Is India On the Verge of Financial Crises – All About Emergency in India
“Hope
for Best, Prepare for the Worst”
The economy of India was not doing well even before the pandemic hit the
sub-continent. The unemployment rate in the country was the worst hit in the
last 45 years. According to CMIE (Centre for Monitoring Indian Economy), the
unemployment rate in India has been 8.14% as of July 2020, the same was the
rate last year as well in 2019. Even Indian Exports fell drastically this year.
During April-June 2020, exports fell by 36.7 %to USD 51.32 billion, while
imports shrank by 52.4 % to USD 60.44 billion.
It is therefore anticipated by the experts that the government might make
the move to impose Financial Emergency. But before we reach any conclusion let
us see the situation in detail.
What is Emergency?
Till date Financial Emergency has never imposed India. In our
constitution, we have three types of Emergencies which are written in part III
of our Constitution. Which says that in a normal situation, India behaves likes
a federal structure (decentralisation of power), but in the emergency situation
India behaves like the unitary structure of government (all the powers with the
centre). Article 352 talks about National emergency and it has been imposed in
1962 (Indo-China war) 1968 (Indo-Pakistan war) 1971 (Indo-Pakistan war). The
1971 emergency was still going on that in the meanwhile Indira Gandhi also
imposed another emergency for Internal Disturbance in 1975 to 1977.
Another provision for emergency India has is to remove the state
government and impose the Presidential Rule under article 356. It is also
called as State Emergency. BR Ambedkar in the constituent Assembly said that it
will remain a dead letter and nobody will use this provision in future India.
whereas in the reality this very emergency has been invoked for more than 120
times in India.
And the last is the Financial Emergency under article 360 in which if
the President of India is satisfied that India is facing a financial crisis, he
can invoke this article. Under article 360 the President has the power to
impose the Financial Emergency. And article 360 read with Article 74(1), which
says that power exercise by the President u/a 360 is on the advice of Council
of Ministers. And hence empowers the Central Government to impose the financial
emergency, after passing it in both the houses.
The doctrine of ‘power plus duty’ is difficult to impose in the current
situation as article 360 is completely based on the subjective satisfaction of
the President, hence article 360 could not be treated as provision containing a
power coupled with duty.
Judiciary has got the power to review the ‘satisfaction of the president’
upon the basis of which emergency was imposed, as inculcated by 44th amendment.
Procedure for imposing Emergency
The proclamation of emergency must be approved by both the houses of
parliament, within 1 month from the date of issue (and within 2 months from
date of issue for Financial emergency). If approved by both the house, then it
will sustain for a period of 6 months which can be further extended to
indefinite period with presidential approval.
For the approval special majority is required, i.e. two-third of the
members of the house shall be present and more than 50% pass it for Nation
emergency. Whereas for the Financial Emergency only simple majority is
required.
If the proclamation is issued when the Lok Sabha was dissolved, then the
proclamation can only survive for until 30 days from the first meeting of Lok
Sabha after its reconstitution, provided the Rajya Sabha has approved it in
meantime.
Maximum Period: The maximum period for emergency u/a 356 is 3
years, for emergency u/a 352 could be for an indefinite period and emergency
u/a 360 there is no maximum period defined and it can be proclaimed for an indefinite
period till it is revoked.
Revocation of Emergency: The emergency can be
revoked any time by means of a simple majority in the Lok Sabha, i.e. more than
50% of the total present members. OR the President of India can anytime revoke
it without any parliamentary approval required.
Will the Fundamental Rights be Suspended in Emergency?
Expression of ‘Proclamation of Emergency’ that President of India has,
is only for the National Emergency. So, therefore, only in case of National
Emergency u/a 352 the Fundamental Rights u/a 19 will automatically be
suspended. And other fundamental rights can only be suspended on by way of, notification
made by the president. Nation emergency after the 44th amendment
cannot be imposed on the advice of the Prime Minister but rather cabinets
approval is required. State emergency or the financial emergency does not
require the cabinet’s approval. If the Prime minister will advise the
President, then the President can impose the financial emergency, in case the
house is not in working due to any reason (for example pandemic
now).
In any case, article 20 and 21 will never be suspended if any type of
emergency is imposed in India.
The Financial Emergency will be a big blow to the autonomy of the State
government and Indian federalism.
Multiple PIL Filed for imposing Financial Emergency 2020
Where in the world, every country is fighting with the pandemic
Covid-19, it is rumored that India along with fighting is also preparing to impose the Financial
emergency. There are multiple PIL filed in the Supreme Court to impose Financial
Emergency. CASC (Centre for Accountability for Systematic Change) filed a PIL
(Public Interest Litigation) on 26th of March in the Supreme
Court n which they pleaded that in order to counter Covid-19 situation
Financial Emergency shall be imposed. The matter is before Hon’ble Jts. L.
Nageshwar Rao and Abdul Nazeer. Due to the unique and unprecedented prayer of
the CASC, make one to ponder, that can Supreme Court issue writ of Mandamus to
the Union/Ministry of Home Affairs/President directing them to impose Financial
Emergency.
What is CASC?
CASC is an independent think tank based in New Delhi, which is
non-political, not for profit organisation. It works towards rationalization
and enforcement of laws for better governance. It is founder by Supreme Court advocate.
Will Government take Support of Supreme Court to Impose Financial
Emergency?
Central Government has the power under article 360 of the Constitution
to impose Financial Emergency but in the current situation, the BJP government
have a majority in the Lok Sabha but not in the Rajya Sabha, therefore it is
said by experts and many people that government will might take the help of
Supreme Court to impose Financial Emergency.
What Raghu Ram Rajan and Subramaniam Swamy said
S. Swamy tweeted on 21st of March - "declaration
of economic emergency is becoming inevitable amid coronavirus pandemic? Is now
declaration of Economic Emergency becoming inevitable? Govt must put doubts at
rest"
Whereas the former RBI governor Raghu Ram Rajan tweeted "Economically
speaking, India is faced today with perhaps it’s greatest emergency since
independence". He said that lockdown for the further duration will
only negatively impact the economic situation. He said that India has
technically announced Rs. 1.7 lakhs crores (and not 20 lakh crore) package,
that is 0.8% of the country’s GDP, way less as compared to other countries
relief package.
Fitch Rating estimates that the Indian GDP due to this pandemic and
global recession could fall to a 30 year low of 2% in 2020-21.
Statement by the Indian Government
Indian Finance Minister Nirmala Sitharaman on 24th of March
2020 said that there is no economic emergency in India, allaying fear that the
economy may not be financially equipped to deal with the fallout of the global
coronavirus pandemic
Shankar Acharya, former Chief Economic Advisor of India and former chairman
of Kotak Mahindra Bank said that, after the lockdown, approximately 100 million
jobs have been lost. He further added that IMF (International Monetary Fund)
has claimed that India’s GDP (Gross Domestic Product) will remain 1.9% and
according to him it is also a very optimistic figure as he fears that the GDP
of India could fall to negative. 24% of unemployment which is measured by the
CMIE is also a huge number, the fall in the participation of labour by 6% and
the probability of an increase in fiscal deficit is all making the situation of
Indian economy very critical.
How many Financial Crises been faced by India?
Balance of Payment Crises
In the year 1991, India was only left with 1.2 billion dollars in
January 1991 and by June 1991 it remained 600 million dollars. Government has a
tremendous fiscal deficit. National Gold Reserve was pledged (around 67 tons of
gold), then only IMF agreed to lend 2.2-billion-dollar loan to India. RBI at
the same time had to pledge 47 tonnes of gold to the Bank of England and 20
tons gold was a pledge to Switzerland, and then only in return, India was able to
receive 600 million dollars. And all this amount was only sufficient for the
next 3 weeks to run the country. GDP had dreadful 12.9 % fiscal imbalance. It
was only after the Narsimha Rao government and Dr Manmohan Singh duo who were
able to revive the country back through their radical reforms.
Whereas now we have around 476 billion dollars of forex reserve, way
better position than that of 1991. GDP, which was 266 billion dollars in 1991,
is now of 3 trillion dollars. Even in 1991 Financial Emergency was
not imposed, so it can be said that there is no as such necessity and
requirement to impose it now.
Impact of Financial Emergency if Imposed
The government will have the full power to control and run the country.
They can reduce or restrain the pension and salary given to the government
employees. They will also have full autonomy to control the fund given by the
centre to the state government. The government can impose various restrictions
on the bank as well, so the people will have to face the restriction in the withdrawal
of funds from the bank, decrease rate in interest etc. if any State Government
oppose to the implementation of the emergency then the centre can dismiss the
state government u/a 356 of the Constitution and the centre will have its
direct rule in those states by means of Presidential Rule. So basically, in a financial
emergency, the Central government will have more executive power mostly with
regard to financial matters over the state government.
1 Comments
Good job, good going
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