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Tuesday, July 3, 2012


Review of Dearness Allowance twice in a year (on the 1st of June and 1st of July) involves followingcalculation.
Dearness Allowance with effect from 1st January every year =(Average of AICPI-IW for the months from January to December of previous year – 115.76)X100/115.76
Dearness Allowance with effect from 1st July every year = (Average of AICPI-IW for the months from July of previous year to June of this year – 115.76)X100/115.76
The 115.76, which we use in this calculation is convertion factor between 1982 series All IndiaConsumer Price Index (Base 1982=100, which was in force prior to implementation of sixth pay commission) and the 2001 series All India Consumer Price Index (Base 2001=100, which is in force presently). This is arrived at by dividing the 1982 series AICPI by a linking factor which is 4.63 (536/4.63=115.76)
As we are in the month of July 2012, everybody would be curious to know the expected DA (Dearness Allowance) for Central Government Employees and Pensioners with effect from 1st July 2012.
This is the calculation based on the above mentioned formula for calculating DA with effect from July every year.
Month AIl Indian Consumer Price Index(AICPI-IW)
July 2011 193
Aug 2011 194
Sep 2011 197
Oct 2011 198
Nov 2011 199
Dec 2011 197
Jan 2012 198
Feb 2012 199
Mar 2012 201
Apr 2012 205
May 2012 206
Jun 2012 Will be known in the last week of Jul-2012
Even if we assume AICPI(IW) for Jun 2012 the current level of 206 to 203, 204 or 205 or remain to be unchanged viz., same as 206 which is the index for May 2012, the DA for government employees and pensioners will be raised by 7% from the present DA of 65% to 72%. However, to get an increase of DA of 8% i.e 1% more than the expected the AICPI for June 2012 should increase from the present level of 206 to 217 which is unlikely. At the same time if AICPI has decreased from the present level of 206 to 202, we will get an increase of 6% of DA only with effect from 1st July 2012, which is also unlikely considering the inflationary trend that continues now.
So, the expected DA from July 2012 will be 72% which is 7% increase over the present DA of 65% we are granted now. The following calculation would prove this point.
(193+194+197+198+199+197+198+199+201+205+206+203)/12 = 199.17
Effecive DA with effect from 1st July 2012 = (199.17-115.76)X100/115.76)
= 72.05
Rounded to 72


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