Cabinet Approves 4% Hike in Dearness Allowance for Central Govt Employees and Pensioners

7th Pay Commission Latest Update: In a move aimed at reducing the impact of rising prices on Central Government employees and pensioners, the Union Cabinet, chaired by Prime Minister Narendra Modi, has given the green light to a 4% increase in Dearness Allowance (DA) and Dearness Relief (DR) effective from January 1, 2024. This hike brings the DA and DR to 50% of the Basic Pay/Pension, up from the previous rate of 46%.

7th CPC Recommendations Bear Fruit: Dearness Allowance Hiked

The decision to raise the DA and DR, which follow the recommendations of the 7th Central Pay Commission, is expected to benefit approximately 49.18 lakh Central Government employees and 67.95 lakh pensioners. The move will have a combined fiscal impact of Rs. 12,868.72 crore per annum.

Union Minister Piyush Goyal underscored that the increase in Dearness Allowance and Dearness Relief aims to alleviate the financial strain caused by inflation, ensuring the maintenance of purchasing power for government employees and pensioners.

The calculation of the hike is based on the Consumer Price Index (CPI) data for industrial workers, with the 12-month average standing at 392.83. This adjustment is crucial as it helps offset the impact of inflation on the standard of living of employees and pensioners.

It's important to note that Dearness Allowance is a component of the total salary of Central Government employees and is adjusted biannually, in January and July, to account for changes in the cost of living due to inflation. Similarly, Dearness Relief is provided to pensioners to ensure that their pensions keep pace with the cost of living.

The decision to increase the DA and DR comes after the last hike in October 2023 when the DA was raised by 4% to reach 46%. This timely adjustment reflects the government's commitment to safeguarding the economic well-being of its employees and retirees in the face of economic fluctuations.

What is Dearness Allowance (DA) and Dearness Relief (DR)?

Dearness Allowance, or DA, is an integral component of a central government employee's overall salary, serving as an adjustment allowance provided by the government to offset the impact of inflation on the cost of living. This allowance is revised biannually, in January and July. It's worth noting that Dearness Relief (DR) is essentially the same allowance as DA, but it is provided to central government pensioners.