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During a National Emergency under Article 352, financial relations between Union and States can be modified under Article 354. Which of the following best describes this modification?
- Union can permanently take over State revenues
- President may modify revenue distribution, but modifications must be approved by Parliament and cease post-Emergency
- States lose all financial autonomy permanently
- Finance Commission recommendations become binding on Union
Answer: President may modify revenue distribution, but modifications must be approved by Parliament and cease post-Emergency
Financial relations during Emergency: (a) Article 354: During Emergency, President may modify distribution of revenues between Union and States (e.g., tax devolution, grants-in-aid), (b) Parliamentary approval: Modifications must be approved by Parliament within specified timeframe, (c) Temporal limitation: Modifications cease post-Emergency unless re-approved; federal fiscal normalcy restored, (d) Rationale: Enable coordinated fiscal response to crisis (e.g., war financing, disaster relief) while preserving Parliamentary oversight, State autonomy post-crisis, (e) Applications: (i) 1962, 1971 Emergencies: Fiscal adjustments for defence spending, resource mobilization, (ii) Post-Emergency: Modifications ceased; Finance Commission recommendations resumed normal operation, (f) Illustrates calibrated fiscal federalism: Enabling coordinated fiscal response to existential threats while preserving State autonomy through Parliamentary approval, time limits, sunset provisions.