Dear Friends,
Can anyone tell me what the Cost of Living Index is and what the relationship is between the Consumer Price Index and DA? How is it calculated, and how does it help in salary revision?
Please advise.
Tara
From India, New Delhi
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1Can anyone tell me what the Cost of Living Index is and what the relationship is between the Consumer Price Index and DA? How is it calculated, and how does it help in salary revision?
Please advise.
Tara
From India, New Delhi
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Hi Mr. Tara,
Please go through the Google site. I promise you will find the required information there, rather than going through a specific economics book. If you discover anything useful, kindly email me at silu.mankind@gmail.com.
Thank you,
Kali Prasanna Sarangi
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Please go through the Google site. I promise you will find the required information there, rather than going through a specific economics book. If you discover anything useful, kindly email me at silu.mankind@gmail.com.
Thank you,
Kali Prasanna Sarangi
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Hi Tara, If you find anything corelated to CPI kindly communicate it to me ASAP. Hoping for your cooperation Regards Kali Prasanna Sarangi
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Understanding Consumer Price Index and Industrial DA
I shall incorporate some details on the Consumer Price Index and Industrial DA. Considering the living cost and all, wage revision is typically done once every five or ten years. However, inflation rises daily, and consequently, the value of money decreases. To address this, we cannot wait until the next wage revision, which is impractical. This is why DA (Dearness Allowance) is introduced.
The devaluation of money can be assessed through the Wholesale Price Index and the All India Consumer Price Index. The difference between these two is that the price variation of all commodities is considered for the Wholesale Price Index. In contrast, the All India Consumer Price Index is based on a specific consumer, namely the Industrial Worker, and includes some specified commodities and services called the "Basket of Goods."
Based on the All India Consumer Price Index, Industrial DA is paid quarterly, commencing from January, April, July, and October. For example, for January, the AICPI will be the average of the previous September, October, and November. Similarly, for April, it will be December, January, and February; for July, it will be March, April, and May; and for October, it will be June, July, and August, respectively.
When the money devaluation is fully compensated, it is called full DA neutralization. The formula for full DA neutralization is (Total points - Base points) / Base points (in percentage). The AICPI was introduced in India in 1960 and revised in 1982 and 2001. AICPI of 2001 x 4.63 gives us the AICPI of 1982, and AICPI of 1982 x 4.93 gives us the AICPI of 1960. For DA calculation, AICPI of 1960 is accepted as the base.
Currently, in India, there are mainly two terms of wage settlements in existence: Wage Settlements of 1.1.1997 and 1.1.2007. The base point in 1.1.1997 is 1708, and in 1.1.2007 is 2884.
I shall quote one example, i.e., the calculation of AICPI for July '10. This is equivalent to the average of the previous March, April, and May, recorded as 170, 170, and 172 (Base year 2001). Multiply with 4.63 and round, we get 787, 787, and 796 (Base year 1982). Multiply with 4.93 and round, we get 3880, 3880, and 3924 (Base year 1960). Find the average of these three and round, we get 3895.
DA for 1.1.97 scale: Total points - 3895, Base points - 1708, Total - Base = 2187. % is 2187/1708 x 100 = 128.0 (Correct to one decimal).
DA for 1.1.2007 scale: Total points - 3895, Base points - 2884, Total - Base = 1011. % is 1011/2884 x 100 = 35.1 (Correct to one decimal).
I shall insert an Excel sheet for IDA calculation w.e.f 1.10.2008. You may extend the rows further as necessary and just enter the three indexes towards the year 2001 in green color columns. The results will appear in yellow, and red is used for static information.
With regards,
ABBAS.P.S,
Secretary,
ITI Employees' Association,
ITI Limited, PALAKKAD - 678 623,
KERALA, INDIA.
[Phone Number Removed For Privacy Reasons]
AICPI (base 2001) can be accessed from the following site: http://labourbureau.nic.in/indexes.htm
From India, Bangalore
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I shall incorporate some details on the Consumer Price Index and Industrial DA. Considering the living cost and all, wage revision is typically done once every five or ten years. However, inflation rises daily, and consequently, the value of money decreases. To address this, we cannot wait until the next wage revision, which is impractical. This is why DA (Dearness Allowance) is introduced.
The devaluation of money can be assessed through the Wholesale Price Index and the All India Consumer Price Index. The difference between these two is that the price variation of all commodities is considered for the Wholesale Price Index. In contrast, the All India Consumer Price Index is based on a specific consumer, namely the Industrial Worker, and includes some specified commodities and services called the "Basket of Goods."
Based on the All India Consumer Price Index, Industrial DA is paid quarterly, commencing from January, April, July, and October. For example, for January, the AICPI will be the average of the previous September, October, and November. Similarly, for April, it will be December, January, and February; for July, it will be March, April, and May; and for October, it will be June, July, and August, respectively.
When the money devaluation is fully compensated, it is called full DA neutralization. The formula for full DA neutralization is (Total points - Base points) / Base points (in percentage). The AICPI was introduced in India in 1960 and revised in 1982 and 2001. AICPI of 2001 x 4.63 gives us the AICPI of 1982, and AICPI of 1982 x 4.93 gives us the AICPI of 1960. For DA calculation, AICPI of 1960 is accepted as the base.
Currently, in India, there are mainly two terms of wage settlements in existence: Wage Settlements of 1.1.1997 and 1.1.2007. The base point in 1.1.1997 is 1708, and in 1.1.2007 is 2884.
I shall quote one example, i.e., the calculation of AICPI for July '10. This is equivalent to the average of the previous March, April, and May, recorded as 170, 170, and 172 (Base year 2001). Multiply with 4.63 and round, we get 787, 787, and 796 (Base year 1982). Multiply with 4.93 and round, we get 3880, 3880, and 3924 (Base year 1960). Find the average of these three and round, we get 3895.
DA for 1.1.97 scale: Total points - 3895, Base points - 1708, Total - Base = 2187. % is 2187/1708 x 100 = 128.0 (Correct to one decimal).
DA for 1.1.2007 scale: Total points - 3895, Base points - 2884, Total - Base = 1011. % is 1011/2884 x 100 = 35.1 (Correct to one decimal).
I shall insert an Excel sheet for IDA calculation w.e.f 1.10.2008. You may extend the rows further as necessary and just enter the three indexes towards the year 2001 in green color columns. The results will appear in yellow, and red is used for static information.
With regards,
ABBAS.P.S,
Secretary,
ITI Employees' Association,
ITI Limited, PALAKKAD - 678 623,
KERALA, INDIA.
[Phone Number Removed For Privacy Reasons]
AICPI (base 2001) can be accessed from the following site: http://labourbureau.nic.in/indexes.htm
From India, Bangalore
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COST OF LIVING INDEX NUMBER FOR EMPLOYEES.pdf
Cost Inflation Index Upto 2014-15.docx