AI CPI(IW) and DA/DR

According to earlier Series the All India Consumer Price Index (AI CPI(IW)) for September 2020 was 340 points and for October 2020 it is 344 points.

Now, the Government has changed the base year for calculating the AI CPI(IW). According to the new Series, the AI CPI(IW) for September was 118 and for October it is 119.5 points. Real impact of this change on rate of IDA will be known only on 31-12-2020 when the Labour Bureau releases AICPI for November 2020.

Anyway, nobody will get any benefit as the DA/DR is frozen till June 2021. And, On 31-12-2020 we will know how much we will be losing from January to March 2021.

The Labour Bureau has Consumer Price Index for Industrial Workers (CPI-IW) for the month of October 2020 and the index increased by 1.4 points over the month. It has to be noted that the index is based on the new CPI-IW series with the base year 2016. The index rose marginally to 5.91 per cent in October from the 5.62 per cent in September and this is mainly due to higher prices of certain food items.

The index now stands at 119.5 for October 2020 and it was 118.1 for September 2020.

The Dearness Allowance for the Central Government Employees is calculated based on 12 months average CPI-IW index. For the Central public sector employees, the Dearness Allowance is calculated based on the average over the last three months.

Earlier, with CPI-IW index released with the base year 2001, the DA was calculated based on the formula

(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 12 months – 115.76)/115.76) x 100

However, with the new index with 2016 as the base year, this is all set to change. DA will be calculated till August 2020 based on the old series and subsequent increments will be based on the new series.

The DA for the month of August 2020 remains at 26.4. So the new index maybe 26.4 plus the average CPI-IW (base 2016) over 12 months.

As the government has frozen the Dearness Allowance hike till June 30, 2021, due to the COVID 19 pandemic, there is no question of the hike before that. The DA paid currently is 17% at December 2019 rates. A 4% hike for Expected DA from January 2020 was announced by the government but was not implemented due to the DA freeze order. However, the DA revision from July 1, 2021, will take into account these increments. Hence for illustrative purpose, based on the calculations on the CPI-IW indices over last one year, it can be said that the DA allowance form January 2021 will be approximately 27%.

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