GS Question

The President of India can proclaim a Financial Emergency under Article 360 of the Indian Constitution if they are satisfied that there exists a grave financial crisis that endangers the stability and credit of the country or any part thereof. This can occur due to factors such as war, external aggression, or internal disturbances.

When a Financial Emergency is proclaimed and remains in force, the following consequences follow:

1. Central government control: The financial powers of the states are transferred to the President, allowing the central government to assume complete control over financial matters in the country or specific regions as necessary.

2. Parliament control: The Parliament gains the power to make laws on matters that fall within the purview of the state legislatures. It can also authorize the President to direct the states on various financial matters.

3. Reduction in salaries and allowances: The President can direct the reduction of salaries and allowances of all government officials, including judges of the Supreme Court and High Courts.

4. Central government's authority on financial institutions: The central government can issue directions to financial institutions and the Reserve Bank of India or take control over their operations if deemed necessary.

5. Suspension of the financial autonomy of states: The President can direct the states to observe certain principles, guidelines, or priorities in financial matters. This allows the central government to exercise control over state budgets and financial decisions.

6. Suspension of fundamental rights: Under a Financial Emergency, the President can suspend the right to move to court for the enforcement of any rights relating to property, rights to property acquired under Article 19, and the right of individuals to hold or dispose of property.

It is important to note that a Financial Emergency has only been proclaimed once in India's history, during 1991 when the country faced a severe balance of payments crisis.