Introduction

If the president is satisfied that the financial stability or credit of India or any part of the state is in danger then he can issue a proclamation declaring a financial emergency.

His satisfaction is subject to judicial review.

Such a proclamation has to be approved by a simple majority in both houses.

If Lok Sabha is dissolved Rajya Sabha can approve it but Lok Sabha has to approve too within 30 days of the first sitting after it’s been reconstituted.

Effect of the Financial Emergency

Once approved it continues indefinitely [no max period] without repeated legislative approvals. President can revoke this proclamation anytime; this doesn’t need parliament’s approval.

During a financial emergency, the center can ask states to observe canons of financial propriety. It can direct that money bills or financial bills of state should need the president’s assent.

President can also direct a reduction of salaries of government servants under union or state. These include judges of SC and HCs.

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