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30-october-2023

1.  In what situations may the President of India declare a Financial Emergency? What happens if a proclamation like this remains in effect?

ANSWER:

  • Part XVIII of the Indian constitution (Articles 352 to 360) provides for three kinds of emergency and Article 360 under this part talks about Financial emergency, the conditions under which it can be imposed, and the consequences of such imposition. Till now financial emergency has not been imposed in India despite the severe economic hardships of the 1991 BoP crisis.

CIRCUMSTANCES UNDER WHICH THIS EMERGENCY CAN BE IMPOSED

The Financial Emergency can be proclaimed by the President of India under the following circumstances:

1.The President may declare a state of financial emergency if he is convinced that circumstances have emerged that jeopardize India’s credit or financial stability in whole or in part.

  1. If the President receives a report from the Governor of the Reserve Bank of India stating that the monetary stability of India is threatened, he can proclaim a state of financial emergency.

CONSEQUENCES OF FINANCIAL EMERGENCY

  1. The President can direct the reduction of salaries and allowances of all or any class of persons serving in the Union or State Governments, including the Judges of the Supreme Court and High Courts.
  2. The President can direct the reduction of pensions of retired persons and other measures to reduce expenditure.
  3. If it is thought necessary to preserve India’s or any portion of its financial stability or credit, the President may order the Union Government to assume management of any financial institution.
  4. The President can direct the Union Government to take over the management of any corporation or company if it is deemed necessary to maintain the financial stability or credit of India or any part thereof.
  5. The President can direct the Union Government to impose restrictions on the withdrawal of deposits from banks and other financial institutions.
  6. The President can direct the Union Government to take such other measures as may be deemed necessary to maintain the financial stability or credit of India or any part thereof.

The National Recovery Act of 1933 of the United States provided the President the authority to enact comparable laws to help the American people overcome the hardships brought on by the 1930s Great Depression, as Dr. BR Ambedkar clarified.

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