Dearness Allowance (DA) is a component of salary paid to government employees in India, Bangladesh, and Pakistan.
It is a cost of living adjustment allowance, meaning its purpose is to protect the real value of employees' salaries from the effects of inflation.
Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
The DA is calculated as a percentage of the basic salary, and this percentage is revised periodically based on the rate of inflation.
The inflation rate used for this calculation is measured by the Consumer Price Index (CPI), specifically the All India Consumer Price Index for Industrial Workers (AICPI-IW).
Therefore, DA is paid to employees using the Consumer Price Index as the basis.