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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 modifications is permitted?
- Permanent transfer of State revenues to Union
- Temporary modification of revenue distribution approved by Parliament
- Abolition of Finance Commission
- Suspension of State budget approval process
Answer: Temporary modification of revenue distribution approved by Parliament
Financial relations modification 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) Permitted modifications: (i) Temporary modification of revenue distribution (e.g., adjusting tax devolution percentages, grants-in-aid amounts), (ii) Must be approved by Parliament within specified timeframe, (iii) Ceases post-Emergency unless re-approved; federal fiscal normalcy restored, (c) NOT permitted: (i) Permanent transfer of State revenues to Union (violates federal balance), (ii) Abolition of Finance Commission (constitutional body with independent mandate), (iii) Suspension of State budget approval process (violates State legislative autonomy), (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.