DA from August 2012  -  CPI Index Shoots Up Sharply  For April 2012

Last week the  CPI Numbers for Industrial Workers for the month of April 2012, were released.   There has been sharp increase of 91 points (Base year 1960) in the index.   The CPI has gone up from 4588 to 4679 in a month's time.   This is the index used for calculation of DA for bank employees.    This is directly owing to sharp rise in inflation in last few months.   The trends for previous years as well as present economic scenario does not give us any confidence that inflation numbers will come down soon.   Thus, the CPI for May and June 2012 which will be released on 30th June and 31st July, 2012, are also likely to show only upward trends.  

The above indicates that bankers, like other Indian poor and middle classes, are reeling under inflation, are likely to get some respite in the form of higher increase of DA from August 2012.   We normally project DA rates only one month before the declaration of the same by IBA.   However, this time inflation has been so high and trends for Indian economy are only gloomy, we feel that the DA increase in August 2012 will be between 5% to 6%.    We will review the position at the end of June 2012, when CPI numbers for May 2012 are also released.