To mitigate the impact of rising prices, the Union Cabinet, chaired by Prime Minister Narendra Modi, approved an additional installment of Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners on March 7, representing a 4 percent increase.
Effective from January 1, 2024, this increase will raise the DA and DR to 50 percent. According to Union Minister Piyush Goyal, this adjustment will benefit 49.18 lakh employees and 67.95 lakh pensioners and aligns with the formula based on the 7th Central Pay Commission’s recommendations.
The hike will result in an annual expenditure of Rs 12,868.72 crore. The previous increase occurred before Diwali in October 2023, when the government raised DA and DR by 4 percentage points to 46 percent from July 1, 2023, benefiting 48.67 lakh central government employees and 67.95 lakh pensioners, with an estimated annual financial impact of Rs 12,857 crore.
DA serves as a cost-of-living adjustment for government employees, while DR assists pensioners in coping with increased living costs. These allowances are revised biannually by the government.
As per the 7th Pay Commission’s recommendations, when DA reaches 50 percent, there will be automatic increases in other benefits such as house rent allowance (HRA), gratuity, children’s education allowance, and transport allowance, boosting the take-home salary of central government employees.
During the Cabinet briefing, Goyal noted, “With the 4 percent hike, since the increase has now reached 50 percent, the consequential increase in HRA will be from 9 to 10 percent, from 18 to 20 percent, and from 27 to 30 percent. Similarly, the upper ceiling for gratuity will increase to 25 lakhs, and all other benefits received will also increase by 25 percent.”
