The Union Cabinet has approved a 3 per cent hike in Dearness Allowance (DA) for central government employees, a decision that will impact nearly 50 lakh employees and 65 lakh pensioners across the country.
The DA hike, which also includes a similar 3 per cent increase in Dearness Relief (DR) for pensioners, is aimed at offsetting the rising cost of living due to inflation. This revision will be effective from July 1, 2024.
The announcement was made during a press briefing by Union Minister Ashwini Vaishnaw after the Cabinet meeting. He confirmed that the government has taken this decision to protect employees and pensioners from the impact of price rises, ensuring that their basic pay and pension retain their real value.
The DA, which is an essential part of government employees’ compensation, is adjusted twice a year based on the increase in the cost of living, as measured by the All India Consumer Price Index for Industrial Workers (AICPI-IW).
For the government, this hike will lead to an additional financial burden of Rs. 9,448.35 crore annually. While this is a significant sum, it reflects the government’s commitment to support its employees, ensuring that they can manage rising expenses, particularly in an inflationary environment.
The increase is based on the recommendations of the 7th Central Pay Commission, which provides a framework for updating salaries and benefits to central government employees.
The DA and DR adjustments are meant to compensate for inflation, which eats into the real value of an individual’s salary or pension. For employees, this means that their pay, adjusted for inflation, maintains its purchasing power, protecting them from the negative effects of price increases in essential goods and services.
As per the government’s statement, the DA and DR adjustments are calculated based on the 12-month average of the AICPI-IW, a crucial index published by the Labour Bureau.
This index tracks inflation by monitoring the prices of essential goods and services used by industrial workers across India. This forms the basis for determining how much the DA should be adjusted each year.
For central government employees and pensioners, the news comes as a relief, especially given the rising costs of essential goods and services in the country.
The 3 per cent hike, though modest, provides a much-needed cushion, ensuring that their income is protected against inflation. Additionally, since the hike is retroactive from July 2024, employees and pensioners will also receive arrears for the months of July, August, and September.
This hike in DA and DR is part of a bi-annual review process conducted by the government, usually in January and July each year. It is designed to help employees and pensioners keep pace with rising costs.
The latest increase comes at a time when inflation in India has been a concern for both consumers and policymakers, especially with essential items like food and fuel experiencing significant price hikes.
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