Article 360 of Constitution of India: Financial Emergency

Article 360, in Part XVIII of the Constitution of India, contains the constitutional framework for a Financial Emergency. It empowers the President to issue a Proclamation when the financial stability or credit of India, or any part of its territory, is threatened.

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What is a Financial Emergency under Article 360?

Under clause (1), the constitutional trigger is a threat to the financial stability or credit of India or any part of India. If the President is satisfied that such a situation has arisen, a Proclamation may be issued declaring a Financial Emergency.

The expression financial stability or credit is not separately defined in Article 360. In the constitutional text, it functions as the threshold condition for exercise of the power under this Article.

Parliamentary approval and duration

A Proclamation may be revoked or varied by a later Proclamation and must be laid before each House of Parliament. It ordinarily ceases to operate after two months unless both Houses approve it by resolutions before that period expires.

If the Lok Sabha is dissolved when the Proclamation is issued, or is dissolved during the two-month period, the Constitution provides a special continuation rule where the Rajya Sabha has approved it. The Proclamation then ceases thirty days after the reconstituted Lok Sabha first sits unless the Lok Sabha also approves it within that period.

Amendment note: Clause (2) in its present form was substituted by section 41 of the Constitution (Forty-fourth Amendment) Act, 1978, with effect from 20 June 1979.

Effect of a Financial Emergency

While a Proclamation under Article 360 is in operation, the Union's executive authority extends to giving directions to a State to observe specified canons of financial propriety. The Union may also give other directions that the President considers necessary and adequate for the purpose.

Reduction of salaries and reservation of State Bills

Directions under Article 360 may require reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a State. They may also require Money Bills, or other Bills to which Article 207 applies, to be reserved for the consideration of the President after passage by the State Legislature.

During the operation of the Proclamation, the President may additionally direct reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of the Union, including Judges of the Supreme Court and High Courts.

Article 360 explained clause by clause

Clause (1): Authorises a Proclamation where the President is satisfied that India's financial stability or credit, or that of any part of its territory, is threatened.
Clause (2): Governs revocation or variation, laying before Parliament, approval by both Houses, the two-month limit and the special rule applicable when the Lok Sabha is dissolved.
Clause (3): Extends Union executive authority to financial-propriety directions to States and other necessary and adequate directions.
Clause (4)(a): Permits directions concerning State-related salaries and allowances and reservation of specified State Bills for Presidential consideration.
Clause (4)(b): Permits Presidential directions reducing Union-related salaries and allowances, expressly including those of Supreme Court and High Court Judges.

Related constitutional provisions

Article 360 forms part of Part XVIII - Emergency Provisions. For the surrounding constitutional scheme, see Article 352 - Proclamation of Emergency, Articles 355 and 356, and Article 359.

Source note: This article is an explanatory guide. For authoritative wording, refer to the official Constitution published by the Legislative Department or India Code.