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Sunday, June 9, 2019

DA from July 2019 – Increase will be not less than 4% – CPI trend suggests

DA from July 2019 – All India Consumer Price Index from July 2018 and April 2019 suggests that increase in DA for Central Government Employees with effect from July 2019 will be not less than 4%

DA increase in July 2019 will be highest ever since January 2016 viz., from the implementation of 7th Pay Commission recommendations.

5% DA increase is also possible if consumer price Index increased by 2 points in May 2019 and the same level is maintained in June 2019.

All India Consumer Price Index  for the month of April 2019 has been released recently. With this release, CPI for 10 months from July 2018 to April 2019, which are needed to determine Dearness Allowance for Central Government Employees with effect from July 2019 is available.
Using this data, we have analysed and estimated possible DA from July 2019 for Central Government Employees including Railway Employees, Defence Personnel and Pensioners in this article.

Pattern of Consumer Price Index from July 2018:

The subject period has witnessed one Phenomenal increase in Consumer Price Index from 291 to 301 which is 10 points increase in July 2018 alone. Historical data reveals that out of consumer price index for the period from 2005 to June 2018, highest monthly increase in the index was recorded in the month of July 2009 which was 7 Points.
From August 2018 to December 2018, trend in CPI was steady as it remained in 301 in December 2018, after increased to 302 during October 2018 and November 2018.
However, Consumer Price Index for the month of January 2019, recorded considerable increase of 6 points and moved to 307. This increasing trend continued and in the month of April 2019 CPI is recorded at 312.
Consumer Price Index from July 2018 to April 2019 is as follows.
Month Actual AICPI-IW
Jul-2018 301
Aug-2018 301
Sep-2018 301
Oct-2018 302
Nov-2018 302
Dec-2018 301
Jan-2019 307
Feb-2019 307
Mar-2019 309
Apr-2019 312
May-2019 Yet to be Released
Jun-2019 Yet to be Released
We have attempted to project consumer price index for the remaining two months and thereby estimate DA from July 2019.

What will be the DA from July 2019 if CPI remained at 312 in the remaining two months ?

In that case, increase in DA from July 2019 will be 4% and all Central Government Employees including Railway Employees, Defence Personnel and Pensioners will be entitled to Dearness Allowance of 16% with effect from July 2019.
Calculation of DA using the above data is as follows:

DA with effect from 1st July 2019 = [ (301+301+301+302+302+301+307+307+309+312+312+312)/12]-(261.4)X100/261.4

= 16 % (increase of 4% from the DA of 12% w.e.f Jan 2019)

 How much will be the increase in DA if CPI witnessed two point increase in May 2019 and remained at the same level in June 2019?

As we suggested in the preface to this article, if the inflationary trend in Consumer price index that exists from January 2019 continues, there is a possibility of CPI moving to 314 in the month of May 2019 and June 2019. In that case, DA from July 2019, will be 17% which 5% increase from the current level of DA.
DA with effect from 1st July 2019 = [ (301+301+301+302+302+301+307+307+309+312+314+314)/12]-(261.4)X100/261.4

= 17 % (increase of 5% from the DA of 12% w.e.f Jan 2019)

Is there any chance of increase in DA from July 2019 will be less than 4% ?

There is a very remote chance of getting increase in DA from July 2019 less than 4%, as this Scenario is possible only if All India Consumer Price Index decrease by 15 points and move to 297 in the month of May 2019 and remained at the same level or record only one point increase in June 2019 and move to 298.
DA with effect from 1st July 2019 = [ (301+301+301+302+302+301+307+307+309+312+297+298)/12]-(261.4)X100/261.4

= 15 % (increase of 3% from the DA of 12% w.e.f Jan 2019)

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