While the United States periodically grapples with government shutdowns due to budgetary deadlocks, India’s Constitution offers a different kind of emergency lever — one that has never been pulled. Known as Article 360, the Financial Emergency provision is a powerful but dormant tool. It is designed to protect the nation’s economic integrity during times of severe financial distress.
What is a financial emergency?
Enshrined in Part XVIII of the Indian Constitution, Article 360 empowers the President of India to declare a Financial Emergency. This occurs if the financial stability or creditworthiness of the country — or any part of it — is under threat. Unlike the U.S. shutdowns that halt non-essential services, India’s mechanism centralises financial control. This allows the Union government to override autonomy of States in fiscal matters.
Once proclaimed, a Financial Emergency gives the Central government sweeping authority:
Centre can issue directives to states on maintaining financial discipline.
It may mandate salary cuts for government employees, including judges of the Supreme Court and High Courts.
Union government require state financial bills to be reserved for presidential review before becoming law.
In essence, the Centre assumes command over the financial levers of both Union and State governments. This represents a dramatic shift from India’s federal balance.
Checks, balances and amendments
The proclamation must be ratified by both Houses of Parliament within two months. If the Lok Sabha is dissolved during this window, the emergency can remain in effect until 30 days after the new House convenes. However, this is provided the Rajya Sabha has already approved it.
Once approved, the Financial Emergency continues indefinitely unless revoked. Notably:
There’s no time limit on its duration.
No repeated approvals are required.
A simple majority in Parliament suffices for its passage.
The 38th Amendment (1975) initially shielded the President’s decision from judicial scrutiny. However, the 44th Amendment (1978) reversed this, allowing courts to review the proclamation. This is a crucial safeguard against executive overreach.
The untouched trigger
Despite facing a major financial crisis in 1991, India has never declared a Financial Emergency. This restraint underscores the gravity of such a move — one that could undermine state autonomy and provoke political backlash.
While Article 360 offers a constitutional remedy for economic collapse, it also raises concerns. There is a potential for centralisation of power and potential misuse. The ability to override state finances and reduce salaries across the board could be seen as draconian if not exercised with utmost caution.
As India continues to navigate global economic uncertainties, the Financial Emergency clause remains important. It is a constitutional safety net. However, it must be deployed only with transparency, judicial oversight, and a commitment to preserving the federal spirit of the nation.
