The Centre-state financial relations in normal times (described above) undergo changes during emergencies. These are as follows:
National Emergency While the proclamation of national emergency (under Article 352) is in operation, the president can modify the constitutional distribution of revenues between the Centre and the states. This means that the president can either reduce or cancel the transfer of finances (both tax sharing and grants-in-aid) from the Centre to the states. Such modification continues till the end of the financial year at which the emergency ceases to operate.
Financial Emergency While the proclamation of financial emergency (under Article 360) is in operation, the Centre can give directions to the states: (1) to observe the specified canons of financial propriety; (ii) to reduce the salaries and allowances of all class of persons serving in the state (including the high court judges); and (iii) to reserve all money bills and other financial bills for the consideration of the President.