The Union Cabinet, led by Prime Minister Narendra Modi, approved an additional Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners on Wednesday. This increase will take effect from July 1, 2024.
Following the cabinet meeting, Information and Broadcasting Minister Ashwini Vaishnaw announced that the 3% increase will be added to the current DA rate of 50% of Basic Pay for pensioners, aimed at alleviating the impact of rising prices. Experts suggest that this measure will enhance the economy by boosting the purchasing power of the beneficiaries.
Representational Image (IANS)
This adjustment is based on the formula established by the 7th Central Pay Commission. The total financial burden on the government is estimated to be around ₹9,448.35 crore annually. Government data indicates that this decision will benefit approximately 49.18 lakh central government employees and 64.89 lakh pensioners.
The Centre typically reviews and adjusts the DA twice a year—in January and July—with official announcements following these assessments. With this latest announcement, current employees will receive DA, while pensioners will get Dearness Relief to help them cope with inflation, which saw CPI inflation exceeding 5% in September.
The previous DA adjustment, which included a 4% increase, was announced in March and came into effect in January 2024. As a result, central government employees are now entitled to a DA of 50% of their basic salary, while pensioners receive a DR of 50% of their basic pension.
Expert opinion
Seema Sharma, an economics professor at the Indian Institute of Technology Delhi, asserts that the recent increase in Dearness Allowance (DA) will significantly stimulate economic activity. In a conversation with ETV Bharat, she elaborated that this raise will provide government employees and pensioners with more disposable income, thereby boosting their purchasing power. As their spending rises, demand for goods will increase, resulting in enhanced production capabilities and more job opportunities. This decision is anticipated to have a positive impact on the overall economy.
In response to the central government's announcement, all states are set to raise DA for their employees and pensioners, further contributing to the broader economic cycle.
What is DA?
Dearness Allowance (DA) is a component of employee salaries intended to mitigate the impact of inflation. Regular increases in DA help to maintain the effective salaries of government employees, ensuring their purchasing power is preserved. For central government employees, the DA amount is determined by the most recent Consumer Price Index for Industrial Workers (CPI-IW), which is released monthly by the Labour Bureau within the Ministry of Labour. The percentage of DA is calculated using a specific formula set forth by the 7th Pay Commission.
Dearness Relief Rates for Pensioners - 7th Central Pay Commission
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%
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