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Article 360 empowers the president to proclaim a Financial Emergency if he is satisfied that a situation has arisen due to which the financial stability or credit of India or any part of its territory is threatened.
A proclamation declaring financial emergency must be approved by both the Houses of Parliament within two months from the date of its issue.
Effects of Financial Emergency
1)Extension of the executive authority of the Union over the financial matters of the States.
2)Reduction of salaries and allowances of all or any class of persons serving in the State.
3)Reservation of all money bills or other financial bills for the consideration of the President after they are passed by the legislature of the State.
4)Direction from the President for the reduction of salaries and allowances of all or any class of persons serving the Union; and the judges of the Supreme Court and the High Courts.
These emergency provisions alter the federal structure of Indian Parliamentary democracy. What was once thought by Constitution makers that emergency provisions would seldom be abused, has been employed by different political parties for political purposes.
The 44th Amendment Act 1978, had introduced a number of safeguards against the misuse of Emergency provisions and made emergency proclamation a subject of Judicial Review.