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

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%:

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%:

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%.

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 272 from the present level of 270, 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.