Under what circumstances can the Financial Emergency be proclaimed by the President of India? What consequences follow when such a declaration remains in force?
Approach · directive: “under what circumstances / what consequences”
What it asks · State when Article 360 can be invoked, the approval and duration rules, and the effects on the Union, the States and judges' pay.
The question has 2 parts — answer each
- Under what circumstances: the ground in Article 360, judicial review, and the approval and duration rules
- What consequences follow while the Proclamation is in force: for the States, for salaries including judges', and for the federal balance
Open with · Article 360 lets the President proclaim a Financial Emergency; it has never been used in India.
Cover
- Ground: the President must be satisfied that the financial stability or credit of India, or of any part of its territory, is threatened, for instance by a severe fiscal or balance-of-payments crisis.
- Approval and duration: the Proclamation is laid before both Houses and ceases after two months unless both approve it; once approved it lasts until revoked, with no maximum period.
- Effect on States: the Union may direct States to observe canons of financial propriety, and States can be told to reserve Money Bills and other financial Bills for the President's consideration.
- Effect on salaries: the President may direct reduction of salaries and allowances of persons serving the Union or a State, including Judges of the Supreme Court and the High Courts.
- Federal and judicial concerns: the power cuts into State fiscal autonomy and touches judicial independence; the 1991 balance-of-payments crisis was met without invoking it.
- Judicial review: the 38th Amendment (1975) had shielded the President's satisfaction from courts, and the 44th Amendment (1978) removed that clause, so the proclamation can be challenged.
Close with · Article 360 is a reserve power for an extreme fiscal crisis; its safeguards are parliamentary approval and judicial review, while its effect on State autonomy and judges' pay explains why it stays unused.
Add value (verified)
- Article 360(1) sets the ground for a Financial Emergency: a threat to the financial stability or credit of India or of any part of its territory. The Constitution of India (as on 1 May 2024), Article 360(1) — Legislative Department ↗“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, he may by a Proclamation make a declaration to that effect.”
Question: UPSC's CS (Main) 2018, GS Paper II — paper ↗. Approach: Minimalist IAS, checked 30 Sept 2026 (how we verify) — UPSC publishes no model answers. ·
Model answer · 233 words (UPSC limit 150) · Minimalist IAS
Article 360 lets the President proclaim a Financial Emergency; it is the one emergency provision India has never invoked.
Circumstances for proclamation
- Ground: the President must be satisfied that the financial stability or credit of India, or of any part of its territory, is threatened.
- Judicial review: the 38th Amendment (1975) made the President's satisfaction final; the 44th Amendment (1978) deleted that clause, so a proclamation is justiciable.
- Approval and duration: it must be laid before both Houses and lapses after two months unless both approve; once approved it continues until revoked, with no outer limit.
Consequences while in force
- Union directions: the Union may direct any State to observe canons of financial propriety and give other directions the President thinks necessary.
- Money Bills: States may be required to reserve Money Bills and other financial Bills passed by their legislatures for the President's consideration.
- Salaries: the President may direct reduction of salaries and allowances of persons serving the Union, including Judges of the Supreme Court and High Courts, and States may be told to do likewise.
- Federal and judicial cost: State fiscal autonomy is suspended in substance and judicial independence touched; even the 1991 balance-of-payments crisis was handled without it.
Article 360 is a reserve power for an extreme crisis; parliamentary approval and judicial review are its safeguards, and its drastic effect on State autonomy and judges' pay explains why it stays unused.
Written by Minimalist IAS from facts checked at source (how we verify) — a little fuller than exam length, so every part of the question is covered; in the hall, keep the structure and trim the detail. UPSC publishes no model answers: compare your structure and coverage with this, then write your own.