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The Indian government announced a significant increase in the Dearness Allowance (DA) for its employees and Dearness Relief (DR) for pensioners, effective from July 1, 2024. This 3% hike, approved during a Cabinet meeting chaired by Prime Minister Narendra Modi, raises the DA rate from 50% to 53% of the basic pay. This adjustment will benefit over one crore employees and pensioners nationwide, providing them with much-needed financial relief amidst rising inflation and the escalating cost of living.
The primary objective of DA is to mitigate the impact of inflation on government employees and pensioners, ensuring their purchasing power remains stable even as prices rise. The government's decision to increase the DA reflects its awareness of the economic challenges faced by its workforce. While this increase will come at a cost of Rs 9,448 crore to the central exchequer, it signifies the government's commitment to supporting its employees and ensuring their financial well-being.
The 3% increase in DR for pensioners mirrors the DA hike, aiming to provide pensioners with additional financial support in the face of rising prices. This increase is particularly significant given the vulnerability of retirees to inflation, as their fixed incomes are directly affected by rising prices. The DA and DR are revised twice a year, typically in January and July. This latest increase follows a 4% hike announced in March 2024, which brought the DA to 50%.
The announcement of the DA hike has naturally sparked curiosity among employees about the financial impact on their monthly salaries. For example, an employee earning Rs 30,000 per month, with a basic pay of Rs 18,000, currently receives Rs 9,000 as DA. With the 3% increase, their DA will rise to Rs 9,540, translating to an additional Rs 540 per month. Employees with higher basic pay will see a proportionately larger increase.
The calculation of DA is directly linked to the All India Consumer Price Index (AICPI), which measures the cost of living. The DA percentage is determined by the increase in the AICPI over a 12-month period, ending in June each year. While DA revisions happen every six months, the government often announces these changes a few months after the effective date. The formula for calculating DA involves comparing the average AICPI for the past 12 months to the base year of 2001, which has an index value of 115.76.
For central public sector employees, a slightly different formula is used. In their case, the DA percentage is calculated based on the average AICPI for the past three months compared to the base year 2001, with an index value of 126.33. This difference in formulas reflects the specific needs and circumstances of central public sector employees.
The government's decision to raise the DA in March 2024 by 4%, bringing it to 50% of the basic pay, was driven by the need to address inflation and ensure employees and pensioners were not disproportionately affected by rising prices. The latest 3% increase, bringing the total DA to 53%, reinforces this commitment to maintaining the standard of living for government employees and pensioners, particularly in the face of rising costs for essential goods and services.
Source: DA hike by 3%: Check new salary, arrear calculations for employees, pensioners