Under what circumstances can the Financial Emergency be proclaimed by the President of India? What consequences follow when such a declaration remains in force? (UPSC 2018)

Under Article 360, the President may proclaim a Financial Emergency if satisfied that the financial stability or credit of India, or any part of it, is threatened.

• Proclamation conditions: Threat to the financial stability or credit of India, or any part thereof; it must be approved by both Houses within two months by simple majority.
• Judicial control: The President’s satisfaction is now open to judicial review on mala fide or irrelevant grounds.

Effects: The Union can direct States on financial propriety, reduce salaries and allowances of Union and State employees, including judges of the Supreme Court and High Courts, and require Money Bills or other financial Bills of States to be reserved for the President. It continues until revoked by the President; Fundamental Rights are not suspended.