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Financial Emergency – Provisions and History

Apr. 11, 2022   •   Nikita Saha

AUTHOR'S PROFILE: Priya Singh, 2nd year (BA. LLB) of Chanakya National Law University


India's Past experiences with Emergency declarations have not been very satisfactory. In India, an emergency refers to a period that can be proclaimed by the President of India during a crisis-like situation, or if the President deems to think that a situation has arisen, proclaim an emergency. The President can proclaim an emergency under the advice of the cabinet of ministers; this decision of the President can overrule many provisions of the constitution, including the fundamental rights of the citizens guaranteed by our constitution. The provisions of emergency are contained in part XVIII of the Indian constitution. These provisions help the central government to tackle the abnormal situation effectively. There are three types of emergency- National emergency, Constitutional emergency, and Financial emergency. The rationale behind the addition of these emergency provisions is to safeguard the Nation's sovereignty, unity, integrity, and security.

  • Proclamation of emergency

The emergency must be approved by both the Houses of Parliament within one year of its introduction in the house. However, when the Lok Sabha is dissolved, then the Proclamation survives 30 days from the first sitting of Lok Sabha while the Rajya Sabha has, in the meantime, approved it. Either house of Parliament must pass the Proclamation with a special majority. Once both the houses approve it, it continues for six months and can be extended to an indefinite period with the Parliament's approval every six months.

  • Revocation of Emergency

Revocation of emergency does not require parliamentary approval. The Lok Sabha revokes it by simple majority disapproving the continuance of emergency, and the President revokes it at any time by a subsequent proclamation.

Emergency Powers– their origin and evolution

The emergency provisions under the Indian constitution can be traced back to British rule. In 1919, the famous Rowlett was passed. It was intended to be used as an emergency measure that was very stringent and was set out to control the territorial activities in India. Then, the Government of India act 1919 came. Section 72 of this act stated that The Governor-General might make and promulgate ordinances for peace and good governance of British India or any part of the Indian territories in cases of emergency. Similar power was conferred to the governor-general by the Government of India act, 1935. Under this act, the Governor-General can issue an emergency whenever a grave situation exists in the state's security.

India got freedom on 15 August 1947; Constituent Assembly was formed on 6 December 1946 to draft the constitution of Independent India. A draft was proposed by the constitutional expert DR. B.N. Rao and clauses 160, 181, and 191 were added to authorize the governor and the President to declare an emergency to their satisfaction. The revision committee suggested some reforms for emergency provisions. A new chapter was added, including article 275 to article 280 of the revised draft containing the emergency provisions. This provision was discussed at length by the founding fathers. Excessive reliance was given on the good faith for the Proclamation of emergency was questioned. Some significant changes were suggested by great stalwarts of that time who belonged from different parts of India and were members of the constituent's Assembly. Some of the important persons who have contributed to shaping such an essential part of the constitution are Dr. B. R. Ambedkar, K. M. Munshi, Kunzuru, Gopalaswami Avenger, and Alladi Krishnaswami Ayyar, K.T Shah, K. Santhanam. Articles 352, 353, 358, and 359 were initially figured out during the constitution and later adopted by the constituent Assembly. In India, a Financial emergency had not been imposed yet, but in the year 1991, there was a financial crisis situation. In 1991, there was a challenging situation for the Indian government, which was led by P.v Narasimha Roy and can be considered a financial emergency in a general sense. India's economic problem started deteriorating in 1985 as the import worsened and the trade balance was in deficit. By the end of 1990, due to the Gulf war, the dire situation arose that the foreign exchange reserves could only finance three weeks of imports. By July of the same year, low reserves led to the currency's sharp depreciation. In 1991, the budget was not passed by the government. The World Bank and IMF also stopped giving their assistance, leaving the government with no option except to mortgage the country's gold, and in that year, the government airlifted its gold reserves. This crisis paved the way for the liberalization of the Indian economy. After this, P.V Narasimha Rao took charge as Prime minister and roped Manmohan Singh as India's finance minister.

Provision of Financial Emergency

India's history of using draconian measures is bloody and harsh, and it is a matter of grave concern as to how to enforce financial emergency without human rights violations. It is also very uncertain whether central ministers would understand what must be done during this emergency or will be able to make use of it. The Planning commission has already proposed 20,000 proposals for economic gathering, but political parties cannot agree among themselves to pass these bills.

Article 360 of the Indian constitution provides provisions for financial emergencies. This article empowers the President to proclaim a financial emergency; if the President is satisfied that a situation has arisen whereby India's financial stability or credit or any part of the territory thereof is threatened, he may by a Proclamation declare that effect. However, a financial emergency is never imposed in India till now. This Proclamation issued may be revoked or varied by a subsequent proclamation. It shall be laid before each House of Parliament. A financial emergency shall cease to operate at the expiration of two months unless it can be approved again by the house's resolution before the expiration of the term. Provided that if such Proclamation is made when the Lok Sabha is dissolved and the Rajya Sabha has passed it, then such Proclamation shall cease to operate at the expiration of thirty days from the date on which the House of the People is first reconstituted.

The Effect of the Proclamation of the Emergency

After the Proclamation of the financial emergency, the union government may direct any state regarding financial matters. The President may ask the states to reduce salaries and allowances of any persons employed in government services, including salaries and allowances of the supreme court and high court judge. The President may also ask the states for any bills for consideration by the Parliament (which is passed by the state legislatures).


Since colonial rule, India has witnessed the adverse effects of emergency rules over civil liberties, which is the most cherished right of everyone. India's Past experiences with Emergency declarations have not been very satisfactory. In India state of emergency refers to a period of emergency that the President of India can proclaim during a crisis-like situation. These provisions help the central government to tackle the abnormal situation effectively. This provision was discussed at length by the founding fathers. Excessive reliance was given on the good faith of the Proclamation of emergency. Financial emergency, the President reduces the salaries and allowances of government-employed persons to tackle the country's financial crises. The emergency provisions give the president sweeping powers to deal with extraordinary and abnormal situations, and any misuse of these powers can lead to the supervision of democracy. It must be in the interest of the country. In declaring a Financial emergency government needs lots of cooperation; proper execution of plans and prioritizing subject matter are critical. The state then decides the essential sources required to help under such crises because the entire constitution is hampered during a financial emergency. Also, the President and the government must work on consensus and accordingly develop a discussed approach to tackle the crises with appropriate directions and guidelines. President can revoke financial emergencies anytime without the approval of Parliament.


  • Who can declare a financial emergency in the country?

The President of India can declare a financial emergency, given the financial situation.

  • Which part of the Indian constitution has emergency provisions?

Part XVIII of the Indian constitution contains emergency provisions from article 352 to article 360.

DISCLAIMER: This article is an original submission of the Author. Niti Manthan does not hold any liability arising out of this article. Kindly refer to our Terms of use or write to us in case of any concerns.

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