Consider the following statements in respect of financial emergency under Article 360 of the Constitution of India: 1. A Proclamation of financial emergency issued shall cease to operate at the expiration of two months, unless before the expiration of that period it has been approved by the resolutions of both Houses of Parliament. 2. If any Proclamation of financial emergency is in operation, it is competent for the President of India to issue directions for the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of the Union but excluding the Judges of the Supreme Court and the High Courts. Which of the statements given above is/are correct?

1. Emergency Provisions: The Constitutional Framework (basic)

Welcome to our journey into the Emergency Provisions of the Indian Constitution. To understand how India maintains its stability during a crisis, we must look at Part XVIII (Articles 352 to 360). These provisions are a unique feature of our Constitution, designed to safeguard the sovereignty, unity, and integrity of the nation by allowing the federal structure to transform into a unitary system during extraordinary situations without a formal amendment Indian Polity, M. Laxmikanth, Chapter 17, p.173.

While we often hear about National Emergency or President's Rule, Article 360 deals specifically with a Financial Emergency. The President can proclaim this if they are satisfied that a situation has arisen where the financial stability or the credit of India (or any part of its territory) is threatened. Once issued, the Constitution provides a rigorous framework for its survival and implementation.

The most critical aspect of the constitutional framework is Parliamentary Approval. A proclamation of financial emergency does not stay in force indefinitely on the President's word alone; it must be approved by both Houses of Parliament within two months of its issue Indian Polity, M. Laxmikanth, Chapter 17, p.183. If the Lok Sabha is dissolved during this two-month period without approving the proclamation, it survives for 30 days from the first sitting of the newly elected Lok Sabha, provided the Rajya Sabha has already approved it.

During the operation of a Financial Emergency, the executive authority of the Union extends to giving directions to any State to observe specific "canons of financial propriety." This includes a very powerful provision: the reduction of salaries and allowances of all classes of persons serving in the State or the Union. It is important to note that this power is all-encompassing—it explicitly includes the Judges of the Supreme Court and the High Courts, whose salaries are otherwise protected under normal circumstances Indian Polity, M. Laxmikanth, Chapter 15, p.157.

Sources: Indian Polity, M. Laxmikanth, Emergency Provisions, p.173; Indian Polity, M. Laxmikanth, Emergency Provisions, p.183; Indian Polity, M. Laxmikanth, Centre-State Relations, p.157

2. National Emergency (Article 352): Grounds and Approval (intermediate)

To understand the full spectrum of emergency powers in India, we must first master the National Emergency under Article 352. Think of this as the most potent tool in the Union's arsenal. The President can declare a National Emergency when the security of India (or even a small part of it) is threatened by three specific grounds: War, External Aggression, or Armed Rebellion. Crucially, the President doesn't have to wait for the shells to start falling; a proclamation can be issued if there is a satisfied sense of imminent danger Indian Polity, M. Laxmikanth(7th ed.), Emergency Provisions, p.173.

There is a vital distinction in how we categorize these emergencies based on the grounds used:

Type	Grounds	Scope of Fundamental Rights
External Emergency	War or External Aggression	Article 19 is automatically suspended (via Article 358).
Internal Emergency	Armed Rebellion	Article 19 is not automatically suspended.

The approval process is where the Constitution ensures democratic checks. Once the President issues the proclamation, both the Lok Sabha and the Rajya Sabha must approve it within one month. If the Lok Sabha is dissolved at the time, the Rajya Sabha must approve it within the month, and the proclamation survives until 30 days after the first sitting of the newly reconstituted Lok Sabha Indian Polity, M. Laxmikanth(7th ed.), Emergency Provisions, p.174.

This shift toward periodic approval ensures that the Executive remains accountable to Parliament. Unlike a Financial Emergency (which we will study later), a National Emergency requires a "fresh lease of life" from the legislature every six months to remain in operation Indian Polity, M. Laxmikanth(7th ed.), Emergency Provisions, p.174.

Sources: Indian Polity, M. Laxmikanth(7th ed.), Emergency Provisions, p.173; Indian Polity, M. Laxmikanth(7th ed.), Emergency Provisions, p.174; Introduction to the Constitution of India, D. D. Basu (26th ed.), EMERGENCY PROVISIONS, p.414

3. President's Rule (Article 356): Failure of State Machinery (intermediate)

President's Rule, also known as 'State Emergency', is a significant provision under Article 356 that allows the Centre to take over the administration of a state when its constitutional machinery breaks down. Unlike a National Emergency, which affects the whole country, President's Rule is specific to a state. There are two distinct grounds for its imposition: first, under Article 356, if the President is satisfied (based on a Governor's report or otherwise) that the state government cannot function according to the Constitution; and second, under Article 365, which states that if a state fails to comply with or give effect to directions from the Centre, the President can deem it a failure of constitutional machinery D. D. Basu, Introduction to the Constitution of India, EMERGENCY PROVISIONS, p.420.

The procedure for approval is strict. A proclamation must be approved by both Houses of Parliament within two months of its issue. Once approved, it lasts for six months and can be extended up to a maximum of three years. However, the 44th Amendment Act (1978) introduced a 'check' to prevent its misuse: after one year, the proclamation can only be extended if two specific conditions are met: (1) a National Emergency is in operation in the whole of India or the state, and (2) the Election Commission certifies that elections to the state legislative assembly cannot be held D. D. Basu, Introduction to the Constitution of India, EMERGENCY PROVISIONS, p.420.

For many years, this power was used frequently and sometimes arbitrarily, leading to landmark legal battles. In the S.R. Bommai case (1994), the Supreme Court established that the President's proclamation is subject to judicial review. The court emphasized that Federalism and Secularism are parts of the 'Basic Structure' of the Constitution, and the power under Article 356 must be used sparingly Laxmikanth, Indian Polity, Basic Structure of the Constitution, p.130. This judgment ensures that the Centre cannot dismiss a state government simply because of political differences.

Sources: Introduction to the Constitution of India, EMERGENCY PROVISIONS, p.420; Indian Polity, Basic Structure of the Constitution, p.130

4. Suspension of Fundamental Rights during Emergencies (intermediate)

When our nation faces a grave threat, the Constitution provides for a temporary shift from a federal to a unitary system to protect the country's sovereignty. A key part of this shift is the suspension of Fundamental Rights, governed by two pivotal articles: Article 358 and Article 359. While they might seem similar, they operate very differently in how they affect our individual liberties.

Article 358 deals exclusively with the six Fundamental Rights guaranteed by Article 19 (like freedom of speech and assembly). The moment a National Emergency is proclaimed on grounds of war or external aggression, these rights are automatically suspended without any separate order Laxmikanth, M. Indian Polity, Emergency Provisions, p. 176. This means the State is freed from the restrictions of Article 19 and can make laws or take executive actions that might otherwise be unconstitutional. However, thanks to the 44th Amendment Act, this automatic suspension only happens during an external emergency, not during an emergency declared due to 'armed rebellion' Introduction to the Constitution of India, D. D. Basu, EMERGENCY PROVISIONS, p. 414.

In contrast, Article 359 does not automatically suspend any rights. Instead, it empowers the President to issue a specific order suspending the right to move any court for the enforcement of specified Fundamental Rights Laxmikanth, M. Indian Polity, Emergency Provisions, p. 177. Crucially, the rights themselves are not theoretically suspended; only their legal remedy (the enforcement) is put on hold. This can apply to any National Emergency (internal or external). However, the President cannot suspend the right to move the court for the enforcement of Articles 20 and 21 (protection in respect of conviction for offences and protection of life and personal liberty), which remain sacrosanct even during the darkest hours of an emergency.

Feature	Article 358	Article 359
Scope	Confined only to Article 19.	Covers all FRs specified in the Presidential Order.
Operation	Automatic suspension.	Requires a specific Presidential Order.
Duration	Operates for the entire duration of the Emergency.	Operates for the period specified in the Order.
Enforcement	Suspends the Rights themselves.	Suspends only the enforcement (remedy) of the rights.

Sources: Laxmikanth, M. Indian Polity, Emergency Provisions, p.176-177; Introduction to the Constitution of India, D. D. Basu, EMERGENCY PROVISIONS, p.414

5. Centre-State Financial Relations: Distribution of Revenue (intermediate)

In the federal structure of India, the distribution of financial resources is designed to ensure that both the Union and the States have the means to perform their respective duties. However, because the Centre has more expansive tax-raising powers, the Constitution provides for a balancing wheel—the Finance Commission—to recommend how revenue should be shared Indian Polity, M. Laxmikanth(7th ed.), President, p.194. Under Article 270, most central taxes are now distributed between the Union and the States based on a formula that was significantly simplified by the 80th Amendment Act of 2000 Introduction to the Constitution of India, D. D. Basu (26th ed.), DISTRIBUTION OF FINANCIAL POWERS, p.386.

While these rules provide stability during normal times, the Constitution allows for a dramatic shift during a National Emergency (Article 352). In such periods, the federal character becomes more unitary. The President is empowered to modify the constitutional distribution of revenues. This means the President can reduce or even completely cancel the transfer of finances—both the sharing of taxes and the provision of grants-in-aid—from the Centre to the States Indian Polity, M. Laxmikanth(7th ed.), Centre-State Relations, p.157.

It is crucial to note the duration of these modifications. Unlike some executive orders that might lapse quickly, any presidential order modifying revenue distribution during a National Emergency continues to have effect until the end of the financial year in which the emergency ceases to operate Laxmikanth, M. Indian Polity, Centre State Relations, p.157. This ensures that the Union government has the necessary fiscal flexibility to handle the crisis without mid-year budgetary disruptions.

Feature	Normal Times	National Emergency (Art. 352)
Revenue Sharing	Based on Finance Commission recommendations.	President can modify, reduce, or cancel sharing.
Grants-in-Aid	Provided as per Art. 275 and Art. 282.	Can be suspended or modified by the President.
Duration of Change	Fixed by 5-year Commission cycles.	Lasts until the end of the current financial year after the emergency ends.

Sources: Indian Polity, M. Laxmikanth(7th ed.), President, p.194; Introduction to the Constitution of India, D. D. Basu (26th ed.), DISTRIBUTION OF FINANCIAL POWERS, p.386; Indian Polity, M. Laxmikanth(7th ed.), Centre-State Relations, p.157; Laxmikanth, M. Indian Polity, Centre State Relations, p.157

6. Article 360: Mechanics of Financial Emergency (exam-level)

To understand Article 360, we must look at it as the 'financial safety valve' of the Constitution. The President can proclaim a Financial Emergency if they are satisfied that a situation has arisen where the financial stability or credit of India (or any part of it) is threatened. While the 38th Amendment (1975) tried to make this 'satisfaction' non-justiciable, the 44th Amendment Act of 1978 reversed this, ensuring that the President's decision is subject to judicial review if it is found to be malafide Indian Polity, M. Laxmikanth(7th ed.) > Chapter 17: Emergency Provisions > p. 183. Once proclaimed, the 'mechanics' of parliamentary control kick in. Unlike a National Emergency, which requires approval within one month, a Financial Emergency must be approved by both Houses of Parliament within two months. A critical distinction here is the voting threshold: it only requires a simple majority (majority of members present and voting) in either House. If the Lok Sabha is dissolved during this two-month window, the proclamation survives until 30 days after the first sitting of the reconstituted Lok Sabha, provided the Rajya Sabha has already approved it Laxmikanth, M. Indian Polity. 7th ed., McGraw Hill. > Chapter 17: Emergency Provisions > p. 183. One of the most unique aspects of Article 360 is its duration. Once the Parliament gives its initial approval, the emergency continues indefinitely until the President revokes it with a subsequent proclamation. There is no requirement for periodic parliamentary approval (unlike National Emergency or President’s Rule) Laxmikanth, M. Indian Polity. 7th ed., McGraw Hill. > Chapter 17: Emergency Provisions > p. 183. During its operation, the Union's executive authority expands significantly. The Centre can issue directions to states to observe specific 'canons of financial propriety.' Most notably, the President can issue directions for the reduction of salaries and allowances of all classes of persons serving the State or the Union—and this power specifically extends to Judges of the Supreme Court and the High Courts, despite their usual constitutional protections Indian Polity, M. Laxmikanth(7th ed.) > Chapter 15: Centre-State Relations > p. 157.

Feature	National Emergency (Art. 352)	Financial Emergency (Art. 360)
Approval Deadline	1 Month	2 Months
Majority Required	Special Majority	Simple Majority
Periodic Renewal	Required every 6 months	Not Required (Indefinite)

Sources: Indian Polity, M. Laxmikanth(7th ed.), Chapter 17: Emergency Provisions, p.183; Indian Polity, M. Laxmikanth(7th ed.), Chapter 15: Centre-State Relations, p.157

7. Executive Powers and Salary Reductions under Article 360 (exam-level)

During a Financial Emergency under Article 360, the normal distribution of financial powers between the Union and the States undergoes a significant shift, leaning towards a unitary structure. The Union executive acquires the authority to give directions to any State to observe such 'canons of financial propriety' as may be specified in the directions. This essentially means the Centre can dictate how a State manages its purse strings to restore financial stability Laxmikanth, M. Indian Polity, Chapter 15: Centre-State Relations, p.157.

The most striking feature of this period is the power to reduce salaries and allowances. While constitutional protections usually prevent the reduction of salaries for high-ranking officials during their term, Article 360(4) overrides these guarantees. The President may issue directions for the reduction of salaries of:

• All or any class of persons serving in connection with the affairs of a State.
• All or any class of persons serving in connection with the affairs of the Union.
• Crucially, this includes the Judges of the Supreme Court and the High Courts, whose salaries are otherwise protected from being varied to their disadvantage D. D. Basu, Introduction to the Constitution of India, Distribution of Legislative and Executive Powers, p.381.

Additionally, the President can require that all Money Bills or other Financial Bills passed by a State Legislature be reserved for his consideration after they are passed. This gives the Centre absolute veto power over the state's financial legislation during the emergency period Laxmikanth, M. Indian Polity, Chapter 30: State Legislature, p.344. If a State fails to comply with these executive directions, the Union may resort to Article 356 (President’s Rule) as a coercive sanction to ensure compliance D. D. Basu, Introduction to the Constitution of India, Administrative Relations Between the Union and the States, p.394.

Sources: Laxmikanth, M. Indian Polity, Chapter 15: Centre-State Relations, p.157; D. D. Basu, Introduction to the Constitution of India, Distribution of Legislative and Executive Powers, p.381; Laxmikanth, M. Indian Polity, Chapter 30: State Legislature, p.344; D. D. Basu, Introduction to the Constitution of India, Administrative Relations Between the Union and the States, p.394

8. Solving the Original PYQ (exam-level)

Now that you have mastered the theoretical framework of Emergency Provisions, this question tests your ability to apply precise constitutional deadlines and the scope of executive authority. To solve this, you must synthesize two critical components: the Parliamentary Approval mechanism and the Effects of Financial Emergency. Statement 1 tests your recall of the two-month window required for the proclamation to remain valid, a core feature of Article 360 that distinguishes it from the shorter one-month requirement of a National Emergency under Article 352.

Walking through the reasoning, Statement 1 is correct because the Constitution explicitly mandates approval by both Houses within two months of issue. However, Statement 2 contains a subtle but critical factual error. While the President can indeed direct the reduction of salaries for those serving the Union, Article 360 specifically includes—not excludes—the Judges of the Supreme Court and the High Courts. In the hierarchy of UPSC traps, this is a negative qualification error designed to catch students who understand the general concept but miss the specific legal exceptions. Therefore, the correct answer is (A) 1 only.

Why are the other options incorrect? Options (B) and (C) fail because they rely on the validity of Statement 2, which contradicts the constitutional provision aimed at fiscal austerity across all branches. UPSC frequently uses words like "excluding" or "except" to flip a statement's accuracy. By remembering that a Financial Emergency grants the Union unprecedented control over all state and federal expenditures as detailed in M. Laxmikanth, Indian Polity, you can confidently identify that no class of official is exempt from these measures.