Monday, 4 January 2016

Expected DA from January 2016 – 2 Point increase in December 2015 may change 7th Pay Commission fitment formula

Expected DA from January 2016 and its impact on 7th Pay Commission Pay fixation formula and Multiplication Factor – If CPI-IW for December reaches 272 then 7th Pay Commission multiplication factor will have to be revised to 2.58

Expected DA from January 2016 – 2 Point increase in December 2015 may change 7th Pay Commission fitment formula

Expected DA from January 2016 – Two Point increase in CPI for Dec 2015 could take it to 126% which is 1% more than what was reckoned for 7th Pay Commission revised Pay fixation.

If DA from January 2016 touches 126%, 7th Pay Commission fitment formula and Multiplication factor of 2.57 may require upward revision

Consumer Price Index (Industrial Workers) for the month of November 2015 has been released recently by Govt. We have one point increase in CPI for November 2015 which has moved from 269 to 270.

Consumer Price Index from January 2015 to November 2015

Month Actual AICPI-IW
Jan-2015 254
Feb-2015 253
Mar-2015 254
Apr-2015 256
May-2015 258
Jun-2015 261
July-2015 263
Aug-2015 264
Sep-2015 266
Oct-2015 269
Nov-2015 270
Dec-2015 Not released

DA from January 2016 – Estimation for 125%:

estimated-DA-expectedDA-dearness-allowance


DA from Jan 2016= [(254+253+254+256+258+261+263+264+266+269+270+258)-115.76]*100/115.76
= 125 % (6% increase in DA from Jan 2016)

Based on actual CPI-IW for 11 months from January 2015 to November 2015 which span from 254 to 270 and estimated index for the month of December 2015, it is almost certain that Dearness Allowance from January 2016 payable to Central Government Employees including Railway Employees and Defence Personnel will not be less than 125% (6% increase).

Even a 12 point fall in CPI-IW from 270 to 258 in December 2015 will not affect the DA from January 2016 clocking 125%.

DA from January 2016 – Estimation for 126%:


Our Proposition discussed in the earlier article on the chances for DA from January 2015 reaching 126% (7% increase) still holds good as two point increase in the CPI-IW in December 2015 would take DA from January 2016 to 126%.


DA from January 2016 126%

DA from Jan 2016= [(254+253+254+256+258+261+263+264+266+269+270+272)-115.76]*100/115.76
= 126 % (7% increase in DA from Jan 2016)

DA from January 2016 – Estimation for 127%:


At the same time possibility of DA from January 2016 reaching 127% or more is remote as CPI-IW has to reach 286 in December 2015 from the present level of 270 for getting DA of 127%.

DA from Jan 2016= [(254+253+254+256+258+261+263+264+266+269+270+286)-115.76]*100/115.76
= 127% (8% increase in DA from Jan 2016)


So, DA from January 2016 will be either 125% (6% increase) or 126% (7% increase). One might think that 1% additional DA from January 2016 is negligible. However, it will be 1% more than what was reckoned for 7th Pay Commission revised Pay fixation.

7th Pay Commission has estimated DA from January 2016 as 125% for the purpose of Revision of Pay and Allowances

Now, if Consumer Price Index (Industrial workers) for the month of December 2015 reaches 172 from the present level of 170, it is certain that DA from January 2016 will be 126%. In that case, 7th Pay Commission pay fitment formula and allowances which are DA indexed will have to be revised accordingly.

For instance, 7th Pay Commission’s uniform multiplication factor of 2.57 includes a factor of 2.25 on account of DA neutralisation, assuming that the rate of Dearness Allowance would be 125 percent at the time of implementation of the new pay. If DA from January 2016 reaches 126% then this multiplication factor will have to revised as 2.58.

Source: gconnect

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