Considering the living cost and all, wage revision is being done once every five or ten years. However, inflation will continue to rise day by day, causing the value of money to decrease. To compensate for this, we have to wait until the next wage revision, which is not practical. This is why the Dearness Allowance (DA) is introduced.
The devaluation of money can be assessed through the Wholesale Price Index, All India Consumer Price Index, etc. The difference between these two is that the price variation of all commodities is taken into account for the Wholesale Price Index.
However, there are some differences and limitations for the All India Consumer Price Index (AICPI):
1. A specific consumer, namely the Industrial Worker, is considered.
2. A defined set of goods and services, known as the "basket of goods," is included.
3. In addition to price variations, the consumable quantity of goods is also taken into account.
4. A total of 78 centers across India are selected to calculate the average.
Based on the All India Consumer Price Index, Industrial Dearness Allowance (DA) is paid quarterly starting from January, April, July, and October. For instance, for January, the AICPI average is calculated using the previous September, October, and November figures. Similarly, for April, the average is based on December, January, and February; for July, it is March, April, and May; and for October, it is June, July, and August.
When the devaluation of money is fully compensated, it is referred to as 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. By multiplying the AICPI of 2001 by 4.63, we get the AICPI of 1982, and by multiplying the AICPI of 1982 by 4.93, we get the AICPI of 1960. The base for DA calculation is the AICPI of 1960.
The indexes can be accessed from the web: [Labour Statistics Page 2](http://labourbureau.nic.in/indexes.htm).
In India, there are mainly two wage settlement terms in existence: the Wage Settlements of 1.1.1997 and 1.1.2007. The base points for these are 1708 and 2884, respectively.
For example, let's calculate the AICPI for July '10. This is equivalent to the average of the previous March, April, and May figures, which are recorded as 170, 170, and 172 (Base year 2001). Multiplying these with 4.63 and rounding, we get 787, 787, and 796 (Base year 1982). Further, multiplying with 4.93 and rounding, we get 3880, 3880, and 3924 (Base year 1960). The average of these three values is 3895.
For the 1.1.97 scale, the DA calculation is as follows: Total points - 3895, Base points - 1708, Total - Base = 2187. The percentage is 2187/1708 x 100 = 128.0 (correct to one decimal).
For the 1.1.2007 scale, the DA calculation is: Total points - 3895, Base points - 2884, Total - Base = 1011. The percentage is 1011/2884 x 100 = 35.1 (correct to one decimal).
An Excel sheet for IDA calculation starting from 1.10.2008 will be inserted. You can extend the rows as needed and enter the three indexes up to the year 2001 in the green-colored columns. The results will appear in yellow, while red is used for static information.
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