Revised base year for CPI-IW : No impact on dearness allowance

Government have changed base year of the CPI-IW from 2001 to 2016.

However, the change in base year of the index will impact DA calculations only in July next year as the government has frozen biannual hike in dearness allowances since January this year to offset the financial implications on the exchequer during the Covid-19 pandemic. Government had in January announced a hike in DA from 17% to 21% but did not implement it..

The next hike, which was due in July, has been deferred and will now be done in July 2021. The dearness allowance (DA) is a cost of living adjustment allowance paid to government employees, public sector employees (PSEs) and pensioners in India.

Under the new series, the CPI-IW for September stood at 118.  The linking factor for the conversion of new series to the old one, which had a base year of 2001, is 2.88. Under the previous base, the CPI-IW for August stood at 338, which would be 117.4 now after accounting for the linking factor.

CPI-IW based on 2001=100

CPI-IW based on 2016=100

September 2020 - 118