Wikipedia defines Dearness Allowance (DA) as a cost of living adjustment allowance paid to Government Employees, Public Sector Employees and Pensioners in India, Bangladesh and Pakistan.

Dearness Allowance is linked to Consumer Price index. After the Second World War DA was known as Dearness Food Allowance. This concept of DA was introduced by Textile Industry in India. This DA is mainly given to beat inflation. This DA is based on location , hence it varies.

How is da calculated?

Da is calculated as % of basic pay in respect of Employees and % of basic pension in respect of Pensioners.

DA is calculated based on AICPI

For Central Government Employees

DA% =( Average of AICPI ( Base year 2001=100) for the past 12 months – 115.76/115.76)*100

For Central PSU

DA% =( Average of AICPI (Base year of 2001 =100) for the past 3 months-126.33/126.33)*100

what is CPI ?

Economic Times defines CPI as comprehensive measure used for estimation of price changes in a basket of Goods and services such as transportation ,food and medical care representative of consumption expenditure in an economy. It gives an idea of inflation. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.

CPI increase is calculated by adding together a sampling of product prices of a previous year. The add together current prices of same products . Divide the total of current prices by old prices, then multiply the result by 100. subtract 100 to find the percentage change in CPI.

For AICPI you are requested to verify this site

ALL INDIA AVERAGE CONSUMER PRICE INDEX (Base 2001=100) for industrial workers


Note: The index numbers with base 1982=100 can be obtained by multiplying the above values with the link factor of 4.63.

DA with effect from 1.1.19 =(288+288+287+288+289+291+301+301+301+302+302+302)/12=269.91-261.4=8.51*100=851/261.4=3.2approx equals 3%

This is the highest DA after 1.1.2016 For more details see the site specified above.


Now do you understand how our DA is calculated if you have any more information you can add up in my comments.

Your attention is also invited to this you tube video


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