Article 360 of the Indian Constitution

Article 360 empowers the President of India to declare a Financial Emergency in the country or a part of its territory if they are satisfied that the

Article 360 of the Indian Constitution: Financial Emergency

Article 360 empowers the President of India to declare a Financial Emergency in the country or a part of its territory if they are satisfied that the financial stability or credit of India is threatened. This provision is part of the Constitution's emergency framework, alongside Article 352 (National Emergency) and Article 356 (State Emergency).

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Text of Article 360

"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, they may by a proclamation make a declaration to that effect."

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Provisions of Article 360

1. Grounds for Declaration:

   • Financial Emergency can be declared if the financial stability or creditworthiness of India or a part of its territory is under threat.

2. Presidential Proclamation:

   • The President of India can issue the proclamation.
   • The proclamation must be approved by both Houses of Parliament within two months of its issuance.

3. Duration:

   • Once approved, the Financial Emergency remains in force indefinitely, with no requirement for periodic renewal (unlike National or State Emergencies).

4. Effects of Financial Emergency:

   • Executive Control:
     • The Union Government assumes control over the financial matters of states.
     • The President can direct the states to observe financial propriety and implement specific measures.
   • Reduction of Salaries:
     • The salaries and allowances of civil servants, including judges of the Supreme Court and High Courts, can be reduced.
   • Parliamentary Oversight:
     • All financial and money bills passed by the state legislatures are subject to the President’s approval.

5. Revocation:

   • The President can revoke the proclamation at any time without parliamentary approval.

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Key Features of Article 360

1. Centralization of Financial Powers:

   • During a Financial Emergency, the Union Government assumes greater control over state finances to stabilize the economy.

2. Preventive Measure:

   • Article 360 is designed as a preventive mechanism to address economic crises before they escalate into unmanageable situations.

3. Impact on Fundamental Rights:

   • Unlike other emergencies, a Financial Emergency does not suspend Fundamental Rights.

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Historical Background of Article 360

1. Inspiration from British Laws:

   • The provision was inspired by similar provisions in the Government of India Act, 1935, which allowed financial oversight during economic crises.

2. Framers’ Intent:

   • The framers of the Constitution included Article 360 as a last resort to safeguard the financial health of the nation.

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Has Article 360 Ever Been Invoked?

• No Financial Emergency has ever been declared in India since its independence.
• Despite economic crises such as the 1991 Balance of Payments Crisis, successive governments have avoided invoking Article 360, opting for economic reforms and international assistance instead.

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Significance of Article 360

1. Economic Stability:

   • Article 360 provides a constitutional mechanism to restore financial stability during economic crises.

2. National Interest:

   • By centralizing financial control, the Union Government can ensure coordinated efforts to overcome financial difficulties.

3. Safeguard Against Mismanagement:

   • The provision acts as a deterrent against financial mismanagement by states or reckless fiscal policies.

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Criticism of Article 360

1. Potential for Misuse:

   • Like other emergency provisions, Article 360 has the potential to be misused for political purposes, undermining the federal structure.

2. Centralized Authority:

   • The sweeping powers given to the Union Government during a Financial Emergency dilute the autonomy of states.

3. Economic Impact:

   • The reduction of salaries and financial austerity measures may affect public sector employees and essential services.

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Judicial Interpretation of Article 360

• There has been no direct judicial interpretation of Article 360 as it has never been invoked.
• However, the judiciary has consistently emphasized the need for restraint and strict adherence to constitutional principles in the application of emergency provisions.

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Comparison with Other Emergencies

Aspect	National Emergency (Art 352)	State Emergency (Art 356)	Financial Emergency (Art 360)
Grounds	War, external aggression, armed rebellion	Breakdown of constitutional machinery in a state	Financial instability or credit threat
Effect	Suspension of Fundamental Rights	Dismissal of state government, dissolution of state legislature	Central control over financial matters
Duration	Initial 6 months, extendable	Initial 6 months, extendable up to 3 years	Indefinite, once approved
Approval Required	Parliament within 1 month	Parliament within 2 months	Parliament within 2 months
Judicial Review	Yes	Yes	Yes

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Conclusion

Article 360 serves as a critical constitutional tool to manage financial crises in India. While it provides the Union Government with extraordinary powers to stabilize the economy, its invocation has been avoided, reflecting a preference for democratic solutions and economic reforms. The provision underscores the Constitution’s ability to adapt to extraordinary situations while maintaining checks and balances.