CSEET · Economic and Business Environment

Key Government Institutions: formula sheet

Full chapter guide

Key formulas

Full form: NITI = National Institution for Transforming India; Replaced the Planning Commission on 1 January 2015.
Nature of body: NITI Aayog = policy think tank + advisory body (set up by executive resolution); It is not a statutory body and does not allocate funds as the Planning Commission did.
Chairperson: Chairperson = Prime Minister of India; Governing Council = PM + Chief Ministers + Lieutenant Governors of UTs without legislatures.
Approach shift: Planning Commission: top-down → NITI Aayog: bottom-up; Core one-line difference. Add cooperative federalism for full marks.
Key organs: Governing Council, Regional Councils, Vice-Chairperson, Members, CEO, Special Invitees; Learn this list for structure questions.
Repo rate: Repo rate = rate at which RBI lends to commercial banks; Higher repo rate makes bank borrowing costlier and tends to reduce credit and inflation.
Reverse repo rate: Reverse repo rate = rate at which RBI borrows from commercial banks; Opposite direction of flow from repo. It absorbs extra money from the system.
Cash Reserve Ratio (CRR): CRR amount = CRR % × bank's net demand and time liabilities; Kept as cash with the RBI. Higher CRR leaves banks with less to lend.
Statutory Liquidity Ratio (SLR): SLR amount = SLR % × bank's net demand and time liabilities; Kept by the bank itself in liquid assets like cash, gold and government securities.
Policy direction rule: Control inflation: raise rates, CRR, SLR, sell securities. Boost growth: do the opposite; Use this to answer any direction-of-effect question.
Statutory basis: SEBI Act, 1992 (statutory status from 30 January 1992); It began in 1988 as a non-statutory body. Do not write 1988 as the Act year.
Three objectives: Protect investors + Develop the market + Regulate the market; Taken from the Preamble. Use these as main headings in any answer.
Three functional heads: Protective + Developmental + Regulatory; Place each function under one head to score structured marks.
Three powers: Quasi-legislative + Quasi-judicial + Executive; Rule-making, adjudication and enforcement respectively.
Appeal route: SEBI order → Securities Appellate Tribunal (SAT); A person aggrieved by a SEBI order may appeal to SAT.
Statute: CCI is established under the Competition Act, 2002; It replaced the MRTP Act, 1969. State the Act name in every answer.
Three core areas: Anti-competitive agreements + Abuse of dominant position + Regulation of combinations; Use this as the skeleton of any long answer.
Dominance test: Dominant position = strength in the relevant market to act independently of competitors or to affect them or consumers in its favour; Dominance alone is not an offence. Abuse is.
Combination rule: Combination above the thresholds → CCI approval needed if it may cause appreciable adverse effect on competition; Do not quote exact threshold figures unless the question gives them.
Appeal route: CCI order → appeal to NCLAT; Remember the appellate body in one line.
Finance Commission: Constitutional body, Article 280; appointed by the President; recommends tax sharing and grants; Recommendations are advisory, not binding. It is appointed about every five years.
IRDAI: Regulator of insurance; set up under the IRDA Act, 1999; Key words: licensing, policyholder protection, orderly growth.
PFRDA: Regulator of pensions; oversees the National Pension System (NPS); Key words: pension funds, subscriber protection, retirement savings.
CAG: Constitutional auditor, Article 148; audits government accounts; reports go to Parliament or Legislature; Public Accounts Committee examines the reports. CAG is independent of the executive.

Quick revision

NITI Aayog is the government's policy think tank and advisory body, which replaced the Planning Commission.
RBI is the central bank: it issues currency, manages monetary policy and regulates banks.
SEBI regulates the securities market and protects investors.
CCI promotes competition and acts against anti-competitive practices.
The Finance Commission advises on sharing tax revenue between the Centre and States.
IRDAI regulates and develops the insurance sector.
PFRDA regulates and develops the pension sector.
CAG audits government accounts and reports on them.
Match each body to its area first: planning, money, markets, competition, insurance, pensions, audit.
For any short note, write definition, purpose, functions and importance in that order.
Revise differences between similar bodies, such as RBI and SEBI.
Use headings and bullets in written answers so the examiner sees each point.

Common mistakes

Saying NITI Aayog is a statutory body created by an Act of Parliament. Fix: Remember it was set up by an executive resolution of the Union Government. It is an advisory think tank.
Writing that NITI Aayog prepares Five Year Plans and allocates funds like the Planning Commission. Fix: Say NITI Aayog gives strategic and policy advice. The old Plan-fund allocation role does not sit with it.
Mixing up repo and reverse repo rate. Fix: Repo: banks borrow from the RBI. Reverse repo: the RBI borrows from banks. The word 'reverse' flips the direction.
Saying CRR is kept with the bank itself. Fix: CRR is cash held with the RBI. SLR is held by the bank in liquid assets such as cash, gold and government securities.
Saying SEBI was established in 1988 by the Act. Fix: Remember: 1988 non-statutory body; SEBI Act 1992 gave statutory powers.
Confusing SEBI with RBI. Fix: SEBI regulates the securities market; RBI regulates banks and money and credit. Link each to its own market.
Saying dominance itself is illegal. Fix: Write that a dominant position is lawful. Only its abuse, such as unfair pricing, is prohibited.
Confusing the CCI with SEBI or RBI. Fix: Link CCI with competition and markets, SEBI with securities, RBI with money and banking.
Saying the Finance Commission's recommendations are binding on the government. Fix: Write that its recommendations are advisory. The government decides whether to accept them.
Mixing up IRDAI and PFRDA. Fix: Link IRDAI to insurance policies and PFRDA to pensions and NPS.

Exam tips

Expect a 'distinguish between Planning Commission and NITI Aayog' question. Prepare a five-point comparison and write it in a table-like pair of lines.
Write the full form and year of formation in the first line. It is an easy mark.
For structure questions, list members in order: Chairperson, Vice-Chairperson, Members, Ex-officio Members, CEO, Special Invitees, Governing Council, Regional Councils.
In Paper 3 the answer must be written in full sentences with headings of your own, so practise a short answer in about 100 words.
Link this topic to Economic Planning and NITI Aayog for the history of Five Year Plans.
Learn the one-line definitions of repo, reverse repo, CRR and SLR. They are asked again and again.
For 'distinguish' questions, compare on who lends, who borrows, where funds are kept and purpose.
Always add the direction of effect on inflation and credit when you name a tool.