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.

Financial Emergency in India: Declaration and Consequences

The President of India can proclaim a Financial Emergency under Article 360 of the Indian Constitution when a situation arises where the financial stability of India is threatened.

Circumstances for Proclamation:

The President can declare a Financial Emergency if:

• The financial stability of India is threatened: This could be due to a severe economic crisis, a sudden decline in government revenue, or a significant increase in public expenditure.
• The President is satisfied that the situation is so grave that it cannot be dealt with by ordinary means: This implies that the crisis is beyond the capacity of the government to handle with normal budgetary measures.

Consequences of Financial Emergency:

• Executive Power of the Union: The President can assume the executive power of the states with respect to their financial matters. This means the central government can take over the state government's financial administration and control their spending.
• Legislative Power of the Union: Parliament can make laws relating to financial matters for the whole of India, even if these matters normally fall under the jurisdiction of the states.
• Distribution of Revenues: The President can modify the distribution of revenues between the Union and the states, and can even withhold funds to the states.
• No Limitation on Powers: Unlike other emergencies, there is no time limit on the duration of a Financial Emergency. It can remain in force until the President is satisfied that the situation has improved.

Constraints on Financial Emergency:

• Parliamentary Approval: While the President declares the Financial Emergency, it requires the approval of both Houses of Parliament within two months.
• Judicial Review: The Supreme Court has the power to review the validity of a Financial Emergency proclamation.
• Limited Scope: The Financial Emergency can only be used to address financial instability. It cannot be used for political purposes or to undermine the federal structure of India.

Historical Context:

India has never declared a Financial Emergency, although there were discussions about its possible imposition during the 1991 economic crisis. The threat of a Financial Emergency serves as a powerful tool to encourage fiscal discipline and responsible financial management by the states.

It's important to note that the declaration of a Financial Emergency is a drastic measure with significant consequences for both the Union and the states. It is a tool that should be used only in extreme circumstances when all other measures have failed.

In India, a Financial Emergency can be proclaimed by the President under Article 360 of the Constitution. The circumstances under which such a proclamation can be made are as follows:

Circumstances:

1. Grave financial crisis: If the President is satisfied that a situation has arisen where the financial stability or credit of India or any part of its territory is threatened.
2. Economic instability: If the President is convinced that the economy of India or any part of its territory is facing a grave economic crisis, leading to a breakdown of the economy or a significant decline in the standard of living.
3. National interest: If the President believes that the financial emergency is necessary to protect the national interest or maintain the sovereignty and integrity of India.

Consequences of a Financial Emergency:

When a Financial Emergency is declared, the following consequences follow:

1. Executive control: The Executive (Central Government) gains control over the finances of the country, including the power to issue directions to states, banks, and financial institutions.
2. Suspension of Fundamental Rights: Certain Fundamental Rights, such as the right to property (Article 31), may be suspended or restricted to ensure financial stability.
3. Reduction in salaries and allowances: The President can reduce the salaries and allowances of all or any class of persons serving in connection with the affairs of the Union, including judges, parliamentarians, and government employees.
4. Control over State finances: The Central Government can issue directions to States on the management of their finances, including the imposition of conditions for the grant of financial assistance.
5. Suspension of legislative powers: The Parliament's power to make laws on certain financial matters may be suspended, and the President may issue ordinances on these matters.
6. Restrictions on borrowing: The Central Government can impose restrictions on borrowing by States, local authorities, and other entities.
7. Austerity measures: The Government can introduce austerity measures, such as reducing non-essential expenditure, to ensure financial discipline.
8. Increased presidential powers: The President may exercise powers related to the management of the economy, including the power to issue directions to any authority or individual.

It is essential to note that a Financial Emergency can only be declared when the President is satisfied that the circumstances justify such a declaration. Moreover, such a declaration must be approved by both Houses of Parliament within two months, failing which it will cease to operate.