Financial Emergency

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What is Financial Emergency ?
Financial Emergency is the one among the three emergency provisions in Indian Constitution, the others being The National Emergency and State Emergency. It can be declared by the President of India if the state of financial stability or credit of India comes under any threat.

What is threatening India's Financial stability to impose Financial Emergency ?
India have taken a major step in the world wide war against Corona Virus by declaring a nation wise lock down. The Prime minister addressed the nation on  March 25th informing the lockdown will continue for next 21 days, but it seems it will be extended for some more day.
As India still about to entry the stage 3 of this Corona Virus outbreak the government is trying its best to stop the transmission and contain the outbreak within stage 2. This lockdown decision may play a vital role doing that but India have to pay a lofty price on that.

During the lockdown  trade,manufacturing, travel and tourism sector are to be remain closed and this can hit the already drowning GDP of the country to drop further. According to Dun & Bradstreet's latest Economy Forecast, the probability of countries entering into recession and companies going bankrupt has increased and India is not likely to "remain decoupled" from the global meltdown.
Moreover a daily wager will also take a major blow from the lockdown. As in India a considerable portion of population depends upon daily wages government have to declare relief package.


Who will decide when to declare Financial Emergency ?
In Part 18, our Constitution there is provisions for financial emergency under the article 360. If the President is satisfied that a situation has arisen whereby the financial stability or credit of India or of any part of the territory thereof is threatened, then he may declares a Financial Emergency. It will be imposed all over the country as soon as it get approved in both house with simple majority with
in two months from time of issue.

What is the maximum duration of Financial Emergency ? Have India imposed any Financial Emergency till date ?
Unlike the Nation Emergency or State Emergency , Financial Emergency is not time bound and need no periodic reviews from parliament. It can be removed by the President only when he considers financial stability is sufficient .
After independence till now no Financial Emergency have been impossed in India. However in 1991 we came very close to face a financial emergency when economic situation was worsen due to frequent war against our neighbors. However it was avoided by some rapid foreign investment came after implementation of the new economic policy like LPG (Liberalisation Privatisation Globalisation).

How Financial Emergency can affect us ?
Just like other emergency, during financial emergency also our Constitution took unitary approach instead of federal approach. All major financial decisions are taken by central body. States are advised by center in all financial matters.When a Financial Emergency is in operation, the directions given by or powers assumed by Union or President are as follows:-
  1. A provision requiring the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a State.
  2. A provision requiring all Money Bills or other Bills to which the provisions of article 207 apply to be reserved for the consideration of the President after they are passed by the Legislature of the State.
  3. It shall be competent for the President to issue directions for the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of the Union including the Judges of the Supreme Court and the High Courts.


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