It has been reported that central government employees in India may see a 4 percent increase in their Dearness Allowance (DA) in July 2023, following a recent 4 percent hike that brought the current DA to 42 percent.
The previous DA hike restarted after being paused due to Covid-19, with an 11 percent increase in July 2021, a further increase in October 2021, and 3 percent and 4 percent hikes in 2022, taking the figure to 38 percent.
The All-India Consumer Price Index (AICPI) for the last four months suggests that the Union Cabinet may approve the 4 percent hike later in the year, though whether it will be 3 or 4 percent remains to be seen after the upcoming AICPI figures are released.
In other news, media reports suggest that the Centre may be considering a new formula for calculating DA increases, as it plans to phase out the pay commission and introduce a new salary calculation formula for central government employees in the coming years.
Under the current 7th Pay Commission rules, the fitment factor stands at 2.57 times, but the Centre may allow employees to change this factor. The report suggests that the fitment factor could be increased to either 3 or 3.68, although there are differing opinions on the matter.
How DA is Calculated Currently?
Currently, the central government uses a formula to determine the Dearness Allowance (DA) and Dearness Relief (DR) for its employees. The formula calculates the DA percentage based on the average of the All-India Consumer Price Index (Base Year 2001=100) for the past 12 months minus 115.76, divided by 115.76, and then multiplied by 100.
For Central public sector employees, the formula is slightly different. The DA percentage is calculated based on the average of the All-India Consumer Price Index (Base Year 2001=100) for the past three months minus 126.33, divided by 126.33, and then multiplied by 100.
