Tuesday, 9 September 2014

7th CPC: Expected Dearness Allowance from January 2015

7th CPC: Expected Dearness Allowance from January 2015

As all of us expected, 7% DA hike has been approved by Cabinet on 4th September 2014. Necessary order for payment of DA with effect from 1st July 2014 will be issued by Ministry of Finance soon. Here after our focus will be moving on to next instalment of dearness allowance which will be paid from 1st January 2015. We just analyse the trend of Consumer Price Index with the past seven months AICPCIN to arrive the expected DA from January 2015.

Since 2006, the AICPIN has witnessed second highest ever increase in July 2014. In 2009 the AICPIN increased by 7 points from 153 to 160 in the month of July. After that, an increase of 6 points over 246 points was declared in July 2014. It is the second highest monthly increase on AICPIN records from 2006. See the table below…

Year Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec MaxIncrease
2006 119 119 119 120 121 123 124 124 125 127 127 127 2
2007 127 128 127 128 129 130 132 133 133 134 134 134 2
2008 134 135 137 138 139 140 143 145 146 148 148 147 3
2009 148 148 148 150 151 153 160 162 163 165 168 169 7
2010 172 170 170 170 172 174 178 178 179 181 182 185 3
2011 188 185 185 186 187 189 193 194 197 198 199 197 4
2012 198 199 201 205 206 208 212 214 215 217 218 219 4
2013 221 223 224 226 228 231 235 237 238 241 243 239 4
2014 237 238 239 242 244 246 252




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What is the impact of this highest increase of AICPIN on expected Dearness Allowance from January 2015?
It is observed that when it was 7 points increase in July 2009, it influenced very much on increasing the rate of DA to be paid from 1st January 2010 and 1st July 2010. The rate of Dearness Allowance had been enhanced by 8% from 25% to 35% with effect from 1.1.2010 and 10% increase from 35% to 45% was declared with effect from 1.7.2010. Though there was no considerable increase after those 7 points in that particular 12 months from July 2009 to June 2010, the rate of DA had been reached 8% and 10% increase level for  successive two instalments.

From this point of view, it is quite obvious that this one month increase on AICPIN is enough to play a vital role to have a considerable hike in rate of Dearness Allowance for forth coming two instalments. So this 6 points increase of AICPIN in July 2014, we can expect, will have a profound impact on increasing the rate of Dearness allowance to be paid, not only from 1st January 2015, but also from July 2015.

Let us see the three probabilities of  AICPIN trend, through which we can figure out approximately the expected DA from January 2015 

Probabilities (with AICPIN-IW points) Expected DA from Jan 2015
Average increase of 3 points for remaining 5 months 9%
Average increase of 2 points for remaining 5 months 8%
If same points (252)continues for remaining  5 months 6%

Source: www.centralgovernmentnews.com

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