DA from July 2021 for Central Government Employees and Pensioners estimated in view of Govt’s original instructions to restore applicable Dearness Allowance from July 2021

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DA from July 2021 for Central Government Employees and Pensioners gains very much significance as the Govt has informed in the order No: 1/1/2020-E-II(B) dated 23.04.2020 that the rates of Dearness Allowance and Dearness Relief as effective from 1st January 2020, 1st July 2020 and 1st January 2021 will be restored prospectively and will be subsumed in the cumulative revised rate effective from 1st July 2021.

Estimate notional loss on account of DA Freeze for Central Government Employees and Pensioners from January 2020 to July 2021

The Government had issued orders for freezing the additional installments of Dearness Allowance for Central Government Employees till July 2021, in order to meet out the huge expenditure arising out of COID-19 pandemic conditions.

Keeping this information in mind, we have come up with this estimation of Dearness Allowance applicable for Central Government Employees with effect from 1st July 2021. It is to be noted that Government is yet to issue orders for granting additional dearness allowance installments applicable for the period January 2020, July 2020, and Janauary 2021.

There is no estimation needed for the DA Rates for half yearly periods starting from January 2020 to January 2021 as All India Consumer Price Index for the period from January 2019 to December 2020, on the basis of which Dearness Allowance and Dearness Relief for Central Government Employees and Pensioners respectively are determined have already been released by Govt.

Calculation of DA for Central Government Employees from January 2020 to January 2021 (Dearness Relief for Pensioners is same as Dearness Allowance for Central Government Employees)

Dearness Allowance with effect from January 2020:

DA with effect from 1st January 2020 calculated on the basis of All India Consumer Price Index for the period from January 2019 to December 2019= [ (307+307+309+312+314+316+319+320+322+325+328+330)/12]-(261.4)X100/261.4
= 21 %

Dearness Allowance with effect from July 2020:

DA with effect from 1st July 2020 calculated on the basis of All India Consumer Price Index for the period from July 2019 to June 2020= [ (319+320+322+325+328+330+330+328+326+329+330+332)/12]-(261.4)X100/261.4
= 24%

Dearness Allowance with effect from January 2021:

DA with effect from 1st January 2021 calculated on the basis of All India Consumer Price Index for the period from January 2020 to Decmeber 2020= [ (330+328+326+329+330+332+336+338+340+344+345+342)/12]-(261.4)X100/261.4
= 28%

In the mean time, calculation of Dearness allowance for Central Government is also impacted by another change introduced by Govt in the Consumer Price Index front. It was announced by Labour Bureau, Ministry of Labour and Employment, Government of India that the release of All India Consumer Price Index with the base 2001=100 based on which DA for Central Government Employees has to be worked out as per 7th Pay Commissioner approved by Govt, would be discontinued.

However, the Govt informed the CPI (IW) 2001=100 would be replaced by a new consumer price index with the base year 2016=100 as the same is more scientific. A linking factor was also released by the govt to calculate CPI(IW) 2001=100 using CPI (IW) 2016=100 which is 2.88.

Revised CPI-IW Based On New Series 2016=100 From The Existing 2001=100

How To Calculate DA Under New CPI – Infographic

Estimation of DA from July 2021

To calculate the additional installment of Dearness Allowance payable to Central Government Employees with effect from July 2021, All India consumer price indices from July 2020 to June 2021 are required. As on date, we have the actual All India Consumer Price Index for the period from July 2020 to March 2021.

MONTHCPI (IW) 2016=100 RELEASED BY GOVTCPI (IW) 2001=100
July 2020—336
August 2020—338
September 2020118.1340
October 2020119.5344
November 2020119.9345
December 2020118.8342
January 2021118.2340
February 2021119.0343
March 2021119.6344
April 2021Yet to released
May 2021Yet to released
June 2021Yet to released

Both upward and downward fluctations could be witnessed in Consumer Price Index during the period from July 2021 to March 2021. While CPI index steadily increased from 336 to 345 from July 2020 to November 2020 with 2 point increase from July 2020 to October 2020, it started going downwards from 345 to 340 from December 2020 to January 2021. In the months of February 2021 and March 2021, CPI has increased to 344. Hence, while estimating the index for the months from April 2021 to June 2021, we need to take in to account both the upward and downward trend.

Downward trend in Consumer Price Index from April 2021 to June 2021:

It could be seen that even if there is a 4 point decrease in CPI in each of the three months from April 2021 to June 2021 (a fall from the present 344 level to 338 in the month of June 2021), DA from July 2021 is calculated as 30% with effect from July 2021. It is assumed that CPI going downwards below this level is almost impossible in the present conditions.

DA with effect from 1st July 2021 calculated on the basis of actual All India Consumer Price Index for the period from July 2020 to March 2021 and estimated CPI from April 2021 to June 2021= [ (336+338+340+344+345+342+340+343+344+340+336+332)/12]-(261.4)X100/261.4
= 30%

Upward trend in Consumer Price Index from April 2021 to June 2021:

If it is assumed that there will be an upward trend in the Consumer Price Index from April 2021 to June 2021, then it requires 6 point increase in each of the first two months viz., April 2021 and May 2021 and 7 point increase in the month of June 2021 (increase from the present 344 level to 363 in the month of June 2021) to get the DA Rate of 32% with effect from July 2021.

However, even if there is 1 point increase in each of the three months from April 2021 to June 2021, (increase from the present 344 level to 347 in the month of June 2021), DA from July 2021 is calculated as 31% with effect from July 2021. It appears that this scenario is very much possible in the present conditions.

DA with effect from 1st July 2021 calculated on the basis of actual All India Consumer Price Index for the period from July 2020 to March 2021 and estimated CPI from April 2021 to June 2021= [ (336+338+340+344+345+342+340+343+344+345+346+347)/12]-(261.4)X100/261.4
= 31%

No increase or decrease in Consumer Price Index from April 2021 to June 2021:

In the case of CPI (IW) remains flat in the remaining three months viz., no increase in the index for the months from April 2021 to June 2021, DA from July 2021 is calculated as 30% with effect from July 2021.

DA with effect from 1st July 2021 calculated on the basis of actual All India Consumer Price Index for the period from July 2020 to March 2021 and estimated CPI from April 2021 to June 2021= [ (336+338+340+344+345+342+340+343+344+344+344+344)/12]-(261.4)X100/261.4
= 30%

New DA Calculator taking in account the introduction of CPI-IW with the base 2016=100, for calculating Dearness Allowance payable to Central Government Employees and Pensioners

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