1. The union will become powerful resulting in harming the federal character of the Indian constitution
  2. There will be a concentration of powers will be in the hands of the union executive
  3. President will hold the dictatorship
  4. There be will be the destruction of the democratic foundation as the fundamental rights will become meaningless.

    Reference –
    Article by – Nitisha Sharma

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