If the President is satisfied that there is an economic situation in which the financial stability or credit of India is threatened, he/she can then proclaim a financial emergency, as per the Constitutional Article Such an emergency must be approved by the Parliament within two months. It has never been declared. On a previous occasion, the financial stability or credit of India has indeed been threatened, but a financial emergency was avoided through the selling off of India’s gold reserves.
A state of financial emergency remains in force indefinitely until revoked by the President.
The President can reduce the salaries of all government officials, including judges of the Supreme Court and High Courts, in case of a financial emergency. All money bills passed by the State legislatures are submitted to the President for approval. They can direct the state to observe certain principles (economy measures) relating to financial matters.
Article 360 empowers the president to proclaim a Financial Emergency if he 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.
A proclamation declaring financial emergency must be approved by both the Houses of Parliament within two months from the date of its issue by simple majority.
However, if the proclamation of Financial Emergency is issued at a time when the Lok Sabha has been dissolved or the dissolution of the Lok Sabha takes place during the period of two months without approving the proclamation, then the proclamation survives until 30 days from the first sitting of the Lok Sabha after its reconstitution, provided the Rajya Sabha has in the meantime approved it.
Once approved by both the houses of Parliament, the Financial Emergency continues indefinitely till it is revoked.