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How to Calculate Dearness Allowance for Central Government Employees and Pensioners after implementation of 7th Pay Commission and introduction new Consumer Price Index with base 2016=100?

Update: Dearness Allowance for Central Government Employees was continued to be calculated after implementation of 7th Pay Commission based on consumer price index with Base 2001=100 till August 2020. From the month of September 2020, Govt replaced CPI with base 2001=100 with new consumer price index with base 2016=100.

Checkout this infographics on new CPI Series and how it affects Dearness Allowance of Central Government Employees?

Checkout press release issued by Labour Ministry for introduction of Consumer Price Index using new series with base 2016=100

DA for central government employees started from 0% with effect from 1st Jan 2016 by merging DA with basic pay.

Dearness Allowance payable with effect from 7th CPC Basic Pay = (Avg of CPI-IW for the past 12 months – Average of CPI-IW recorded in 2015)*100/(Average of CPI-IW recorded in 2015)

How to Calculate DA from 1st January 2016?

We have all the actual Consumer Price Indices from January 2015 to December 2015 based on which DA from Jauary 2016 is calculated to be 0%

DA with effect from 1st January 2016 = [261.4]-(261.4)X100/261.4

Thereafter consumer prize index with Base 2001=100 was used to determine Dearness Allowance till July 2019. This calculation is given below.

Consumer Price Index from July 2018 to June 2019 is as follows.

Month Actual AICPI-IW
Jul-2018 301
Aug-2018 301
Sep-2018 301
Oct-2018 302
Nov-2018 302
Dec-2018 301
Jan-2019 307
Feb-2019 307
Mar-2019 309
Apr-2019 312
May-2019 314
Jun-2019 316

Calculation of DA using the above data is as follows:

DA with effect from 1st July 2019 = [ (301+301+301+302+302+301+307+307+309+312+314+316)/12]-(261.4)X100/261.4
= 17 %

After July 2019, Government Order for Dearness Allowance Rate for Central Government Employees was not issued on acccount of DA Freeze announced by Government till July 2021.

Checkout here for DA Freeze order and the tool to estimate loss on account of DA Freeze

With the introduction of new series, a linking factor will be required to bridge old series of CPI and new consumer price index for calculating DA for Central Government Employees and pensioners.

As per Govt’s press release, the maiden index on new base for September, 2020 stands at the level of 118 and linking factor for the conversion of new series index to previous series on base 2001=100 is 2.88.

This linking factor will have to be used to convert CPI (IW) announced by Government from September 2020. For example, Consumer Price Index with base 2016=100 for the month of September 2020 is 118.1 can be converted to CPI with base 2001=100 as 118.1 X 2..88 = 340.13. Like wise, consumer price index for the subsequent months are also to be calculated.

New DA Calculator for calculating Dearness Allowance payable to Central Government Employees and Pensioners

Taking in to account, all the factors discussed above we have now come up with a new DA Calculator using which we can estimate DA from January 2021 and later months.