DA from July 2016 set to increase by 6% or 7% for pre-revised

On the basis of All India Consumer Price Index for the period from July 2015 to April 2016 and assumed indices for May and Jun 2016, DA for Central Government Employees in Pre-revised pay (6th CPC) and DA from July after implementation of 7th Pay Commission have been estimated

DA-Pre-7th-CPC-Pay

DA from July 2016 set to increase by 6% or 7% on the basis of All India Consumer Price Index (Industrial Workers) with base year 2001=100, for Pre revised Pay (Pay prior implementation of 7th Pay Commission)

 DA from July 2016 – An analysis – Labour Bureau, Govt of India has released the Consumer Price Index (IW) for the month of April 2016.

Having actual All India Consumer price index for 10 months in hand, out of AICPI-IW needed for calculation of DA, an attempt has been made here to estimate the said DA from July 2016.

This DA estimation is based on Consumer Price Index (IW) with the base year 2001=100 which is being followed presently for calculation of Dearness Allowance applicable for Central Government Employees, Defence personnel and Pensioners.

7th Pay Commission has also recommended that the same consumer price Index could be retained for granting Dearness Allowance.

Here is the extract of analysis and recommendations of 7th Pay Commission relating to Dearness Allowance

“The VICPC had recommended that the National Statistical Commission may be asked to explore the possibility of a specific survey covering government employees exclusively, so as to construct a consumption basked representative of government employees and formulate a separate index. This has, however, not been done.

Keeping in mind that the present formulation of DA has worked well over the years, and there are no demands for its alteration, the Commission recommends continuance of the existing formula and methodology for calculating the Dearness Allowance.”

Hence, it is assumed that CPI-IW with the base year 2001=100 would be followed with effect from January 2016 on implementation of 7th Pay commission report as far as Dearness Allowance is concerned.

In that case, DA from July 2016 after implementation of 7th Pay Commission has to be calculated using the following DA Calculation Formula

[ (Average of Consumer Index for the period from July -2015 to Jun-16) – (Average All India Consumer Price Index for 2015) X 100] / Average All India Consumer Price Index for 2015

Based on the above formula, after merger of DA of 125% with Basic Pay, DA from January 2016 would be calculated as 0% and Likely DA from July 2016 after implementation of 7th Pay Commission will be 2% or 3%