Central Government has released the All India Consumer Price Index for Industrial Workers (AICPI-IW) for the month of May 2012 (Base 2001=100).

As expected the said index has increased by 1 point from 205 to 206.

All India Consumer Price Index for Industrial Workers (AICPI-IW) is significant as far as Central Government Employees are concerned with regard to calculation of Dearness Allowance payable to them.

Review of Dearness Allowance twice in a year (on the 1st of June and 1st of July) involves following calculation.

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 converting factor between 1982 series All India Consumer 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 nearing 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 an 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 |

This calculation can be made at ease using the following GConnect DA Calculator. Just enter the assumed AICPI for the month of June-2012 in the given text field (the assumed AICPI is from 203 to 216) and click “Calculate DA July 2012” Button. The result will be shown in the Text field nearer to this Button.