Diwali Surprise: Cabinet Announces 3% Dearness Allowance Hike for Employees and Pensioners
The Union Cabinet, led by Prime Minister Narendra Modi, has approved a 3% increase in the Dearness Allowance (DA) and Dearness Relief (DR) for central government employees and pensioners. This decision was announced on October 16, 2024, bringing festive cheer ahead of Diwali. The new DA will rise from 50% to 53% of the basic salary, effective from July 1, 2024. This adjustment is expected to provide significant financial relief to over one crore government employees and pensioners during the festive season.
Full Details of Dearness Allowance (DA)
The latest hike will cost the exchequer approximately Rs 9,448 crore annually. The DA is designed to help employees cope with inflation, which has been a pressing issue in recent months. The increase means that an entry-level employee with a basic salary of around Rs 18,000 per month will see an increase of about Rs 540 in their monthly take-home pay.
This adjustment is part of a biannual review process that typically occurs in January and July. The last revision took place in March 2024, when the DA was increased by 4%, bringing it to the previous level of 50%. The DA and DR are calculated based on the average of the All India Consumer Price Index (AICPI) over a specified period, reflecting changes in living costs.
The Confederation of Central Government Employees had previously expressed concerns regarding delays in announcing the DA hike, especially with major festivals like Durga Puja approaching. In a letter addressed to Finance Minister Nirmala Sitharaman, they highlighted the urgency of this announcement.
The DA hike not only provides immediate financial relief but also serves as an essential component of government employees’ salaries. It is crucial for maintaining their purchasing power amid rising living costs. The formula used to calculate DA takes into account various economic indicators, ensuring that it aligns with current inflation rates.
Cabinet approved 3% Dearness Allowance hike for Central Govt Employees, Pensioners from July 2024#DearnessAllowance #DA #DearnessRelief #dahike https://t.co/eNiP8FXWnI
— Central Government Employees News (@igecorner) October 16, 2024
Impact on Employees and Pensioners
- Financial Relief: The increase will significantly aid employees and pensioners in managing their expenses during the festive season.
- Arrears Payment: Employees and pensioners will receive arrears for July, August, and September due to the retroactive effect of this increase.
- Broader Economic Implications: By increasing the DA, the government aims to stimulate consumer spending during Diwali, which can have positive effects on the economy.
Calculation Methodology
The calculation of DA is based on the following formula:
For instance, if the base index is set at 115.76, any increase in AICPI will directly affect the DA percentage.
