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If the President of India is satisfied that a situation has arisen due to which the financial stability or credit of India or any part of its territory is threatened. He/she can declare the Financial Emergency on the aid and advise of the Council of Ministers.
Article 360 gives authority to the President of India to declare a financial emergency.
A financial emergency is one of the three types of emergency declarations provided in the Indian Constitution. Article 360 of the Constitution empowers the government to ask the President to enforce a financial emergency if a “situation has arisen whereby the financial stability or credit of India or of any part of the territory there of is threatened”.
During a financial emergency, “the executive authority of the Union shall extend to the giving of directions to any state…” on financial matters. Article 360 has a provision requiring the reduction of salaries and allowances of all or any class of person serving a State or the Union. Once approved it remains in force till revoked by the President.
As the number of coronavirus cases increase in India, Finance Minister Nirmala Sitharaman announced a slew of measures considering the hardship people are facing due to the pandemic. However, a financial emergency has not been imposed in India yet. Nirmala Sithraman said today, That there is no economic emergency in India, Finance Minister allaying fears that the economy may not be financially equipped to deal with the fallout of the global coronavirus pandemic.
She announced that the Economic Task Force will soon release a relief package to deal with the impact of the COVID-19 pandemic on the economy.
Sitharaman also brought in a slew of measures in an effort to boost the economy, including extending tax deadlines, easing business rules, and waiving off bank charges.
Announcements during Lockdown:
- The Financial Minister extended the last day of filing returns for the financial year 2018-19 to June 30, 2020.
- The Vivaad se Vishwaas scheme was also extended to the same date, with no additional charge of 10%.
- The finance minister announced that debit card holders can now withdraw cash from ATMs of any bank free of charge, for the next three months. Minimum balance requirement has also been done away with for this period.
- The Aadhaar-pan linking date has also been extended to June 30 from March 31.
Types of Emergency in India
Emergency Provisions in the Indian Constitution are derived from the Constitution of Germany. The Constitution of India envisages three types of emergencies i.e.
- National Emergency in Article 352
- President’s rule in Article 356
- Financial Emergency in Article 360
Article 360 Economic Emergency
During destructive chaos in the nation due to corona virus, the Prime Minister has the power to declare one of the following emergencies- 352, 356, and 360. Accordingly, article 352 is in the times of national security, whereas, 356 is during law and order breakdown in the state. Meanwhile, 360 is especially for economical emergencies. Thus, article 360 gives authority to the country’s PM to declare a financial emergency. However, with a clause that specifies the state of the nation during which he can declare the same. That situation being, the economic stability of the country has worn off, credit is under threat or any other similar conditions.
Few of the Dire Instances of the Financial crisis
- RBI has appointed a committee of 90 people prudently over the Indian economy.
- Foreign Investors backing out of Indian market.
- Several multinational companies shut as the employees are advised to work from home.
- In other worse cases, the employees are terminated or asked to take unpaid leaves.
- Over 80% of the nation’s financial units are under lock down- Bangalore, Mumbai, Pune, Delhi, Lucknow, Kanpur, Hyderabad, Jaipur, Chennai, Kolkata, Gurgaon, Noida, Ahmedabad, and Surat.
- US dollar is crossing its highest value against the India Currency. As of today, 24-03-20, 1 USD is equal to Rs 76.18.
- The revenue-generating sectors such as oil- petrol, security service industries, transport, railways, and so on are facing the wrath of the coronavirus.
- The RBI’s contingency funds and emergency funds are depleted and in no state to help the current financial crisis.
- The worst of all cases is the share market of India. For instance, the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) haven’t experienced a spike after the pandemic hit. Rather, they are experiencing a continuous steep fall.
Effects of Financial Emergency
- All money bills or other financial bills, that come up for the President’s consideration after being passed by the state legislature, can be reserved.
- The President may issue directions for the reduction of salaries and allowances of;
(i) All or any class of persons serving the Union and
(ii) The judges of the Supreme Court and the High Court
Recently, all the Members of Parliament including the President, the Vice President, and the State Governors have decided to accept a 30% pay cut for the next year.
Some critics say that provisions of financial emergency pose a serious threat to the financial autonomy of the states that is against the federal structure of the country.
Earlier, a serious financial crisis had arisen in India in 1991, but even then a Financial Emergency was not announced. Therefore, even at this time, the government should make a conscious decision in this regard, although the whole country stands together with the government to deal with any situation due to the COVID-19 pandemic.
Doing the Necessary to Fight Coronavirus Pandemic
Despite the things said and done, and their everlasting effects, it is now important to focus on diminishing the Coronavirus Pandemic. Further, the health aspect of the global pandemic is immense along with its economic effect. In this regard, the Government measure- Janata Curfew was a partial success until the commoners expressed their gratitude by grouping and moving around by 5 pm. Consequently, the lockdowns to stop the spread of virus is a commendable step in the right direction. Meanwhile, in this dreadful scenario of fighting the nemesis of humanity, we certainly must rely on the fiscal intellects that could aid us.
In conclusion, the government is trying to curb the financial crises due to coronavirus. Thus, as citizens, it is necessary to abide by their constraints to successfully beat coronavirus. Declaration of financial emergency under Article 360 is highly unlikely by PM Modi.