BharatNotes What is Financial Emergency (Article 360)?
Article 360 of the Constitution of India empowers the President to proclaim a Financial Emergency if satisfied that "a situation has arisen whereby the financial stability or credit of India or of any part of the territory thereof is threatened." It is the third and least-used of the three emergency types in Part XVIII of the Constitution, and has never been proclaimed in India (as of June 2026), even during the 1991 balance-of-payments crisis.
Key Provisions and Procedure
A proclamation of Financial Emergency must be laid before Parliament and approved by both Houses within two months, failing which it ceases to operate. Approval requires only a simple majority (unlike the special majority needed for a National Emergency under Article 352). Once approved, the proclamation continues indefinitely — there is no maximum duration — until the President revokes it by a subsequent proclamation, which needs no parliamentary approval.
| Feature | Position under Article 360 |
|---|---|
| Who proclaims | The President |
| Ground | Threat to financial stability or credit of India |
| Approval period | Within 2 months by both Houses |
| Majority required | Simple majority |
| Maximum duration | No limit; continues until revoked |
| Times invoked | Never (as of June 2026) |
Effects of a Financial Emergency
During its operation, the Union acquires sweeping control over Centre-State financial relations. The executive may direct any state to observe canons of financial propriety, and such directions may include:
- Reducing salaries and allowances of all or any class of persons serving the state.
- Reserving all Money Bills and other financial Bills passed by a state legislature for the President's consideration.
Crucially, the President may also direct the reduction of salaries and allowances of persons serving the Union, including the Judges of the Supreme Court and the High Courts — a provision that highlights the gravity of the power, since judicial salaries are otherwise constitutionally protected.
The Judicial Review Dimension
The 38th Amendment Act, 1975 made the President's satisfaction in declaring a Financial Emergency final and conclusive, beyond challenge in any court. The 44th Amendment Act, 1978 deleted this clause, restoring the position that the President's satisfaction is subject to judicial review and can be questioned on grounds of malafide or being based on irrelevant or extraneous considerations. This restoration of accountability mirrors the broader post-Emergency reforms designed to prevent arbitrary use of emergency powers.
UPSC Angle
For Prelims, the safest preparation is a side-by-side comparison of Articles 352, 356 and 360 — focusing on approval periods, majority required, and duration. For Mains (GS2), Article 360 illustrates the unitary tilt of Indian federalism in times of crisis and the importance of constitutional safeguards. The standout exam facts: it has never been used, approval needs only a simple majority and has no time limit once approved, and the 44th Amendment made the proclamation justiciable.
