Financial Emergency under Article 360 of Indian Constitution

Financial Emergency under Article 360 of Indian Constitution


One of the chief characteristics of the Indian Constitution is the way in which the normal federal constitution can be adopted to emergency situation. It is the merit of the constitution that it visualizes the circumstances when the strict application of the federal principles might destroy the basic assumptions on which our constitution is built.

The Constitution of India provides for three types of emergency:

  • National Emergency – Due to war, external aggression or armed rebellion (article 352)
  • State Emergency – Due to the failure of constitutional machinery in states (article 356)
  • Financial Emergency – (article 360)


Financial Emergency was never declared in our country India but during 1991 it was thought to exercise financial emergency. It is known as “balance of payment crisis”. In the period of 70s and 80s total 21 areas were in direct control of government, and during that period India was tackling with so many other issues like multiple wars such as India-China war, India-Pakistan war because of which pending wars and defense was increased. For that wars and defense loan was procured from international agencies and the interest was so high that the budget of 80s and 90s was of biggest element i.e. 14%. Therefore, notion of financial emergency was going on.

In such situation government usually have 3 options:

  • Minting – Releasing new currency notes. This could have possibly led to an inflation.
  • International Help – Considering the fact that India was already under a lot of loan, this did not seem like a feasible option.
  • Domestic Help – Due to inflation and low economy, even this option was strike out.

Therefore, Dr. Manmohan Singh and P.V. Narasimha Rao came with policy of liberalization, privatization and globalization (LPG). Because of these policies the companies of other foreign countries were allowed to invest in our countries.

Though the whole market was in control of government, and the Foreign Direct Investment (FDI) was more in number so the government left their control over some major areas and allowed private companies. And by this way the emergency of 1991 was not announced.

Procedure for application of article 360 in India:

Article 360 provides that if the president is satisfies that situation has arisen whereby the financial stability or credit of India or part of the territory thereof is threaten, he may by a proclamation make a declaration to that effect. In other words, article 360 gives authority to the president of India to declare a financial emergency. But keeping in mind that the 44th constitutional amendment act of 1978 says that the president’s ‘satisfaction’ is not beyond judicial review. It means the Supreme Court can review the declaration of Financial Emergency.

Approval and Duration of Financial Emergency

The proclamation of financial emergency shall cease to be in operation at the expiry of 2 months unless it has been approved by both houses of parliament. Such a proclamation may be revoked by the president by a subsequent proclamation. But if the Lok Sabha is dissolved during the period of two months and resolution is approved by the Rajya Sabha, but not by the Lok Sabha the proclamation shall cease to operate at the expiry of 30 days from the date on which the new Lok Sabha sits unless before the expiry of 30 days a resolution approving proclamation is passed by the Lok Sabha.

Then the question arise, if financial emergency is imposed then who will end it?

The power has been given to president, if he/she issue a proclamation to end the financial emergency. A proclamation of financial emergency may be revoked by the president anytime without any parliamentary approval.

Effects of Financial Emergency:

  • The union executive will guide state executive that which standards shall be adopted, how to function, how to create financial discipline in the state.
  • Any kind of money will of every state will be issued by consent of president.
  • Union can guide state in accordance with salary, pension and allowance can be reduce. Also, the persons, who are working under union i.e. judges of Supreme Court or judges of High Court their salary, pensions or allowance can be stopped or reduced.


The constitution of India is unique in respect that it contains a complete scheme for speedy re-adjustment of peace-time machinery is movement of national peril. India come up with its new glorious power whenever feels weak. It is far well that the constitution guards against the forces of disintegration events may take place threatening the very existence of the state.

Author: Nishchal Kukade,
Dr. Babasaheb Ambedkar College of Law, Nagpur Final year Student

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