Expected DA from July 2013 estimated to be 89% or 90%

AICPI (IW) (All Consumer Price Index for Industrial Workers) for the month of March 2013 released – Expected DA from July 2013 is estimated to be 89% in case of no inflation

Expected DA from July 2013 will be 90% in case of 1 point increase in AICPI from April to June 2013

Expected DA from July 2013 – Click here to read the Official Note on release of AICPI (IW) for the month of March 2013

“Government has no proposal at present to set up 7th pay commission”

“6CPC did not recommend for merger of DA with Basic Pay”

These are some of negative news Central Government Employees receive of late. The only solace for CG employees nowadays is the grant of Dearness Allowance by Government to neutralise Inflationary prices.

As AICPI (IW) Indices for Nine months out of 12 months which are required for expected DA from July 2013 are officially announced now we may safely guess about CG Employees and Pensioners expected DA from July 2013

All India consumer price index AICPI-IW for the period from July 2012 to June 2013

Month AICPI-IW
Jul 2012 212
Aug 2012 214
Sep 2012 215
Oct 2012 217
Nov 2012 218
Dec 2012 219
Jan 2013 221
Feb 2013 223
Mar 2013 224
Apr 2013 To be released in the month May 2013
May 2013 To be released in the month June 2013
Jun 2013 To be released in the month July 2013

 

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
115.76 is a factor which converts 1982 series AICPI (IW) (Base 1982=100), which was applicable prior to 6CPC to 2001 series AICPIW (Base 2001=100). In turn, This is arrived at by dividing the 1982 series AICPI by a linking factor which is 4.63 (536/4.63=115.76)

Three Scenarios on the progression of AICPI (IW)

Scenario 1 (No Inflation) Scenario 2 ( Inflation contained) Scenario 3(Same inflationary trend) Scenario 4 (More inflation)
Month AICPI-IW AICPI-IW AICPI-IW AICPI-IW
Jul 2012 212 212 212 212
Aug 2012 214 214 214 214
Sep 2012 215 215 215 215
Oct 2012 217 217 217 217
Nov 2012 218 218 218 218
Dec 2012 219 219 219 219
Jan 2013 221 221 221 221
Feb 2013 223 223 223 223
Mar 2013 224 224 224 224
Apr 2013 (expected) 224 220 225 227
May 2013 (expected) 224 220 226 230
Jun 2013 (expected) 224 220 227 234
Expected DA 89% 88% 90% 91%

Scenario 1:

If we assume that there is no inflation from April 2013 and the AICPI-IW remains at 224 for the months of April 2013, May 2013 and June 2013, the expected DA for the Central Government Employees and pensioners will be 89%, which is 9% more than the present 80%

Scenario 2:

If the inflation will be contained in the coming months then it could be assumed that AICPI-IW will be 220 for months from April 2013 to June 2013. Consequently expected DA from July 2013 will be of 88%, which is 8% more than the present 80%

Scenario 3:

If we assume that there will be  1 point increase in AICPI (IW) in the coming months then expected DA will be 90% with effect from July 2013, which is 10% more than the present 80%

Scenario 4:

In the case of more inflation than the one expected in Scenario 3 in the coming months, we tested with various various values for AICPI (IW) for April 2013, May 2013 and June 2013, to get 1% more increase in DA than the 10%  increase of DA we get in Scenario 3.  The minimum assumed values for AICPI (IW) for April 2013, May 2013 and June 2013 which gave DA increase of 1% more than the 10% of DA increase that we get in Scenario 3 are 227, 230 and 234 respectively.

Chances of Scenario 1 or 3 coming to reality is More

Considering the reduction in Crude Oil Prices and other commodity prices recently, we feel that chances of Scenario 1 or 3 coming to reality are more. So it could be safely assumed that expected Dearness Allowance from July 2013 will be 89% or 90%.

We request Readers to provide their views in the form of comments to this article.  It may also be noted that the above analysis is based purely on assumption.  The actual increase of DA from July 2013 will be known only after the formal announcement of the same by Government in the  month of October 2013.

Use the following DA Calculator to test the above 4 Scenarios

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