DA Calculator for Central Government Employees – How to calculate Dearness Allowance?

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?

DA Calculator for Central Government Employees – 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 January 2016 is calculated to be 0%

DA with effect from 1st January 2016	= [261.4]-(261.4)X100/261.4
	=0%

 

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

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 (rounded as 340 to the nearest whole number). Like wise, consumer price index for the subsequent months i.e from October 2020 are also to be calculated.

This calculation is given below.

Table of Consumer Price Index with the base 2001=100 calculated from CPI (IW) with Base 2016=100 for the Months from July – 2020 to Dec – 2021

Month	CPI (IW) 2016=100 released by Govt from Sep 2020	CPI (IW) 2001=100 calculated using the linking factor of 2.88
July 2020	not implemented	336
August 2020	not implemented	338
September 2020	118.1	340
October 2020	119.5	344
November 2020	119.9	345
December 2020	118.8	342
January 2021	118.2	340
February 2021	119.0	343
March 2021	119.6	344
April 2021	120.1	346
May 2021	120.6	347
June 2021	121.7	350
July 2021	122.8	354
August 2021	123.0	354
September 2021	123.3	355
October 2021	124.9	360
November 2021	125.7	362
December 2021	125.4	361

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 Dearness Allowance applicable to Central Government Employees and Pensioners.

For example Calculation of DA with effect from 1st July 2021 for Central Government Employees and Pensioners using the above data for the period from July 2020 to June 2021 is as follows:

DA with effect from 1st July 2021	= [ (336+338+340+344+345+342+340+343+344+346+347+350)/12]-(261.4)X100/261.4
	= 31%

Expected DA for Central Government Employees with effect from 1st January 2022

The very purpose of making a DA Calculator for Central Government Employees and Pensioners is to estimate forthcoming Dearness Allowance announcements by Govt. In this sense, we can estimate DA from January 2022, for which we have actual All India Consumer Price Index for 10 months in hand i.e from January 2021 to October 2021. Consumer Prince Index for the remaining 2 months will have to be estimated any way based on the current inflation trend.

Table of Consumer Price Index with the base 2001=100 calculated from CPI (IW) with Base 2016=100 for the Months from January 2021 to December – 2021

Month	CPI (IW) 2016=100 released by Govt from Sep 2020	CPI (IW) 2001=100 calculated using the linking factor of 2.88
January 2021	118.2	340
February 2021	119.0	343
March 2021	119.6	344
April 2021	120.1	346
May 2021	120.6	347
June 2021	121.7	350
July 2021	122.8	354
August 2021	123.0	354
September 2021	123.3	355
October 2021	124.9	360
November 2021	125.7	362
December 2021	125.4	361

 

Scenario 1: No increase in consumer price index for the remaining two months as a result of no further inflation in the remaining two months of the current year. (All India Consumer Price Index of 360 for the month of October 2021 (2001=100) prevails in the next two months). This assumption provides 3% increase in DA from January 2022 added to current DA rate of 31%.

DA with effect from 1st January 2022	= [ (340+343+344+346+347+350+354+354+355+360+360+360)/12]-(261.4)X100/261.4
	= 34% (3% increase in DA from January 2022 added to current DA rate of 31%)

Scenario 2: Increase in consumer price index for the remaining two months as a result of inflation at the same rate it was between September 2021 and October 2021. (There was a positive change of 5 index points in All India Consumer Price Index for the month of October 2021 (2001=100) from the previous month i.e September 2021 ). Still we have only 3% increase in DA from January 2022 added to current DA rate of 31%.

DA with effect from 1st January 2022	= [ (340+343+344+346+347+350+354+354+355+360+365+370)/12]-(261.4)X100/261.4
	= 34% (3% increase in DA from January 2022 added to current DA rate of 31%)

Scenario 3: A nominal Decrease in consumer price index for the remaining two months as a result of negative growth in inflation in the remaining two months of the current year. If we assume that there will be negative change of 2 index points in All India Consumer Price Index for each of two remaining months though it’s far fetched, it will be at 358 and 356 in Nov 2021 and Dec 2021 respectively. It could be seen that still we have 3% increase in DA from January 2022 added to current DA rate of 31%.

DA with effect from 1st January 2022	= [ (340+343+344+346+347+350+354+354+355+360+358+356)/12]-(261.4)X100/261.4
	= 34% (3% increase in DA from January 2022 added to current DA rate of 31%)