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» DA from July 2016 set to increase by 6% or 7%
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 yesterday.
Click here to read the press release of Labour Bureau for release of Consumer Price Index for 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%
DA from July 2016 for Pre-Revised Pay
CPI-IW from July 2015 to April 2016
Month | Actual AICPI-IW |
July-2015 | 263 |
Aug-2015 | 264 |
Sep-2015 | 266 |
Oct-2015 | 269 |
Nov-2015 | 270 |
Dec-2015 | 269 |
Jan-2016 | 269 |
Feb-2016 | 267 |
Mar-2016 | 268 |
Apr-2016 | 271 |
May-2016 | yet to be released |
Jun-2016 | yet to be released |
Scenario 1: Possibility of increase in DA from July 2016 for Pre-Revised Pay working out to be less than 6%
Possibility
of increase in DA from July 2016 working out to be less than 6% is very
remote due to the fact that the index should be getting reduced by at
least 4 points in any one of the coming two months from the previous
month and further reduction of at least 3 points in the other month.
In
other words index for May 2016 should be getting reduced by 4 points to
267 and also witness further reduction by 3 points to 264, for increase
in DA from July 2016 less than 6%. If index for May 2016 registers not
more than 3 point reduction then index for June 2016 has to reduce at
least by 4 points in order get the less than 6% increase in DA from July
2016
Calculation of DA from July 2016 based on CPI(IW) from July 2015 to June 2016
DA from July 2016 | =[(263+264+266+269+270+269+269+267+268+271+267@+264@)-115.76]X100/115.76 |
| =130% (5% increase in DA from July 2016) |
@ Assumed CPI(IW) for May 2016 and June 2016 |
DA from July 2016 | =[(263+264+266+269+270+269+269+267+268+271+268@+264@)-115.76]X100/115.76 |
| =130%-125% (5% increase in DA from July 2016) |
@ Assumed CPI(IW) for May 2016 and June 2016 |
Scenario 2: Possibility of increase in DA from July 2016 for Pre-Revised Pay working out to be 6%
Even
if index gets lower by 3 points during both of these months compared to
previous month, viz., May 2016 registers 3 point reduction from April
and further three point reduction in June 2016 compared to May 2016,
increase in DA from July 2016 will be 6%.
DA from July 2016 | =[(263+264+266+269+270+269+269+267+268+271+268@+265@)-115.76]X100/115.76 |
| =131% -125% (6% increase in DA from July 2016) |
@ Assumed CPI(IW) for May 2016 and June 2016 |
We
are of the opinion that increase in DA from July 2016 registering at
least 6% is quite possible as chances for CPI (IW) getting reduced to
less than 265 from the present level 271 in two months is very remote.
Scenario 3: Possibility of increase in DA from July 2016 for Pre-Revised Pay working out to be 7%
If
CPI (IW) gets increased at least by 2 points in any one of the coming
two months and by 1 point increase in the other month compared to
previous month, then DA from July 2016 will be poised for an increase of
7%.
In
other words, if consumer price index for May 2016 and June 2016
witnesses at least 2 point increase and further 1 point increase
respectively or vice versa, increase in DA from July 2016 is calculated
to be 7%
DA from July 2016 | =[(263+264+266+269+270+269+269+267+268+271+273@+274@)-115.76]X100/115.76 |
| =132% -125% (7% increase in DA from July 2016) |
@ Assumed CPI(IW) for May 2016 and June 2016 |
DA from July 2016 | =[(263+264+266+269+270+269+269+267+268+271+272@+273@)-115.76]X100/115.76 |
| =132% -125% (7% increase in DA from July 2016) |
@ Assumed CPI(IW) for May 2016 and June 2016 |
Considering
the inflationary trend shown by 3 point increase in April 2016, this
scenario may become a reality. In that case DA from July 2016 will be 7%
Scenario 4: Possibility of increase in DA from July 2016 for Pre-Revised Pay working out more than 7%
In
order to get an increase in DA from July 2016 more than 7%, CPI(IW) for
both May 2016 and June 2016 should witness at least 7 point increase
from the present level of 271. If any one of this month registers lesser
increase than 7 points then the other month has to compensate the same
by registering increase of index by more than 7 points.
It
is apparent that possibility for such an increase in CPI(IW) is not at
all Possible. Hence we can conclude that increase in DA from July 2016
may not be more than 7%
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