Tuesday, 2 November 2010

How to Calculate Dearness Allowance?

Every year the Dearness allowance increases twice. One In the month of January and the other in the month of July. Ever you think that how this Dearness allowance increase or how it is calculated? You might be aware that the price of essential commodities increases day by day. The Government of India takes the detailed information of these increases or changes, the rise and fall of prices of essential commodities in certain cities and these data is tabulated and decide the changes on the basis of a certain year. Labour Bureau’ of Government of India conducting these studies. These data we got as All India Consumer Price Index Number.

The consumer price index number is calculated for different purpose with different base years. Those are Consumer Price Index Number for Industrial workers – CPI (IW), Consumer Price Index Number for Agricultural Labourers and Consumer Price Index Numbers for Rural Labourers etc. In the month of August and September the AICPN for industrial workers are 178 and 179 respectively on the basis of the base year 2001 = 100. But AICPIN for Agricultural Labourers, it is 557 and 562 on the basis of the base year 1986-87 = 100. The Consumer Price Index for Rural Labourers is 556 and 562 on the basis of the base year 1986-87 = 100

For the calculation of Dearness allowance for Government employees the consumer price index of industrial labourers is considered. For the declaration of D.A on January and July the average consumer price index number is calculated and that will be the D.A. It is according to the inflation of essential commodities. So Dearness allowance is to compensate the inflation. It is in the consideration that even if the prices of essential commodities increase the standard of living must be stable.

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