DA from July 2013 estimated to be 89% or 90%

As AICPI (IW) Indices for Nine months out of 12 months which are required for estimating DA from July 2013 are officially announced now we may safely guess about CG Employees and Pensioners DA from July 2013

ALL INDIA CONSUMER PRICE INDEX AICPI-IW FOR THE PERIOD FROM JULY 2012 TO JUNE 2013

Month	AICPI-IW
Jul 2012	212
Aug 2012	214
Sep 2012	215
Oct 2012	217
Nov 2012	218
Dec 2012	219
Jan 2013	221
Feb 2013	223
Mar 2013	224
Apr 2013	To be released in the month May 2013
May 2013	To be released in the month June 2013
Jun 2013	To be released in the month July 2013

Dearness Allowance with effect from 1st January every year	(Average of AICPI-IW for the months from January to December of previous year – 115.76)X100/115.76
Dearness Allowance with effect from 1st July every year	(Average of AICPI-IW for the months from July of previous year to June of this year – 115.76)X100/115.76
115.76 is a factor which converts 1982 series AICPI (IW) (Base 1982=100), which was applicable prior to 6CPC to 2001 series AICPIW (Base 2001=100). In turn, This is arrived at by dividing the 1982 series AICPI by a linking factor which is 4.63 (536/4.63=115.76)

THREE SCENARIOS ON THE PROGRESSION OF AICPI (IW)

	Scenario 1 (No Inflation)	Scenario 2 ( Inflation contained)	Scenario 3(Same inflationary trend)	Scenario 4 (More inflation)
Month	AICPI-IW	AICPI-IW	AICPI-IW	AICPI-IW
Jul 2012	212	212	212	212
Aug 2012	214	214	214	214
Sep 2012	215	215	215	215
Oct 2012	217	217	217	217
Nov 2012	218	218	218	218
Dec 2012	219	219	219	219
Jan 2013	221	221	221	221
Feb 2013	223	223	223	223
Mar 2013	224	224	224	224
Apr 2013 (expected)	224	220	225	227
May 2013 (expected)	224	220	226	230
Jun 2013 (expected)	224	220	227	234
Expected DA	89%	88%	90%	91%

Scenario 1:

If we assume that there is no inflation from April 2013 and the AICPI-IW remains at 224 for the months of April 2013, May 2013 and June 2013, the expected DA for the Central Government Employees and pensioners will be 89%, which is 9% more than the present 80%

Scenario 2:

If the inflation will be contained in the coming months then it could be assumed that AICPI-IW will be 220 for months from April 2013 to June 2013. Consequently expected DA from July 2013 will be of 88%, which is 8% more than the present 80%

Scenario 3:

If we assume that there will be  1 point increase in AICPI (IW) in the coming months then expected DA will be 90% with effect from July 2013, which is 10% more than the present 80%

Scenario 4:

In the case of more inflation than the one expected in Scenario 3 in the coming months, we tested with various various values for AICPI (IW) for April 2013, May 2013 and June 2013, to get 1% more increase in DA than the 10%  increase of DA we get in Scenario 3.  The minimum assumed values for AICPI (IW) for April 2013, May 2013 and June 2013 which gave DA increase of 1% more than the 10% of DA increase that we get in Scenario 3 are 227, 230 and 234 respectively.

Chances of Scenario 1 or 3 coming to reality is More

Considering the reduction in Crude Oil Prices and other commodity prices recently, we feel that chances of Scenario 1 or 3 coming to reality are more. So it could be safely assumed that expected Dearness Allowance from July 2013 will be 89% or 90%.

We request Readers to provide their views in the form of comments to this article.  It may also be noted that the above analysis is based purely on assumption.  The actual increase of DA from July 2013 will be known only after the formal announcement of the same by Government in the  month of October 2013.