Expected Dearness allowance [DA] from January 2021 Calculator

Expected DA from January 2021

A simple DA Calculator is provided to find the DA from January 2021 with inputs of expected AICPIN for the required months.

Freezing of DA from Jan 2020 to June 2021

The union cabinet had hiked the dearness allowance by 4 per cent from the existing 17 per cent to 21 per cent. It was then kept on hold due to the COVID-19 pandemic in the country. The Central Government announced the hike in DA and DR had frozen along with the future instalments for central government employees and pensioners till July 2021 due to COVID-19.

How to Calculate DA from January 2021

Now let’s have a look at how Dearness Allowance is calculated based on (2001-100)

DA calculation formula:

Percentage of Dearness allowance = (Average of AICPIN for last 12 months)-261.42 x 100 / 261.42

Recently the government announced the new series of CPI for industrial workers (CPI-IW) with a new base year of (2016-100). This will be used to calculate DA from September onwards.

Expected DA from January 2021 is 28%

Due to rising the cost of living, this DA hike is very important. DA for the month of July 2020 increased by 3 points, So DA confirmed to 24%. If expected DA for the month of Jan 2021 approximately increased by 4%, then DA hike may go up to 28%. DA payment will be done twice a year based on the CPI-IW inflation usually January and July. The DA, a component of salary, is revised every six months to keep pace with the inflation rate. According to the new calculation method Central government employees hope that DA will increase step by step due to the increase in inflation. From Jan 2021 to July approximately DA may increase by 4% then the Hike of DA confirm up to 32% definitely. These changes are going to significantly benefit all the employees and pensioners of the Central Government.

Impact on DA from Jan 2021 with a new base year of (2016-100)

The government recently launched the new series of CPI for industrial workers (CPI-IW) with a new base year of 2016. This is used for tracking inflation and for fixing dearness allowance (DA) of employees and industrial workers.

The important improvements made under the new series of CPI-IW (2016=100) vis-à-vis old series (2001=100)which are as under:

• A total of 88 centers have been covered in the 2016 series as against 78 centers in the 2001 series.
• The sample size for the conduct of Working Class Family Income and Expenditure Survey, on the basis of which weighting diagrams have been derived, was increased to 48384 families from 41040 in the 2001 series.
• The number of selected markets for collection of retail price data has also been increased to 317 markets under the 2016 series as against 289 markets covered in the 2001 series.
• The number of items directly retained in the index basket has increased to 463 items as against 392 items in the 2001 series.
• The number of States/UTs has increased to 28 under 2016 series as against 25 in the 2001 series.
• In the new series, as per the direction of Technical Advisory Committee (TAC) on Statistics of Prices and Cost of Living (SPCL), the Geometric mean based methodology (GM of Price Relatives) is used for compilation of indices as against arithmetic mean used in 2001 series.

Currently, this new series of CPI does not make any impact on DA.  The benefit of new price index will impact only after few months and will bring increase gradually in Dearness allowance, including pensioners as well. Upcoming months we can expect AICPIN value will be much better.

Expected DA from Jan 2021 with new series of CPI(IW) 2016-100 based DA calculation method will be updated soon.