New Delhi: The Union Cabinet, chaired by Prime Minister Narendra Modi on Wednesday approved an additional Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners. This will be effective from July 1, 2024.
Post cabinet meeting, information and broadcasting minister Ashwini Vaishnaw said that this increase of 3% will be added to the current rate of 50% of Basic Pay of Pension to help offset rising prices. Experts believe that this step is going to give a boost to the economy by increasing the purchasing power of the beneficiaries.
This adjustment follows the formula established by the 7th Central Pay Commission. The total financial impact on the government will be approximately 9,448.35 crore rupees per year. As per government data, this decision will benefit around 49.18 lakh central government employees and 64.89 lakh pensioners.
Typically, the Centre evaluates and adjusts the Dearness Allowance (DA) twice a year—first in January and then in July, with official announcements made after these assessments. With this announcement, current employees receive DA, while pensioners are granted Dearness Relief to help them cope with inflation. CPI inflation crossed 5 per cent in September.
The last DA adjustment, which included a 4% increase, was announced in March and took effect in January 2024. As a result, central government employees are now eligible for a DA of 50% of their basic salary, while pensioners receive a Dearness Relief (DR) of 50% of their basic pension.
Experts view
Seema Sharma, a professor of economics at the Indian Institute of Technology Delhi, believes the recent hike in DA will give a significant boost to economic activities. In an interview with ETV Bharat, she explained that this increase will put more money in the hands of government employees and pensioners, enhancing their purchasing power. As they start spending more, it will create a higher demand for goods, leading to increased production capacity and more job opportunities. Ultimately, this decision is expected to benefit the economy as a whole.
Following the central government's announcement, all states will also raise the DA for their employees and pensioners, which will further support the economic cycle on a larger scale.
What is DA?
DA is a part of employees' salaries designed to counter the effects of inflation. Periodic hikes in DA help adjust government employees' effective salaries, ensuring their purchasing power remains intact. The amount of DA for central government employees is based on the latest Consumer Price Index for Industrial Workers (CPI-IW), which is published monthly by the Labour Bureau under the Ministry of Labour. The percentage of DA is calculated using a specific formula established by the 7th Pay Commission.
Dearness Relief Rates for Pensioners - 7th CPC
1st Jan 2024 50%
1st July 2023 46%
1st Jan 2023 42%
1st July 2022 38%
1st Jan 2022 34%
1st July 2021 31%
1st July 2019 17%
1st Jan 2019 12%
1st July 2018 9%
1st Jan 2018 7%
1st July 2017 5%
1st Jan 2017 4%
1st July 2016 2%
