New Delhi, October 17: The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a 3% increase in Dearness Allowance (DA) for central government employees, effective from July 1, 2024. In a simultaneous relief measure, pensioners will also receive a 3% hike in Dearness Relief (DR), according to Union Minister Ashwini Vaishnaw.
This decision comes as part of the government’s efforts to shield employees and pensioners from inflation and maintain the value of their earnings amid rising costs.
Impact and Scope of the Hike
The hike raises the DA/DR rate from 50% to 53% of the basic pay or pension. The change is expected to benefit approximately 49.18 lakh employees and 64.89 lakh pensioners across the country.
The government estimates that the combined financial burden of the revised DA and DR will amount to ₹9,448.35 crore annually. Employees and pensioners will also receive arrears for the months of July, August, and September 2024.
Implementation Based on 7th Pay Commission Recommendations
The DA/DR hikes are calculated using a well-established formula aligned with the recommendations of the 7th Central Pay Commission. The formula takes into account changes in the All India Consumer Price Index for Industrial Workers (AICPI-IW), which reflects inflation trends.
As part of this system, adjustments are made twice a year—on January 1 and July 1—to offset the effects of inflation on the cost of living.
What is DA/DR?
Dearness Allowance (DA) and Dearness Relief (DR) are allowances given to employees and pensioners, respectively, to mitigate the impact of inflation and ensure that their income maintains purchasing power. These allowances play a critical role in balancing the erosion of real income caused by rising prices.
Broader Economic Impact
This DA/DR revision is not only a financial adjustment but also reflects the government’s intent to support public servants and pensioners amid inflationary pressures. The additional spending could provide a minor boost to consumption, potentially aiding economic activity.
