Under what circumstances can the Financial Emergency be proclaimed by the President of India? What consequences follow when such a declaration remains in force? (UPSC 2018, 10 Marks, )

EN ह

Circumstances for Proclaiming Financial Emergency

Please refer to 1987 question.

Consequences of a Financial Emergency

• Reduction in Salaries:
• Government Employees: During a Financial Emergency, the salaries and allowances of all or any class of persons serving the Union or a State, including judges of the Supreme Court and the High Courts, can be reduced.
• Control Over Financial Expenditure:
• Central Government’s Authority: The President can issue directions requiring all states to observe certain canons of financial propriety, and other necessary directions can also be issued to reduce government expenditure.
• Parliamentary Approval: Any proclamation of Financial Emergency must be approved by both Houses of Parliament within two months of the proclamation.
• Impact on State Finances:
• Central Supervision: The financial arrangements between the Centre and the states can be altered by the directions of the President to ensure the financial stability of the country.
• Duration and Revocation:
• Continuity: Once approved, the Financial Emergency continues indefinitely until it is revoked by the President.
• Revocation: The President may revoke the Financial Emergency at any time without requiring the approval of Parliament.