7th Pay Commission: Govt to Hike DA by 4% For Central Employees In July Using New Calculation Method

According to media reports, the government may boost the Dearness Allowance (DA) for central government employees by an additional 4% in July of this year after a 4% rise in January 2023. Twice a year, in January and July, the DA and Dearness Relief (DR) are reviewed. Also, it has been suggested that a new method is anticipated to be used to determine the increase in DA.

The Dearness Allowance (DA) calculation formula was changed by the Labour Ministry in 2016, and the DA base year was also updated. The Ministry further unveiled the WRI-Wage Rate Index, a new series of Wage Rate Index (WRI) data. According to the Ministry, the new WRI series, which has a base year of 2016=100, has replaced the previous series, which had a base year of 1963–1965.

For the purpose of updating the Dearness Allowance (DA) and Dearness Relief (DR) for its employees, the Central Government uses a specified formula. The equation reads as follows:

((Average of All-India Consumer Price Index (Base Year 2001=100) for the last 12 months -115.76)/115.76)x100 is the formula for computing the DA percentage.

Employees in the Central Public Sector use a somewhat modified formula: ((All-India Consumer Price Index Average, Base Year 2001=100) for the previous three months, -126.33)/126.33)x100.

Approximately 47.58 lakh central government employees and 69.76 lakh pensioners would receive a rise in their pay and pensions as a result of the recent 4% increase in Dearness Allowance (DA) and Dearness Relief (DR). Because the DA is based on the employee's base salary, an increase in the DA will also enhance take-home pay.

For instance, previous to the most recent 4% raise, an employee with a monthly take-home pay of around Rs 42,000 and basic pay of about Rs 25,500 would have gotten Rs 9,690 as DA. This sum will rise to Rs 10,710 with the most recent DA hike, resulting in an increase in take-home pay of Rs 1,020 each month.

The last DA modification was implemented on September 28, 2022, and it became effective on July 1, 2022. The Centre raised the DA by four percentage points to 38% based on the rate of growth in the 12-month average of the All India Consumer Price Index for the year ending June 2022.