This article has been written by Ayush Tiwari, a student of Symbiosis Law School, NOIDA. This article explains Article 360 of the Indian Constitution, which deals with the provision of financial emergency in India.
It has been published by Rachit Garg.
The term “emergency” in general refers to a situation requiring quick action. Politically, it refers to a situation that occurs suddenly and requires governmental authorities to respond quickly and within their legal authority.
An emergency is a scenario in which the governing system has failed and quick action is needed so that the right procedures may be followed to address the problem in a timely manner.
In an emergency, the Centre assumes control of all decision-making authorities to guarantee that prompt solutions are supplied for the crisis that has developed. As a result, while the emergency is in place in India, the country transitions to a unitary system of government for the duration of the emergency.
The Indian Constitution’s emergency provisions were borrowed from the German Constitution. Part XVIII of the Constitution, from Articles 352 to 360, contains the emergency provisions. These Articles enable the Union government to properly respond to any unusual event. The rationale behind the Constitution’s inclusion of these Articles is to protect the nation’s sovereignty, unity, integrity, and security, as well as the democratic political system and the Constitution.
While emergency provisions are necessary, the government should not use them to solve every problem that arises in the country; instead, all other alternative solutions for resolving such a situation should be used first, and only when these methods fail to effectively address the problem then the provision of emergency be used to solve it.
Who has the power to declare an emergency in India
During times of crisis, the President of India, who is also the Head of State, under Article 360(1) of the Indian Constitution has the right to proclaim a state of emergency. According to Article 360(1), “If the President is of the opinion that such scenario has developed that he may issue a proclamation declaring that the financial stability or credit of India or any portion of its territory is under risk.” However, the President cannot declare an emergency at any time; instead, the Constitution requires that he does so only after the Union Cabinet, which includes the Prime Minister of India, has communicated to him in writing that an emergency is to be declared, and only then can the President declare an emergency. In the event that a state declares an emergency, the Governor of that state shall notify him in writing.
Financial emergency under Article 360
There are three types of emergencies given in the Constitution of India, and one of them is the financial emergency. The Indian Constitution acknowledges the potential for economic harm in certain circumstances. As a result, in the event of such an occurrence, Article 360 of the Indian Constitution allows for the imposition of a financial emergency in the country.
According to Article 360 of the Indian Constitution, the President may declare a Proclamation of financial emergency if he considers that the financial stability of India or any part of its territory is in jeopardy. So, when a scenario in the country emerges that leads to an economic crisis, the President of India may declare an emergency to address the problem. Judicial review of financial emergencies is made possible by the 44th Amendment Act of 1978.
Approval of Parliament and the time period of financial emergency
According to Article 360(2) of the Indian Constitution, the declaration of financial emergency must be ratified by both Houses of Parliament within two months of its issuance. A financial emergency, if approved by both Houses of Parliament, lasts indefinitely until it is repealed. Two things are implied by this:
1. Its continuance does not need repeated Parliamentary approval.
2. The function of a financial emergency is not subject to any time limits.
A Resolution approving the declaration of a financial emergency may only be carried by a simple majority in either House of Parliament (Lok Sabha or Rajya Sabha). The President can rescind a proclamation of a financial emergency at any moment without parliamentary agreement.
Outcomes of a financial emergency
After the Parliament approves the state of emergency, the Union assumes complete control of the country’s financial affairs. The Union Government may provide financial directives to any of the states, and the President may ask the states:
- to cut the pay and benefits of all or any class of government employees.
- to hold all money bills in reserve for consideration by Parliament once they have been enacted by the State Legislature.
- To reduce the salaries and allowances of central government officials, including those of Supreme Court and High Court judges.
Types of emergencies under the Indian Constitution
There are three types of emergencies mentioned under the Constitution of India:
- National emergency
- State emergency (President’s rule)
- Financial emergency
National emergency (Article 352)
A national emergency is defined under Article 352 of the Constitution. The declaration of a national emergency corresponds to statutory standards that must be followed when an extraordinary circumstance threatens or affects the nation’s harmony, defence, prosperity, or administration.
When the preceding circumstances were also met, emergency implementation was carried out in accordance with Article 352 of the Constitution.
- External aggression or
- Armed rebellion.
Article 352 provides that if the President feels “satisfied” that a perilous situation exists that jeopardises the security of India or any section of it as a result of foreign invasion or armed rebellion, he will issue a statement in that regard for all or nearly all of India.
When the President declares a state of emergency in the country, it lasts for one month. To prolong the term, the President must bring the proclamation to both Houses of Parliament, and if they accept the resolution, then it will last for six months. If the situation continues to deteriorate and an extension of the State of Emergency beyond 6 months is required, a Resolution must be enacted by both chambers once more. A Presidential Declaration of National Emergency can be repealed by the President at any point before the 30-day term from the date of its proclamation has expired, hence there is no minimum time duration for such a proclamation to be in effect.
State emergency or President’s Rule (Article 356)
Article 356 of the Constitution allows the President to establish President’s Rule on any Indian state if the constitutional machinery fails. There are two forms of this:
- If the President gets a report from the Governor of the state or is otherwise convinced or satisfied that the state’s position is such that the state government cannot rule according to the Constitution’s provisions.
- Under Article 365, if a state fails to comply with all orders made by the Union on subjects over which it has authority, President’s Rule may be imposed.
In basic terms, President’s Rule occurs when the state government is suspended and the state is administered directly by the national government through the governor’s office. The implementation of the President’s Rule in any state requires parliamentary consent. Within two months of its issuance, the President’s Rule proclamation must be ratified by both Houses of Parliament. A simple majority is required for approval.
The President’s Rule is in effect for six months at first. It can then be renewed every six months for another three years with legislative approval.
The 44th Amendment to the Constitution (1978) imposed various limitations on the installation of the President’s Rule for more than a year. It states that the President’s Rule can only be renewed beyond one year if the following conditions are met:
- In India, there is a national emergency.
- Due to the challenges in holding assembly elections in the state, the Election Commission of India declares that the President’s Rule must be maintained.
What happens when the President’s Rule has been implemented
- On behalf of the President, the governor oversees the state’s government. He or she enlists the assistance of the state’s Chief Secretary as well as other experts and administrators that he or she might choose.
- The President has the authority to announce that the functions of the state legislature will be exercised by Parliament.
- The President would either suspend or dissolve the state legislative assembly.
- When Parliament is not in session, the President has the authority to issue ordinances governing the state’s administration.
Instances where financial emergency could have been an option
Till now, there hasn’t been a single financial emergency in India.
The financial crisis of 1991
The most severe financial crisis in India’s history occurred in 1991. India’s economy was in transition. Fiscal imbalances were substantial and worsening in the 1980s, which fueled the financial catastrophe. The aggregate fiscal deficits of the federal and state governments widened significantly.
India’s foreign exchange reserves were so low that they could barely cover three weeks’ worth of imports, which led to a significant devaluation of the rupee. In the middle of 1991, India’s exchange rate underwent a significant adjustment.
However, despite the dire circumstances that brought India to the verge of bankruptcy, no financial emergency was declared.
The Center for Accountability and Systemic Change (CASC) requested that a financial emergency be proclaimed as a result of the COVID-19 outbreak in a writ petition filed as public interest litigation during the lockdown in March 2020. The argument, however, was rejected on the basis that the President must decide whether a financial emergency is valid or not.
Financial emergencies can only be declared by the President; the Supreme Court can only examine such declarations. The petition stated:
Since independence, COVID-19 has been the nation’s and world’s most pressing emergency, and it requires a joint command between the Union and state governments to manage in accordance with the law.
Criticisms of the provision of financial emergency
One fundamental issue with the financial emergency law is that, unlike other laws, it does not specify what constitutes a financial emergency. ‘Financial instability” is a broad term that governments may use to their advantage. India is governed under a federal system with a power shift to the centre. However, this statute restricts the authority of the state’s elected administrations. Their ability to make decisions in their own best interests is limited. Furthermore, India’s economy is managed by the central government. Even the best-performing states would have to bear the weight of the central government’s incompetence and failure. But, this provision has never been used.
Recent instances of a financial emergency
Since the Taliban gained control of Afghanistan in August, the nation’s financial and humanitarian crises have worsened. Acute malnutrition has ravaged Afghanistan since the United States withdrew its troops, generating a food crisis and jeopardising food security. According to the United Nations, at least 55% of the population is “likely to be in crisis or extreme levels of food scarcity” until March 2022, according to a study by Human Right Watch. Several humanitarian groups have issued warnings as the crisis’ scope and effect have grown, with several Afghan children dying of starvation every day.
The Coronavirus pandemic has had a significant negative impact on the tourist sector, which accounts for approximately 10% of the nation’s GDP and generates foreign exchange. Forex reserves have decreased as a result. The cost for Sri Lankans to obtain the foreign currency required to import products has increased as a result of the declining foreign exchange availability. Consequently, the Sri Lankan rupee value has decreased. To satisfy even its most basic food needs, the nation is largely dependent on imports. As a result, the cost of food has increased along with the rupee’s decline. By reducing agricultural productivity, the government’s restriction on the use of artificial fertilisers in farming has made the issue even worse. Thus causing an economic crisis in Sri Lanka. Recently, a public emergency was also proclaimed as a measure to control the crisis. Despite the fact that the Sri Lankan Constitution does not define an emergency in any legal sense. The Public Security Ordinance (PSO) of 1947 lists the causes or circumstances that might lead to a state of emergency, A state of emergency may only be declared by the President, and a judge cannot examine this choice. “The power to make emergency regulations under the PSO or the law for the time being in force relating to public security shall include the power to make regulations having the legal effect of overriding, amending or suspending the operation of the provisions of any law, except the provisions of the Constitution,” states Section 155(2) of the Sri Lankan Constitution.
These provisions of a financial emergency were provided with the intention of upholding the Constitution’s honour. The protection of the constitutional system, not its destruction, is the goal of power accumulation. The Emergency Provisions enhance the efficiency of the national government. The Union is in charge of protecting the country. The law was never applied in India. India never even attempted to use the provisions, despite going through a severe financial crisis in 1991 and fighting both starvation and war at the same time in 1965. Declaring a financial emergency harms the reputation of the nation. In order to protect the federal framework of the Union of India, the President is therefore given emergency powers as the Federal Head.
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