The Constitution of India incorporates Emergency provisions to protect the sovereignty, unity, integrity, and security of the country, as well as the democratic political system and the Constitution itself.

During an Emergency, the central government gains significant authority, and the states come under its complete control, effectively transforming the federal structure into a unitary one without a formal constitutional amendment.

This unique feature of the Indian Constitution empowers the Union government to address critical situations that threaten the financial stability or credit of India or any part of its territory.


Grounds of Declaration of financial emergency:

  • The President of India can proclaim a Financial Emergency under Article 360 of the Constitution if he is satisfied that the financial stability or credit of India or any part of its territory is at risk.
  • The 38th Amendment Act of 1975 initially made the President’s satisfaction in declaring a Financial Emergency final and conclusive, without any scope for judicial review. However, this provision was subsequently removed by the 44th Amendment Act of 1978, ensuring that the President’s decision is subject to judicial scrutiny.

Consequences of Financial Emergency:

  • The executive authority of the Centre expands significantly during a Financial Emergency. The Union government can direct any state to observe specific financial propriety canons and take necessary measures as deemed fit by the President.
  • The directions issued by the President may include provisions for reducing the salaries and allowances of state officials and reserving all money bills or other financial bills for the President’s consideration after passing by the state legislature.
  • The President can also issue directions for reducing the salaries and allowances of Union government employees, Supreme Court judges, and High Court judges.
  • Consequently, during a Financial Emergency, the Centre gains complete control over financial matters in the states.
  • Once a Financial Emergency is approved, it continues indefinitely until the President revokes it, without the need for repeated legislative approvals, and parliamentary approval is not required for its revocation.


  • Despite the provision for a Financial Emergency in the Constitution, India has never witnessed the imposition of such an Emergency in any part of the country.
  • Moreover, Article 360, which empowers the Union government to take control over state governments in financial matters, has not been utilized to date.


The incorporation of Emergency provisions in the Indian Constitution serves the vital purpose of safeguarding the nation’s interests during critical times.

A Financial Emergency empowers the Union government to manage financial matters in the states, ensuring financial stability and credit during challenging situations.

However, the provision has remained dormant since its inception, indicating the resilience and stability of India’s financial systems and the nation’s commitment to maintaining a democratic and federal structure.

Legacy Editor Changed status to publish March 2, 2024