By The Sampadak Express
In a key decision, the Union Cabinet on Friday approved a 2% hike in Dearness Allowance (DA) for central government employees and pensioners, impacting nearly 1.15 crore individuals. The move is expected to provide significant relief to employees, as it aims to counter the rising cost of living and inflation.
Key Highlights:
2% DA Increase: Effective from January 1, 2025, the hike will raise the DA from 53% to 55% of the basic pay or pension for government employees and pensioners.
Total Impact: The hike will result in an additional ₹6,614.04 crore annual expenditure for the government, covering both Dearness Allowance (DA) for employees and Dearness Relief (DR) for pensioners.
Beneficiaries: Around 48.66 lakh central government employees and 66.55 lakh pensioners will benefit from this increase.
Union Minister Ashwini Vaishnaw confirmed after the Cabinet meeting that this additional installment of DA and DR is aimed at alleviating the financial burden on employees and pensioners caused by inflation. This increase comes ahead of the anticipated 8th Pay Commission, which is expected to introduce further revisions.
Impact on Salaries
The hike in DA will provide a salary boost for employees. For example, a Multi-Tasking Staff (MTS) employee, whose basic pay is ₹18,000, will see an increase of ₹360 in their monthly salary. Currently, such an employee receives ₹9,540 as DA (53% of ₹18,000). With the new hike, the DA will rise to ₹9,900, adding ₹360 to their salary.
For employees with higher base pay, the impact will be more substantial. For instance, for a base pay of ₹1 lakh, the DA will increase from ₹53,000 to ₹55,000, marking a ₹2,000 increase in their monthly earnings.
Previous DA Hike and Future Adjustments
This move follows the last DA revision in July 2024, when the DA was increased by 3%, raising it from 50% to 53%. DA is revised bi-annually, with adjustments typically made in January and July, based on the cost of living and inflation. This current hike is expected to provide employees with some financial cushioning ahead of the 8th Pay Commission.
What is Dearness Allowance (DA)?
Dearness Allowance (DA) is a component of the salary or pension paid by the government and public sector employers to help employees and pensioners cope with inflation. It is calculated as a percentage of the basic salary or pension, and the rate is revised every six months based on the Consumer Price Index (CPI), which tracks inflation levels.
DA is part of the total remuneration that helps employees maintain their purchasing power in the face of rising prices. It is also taxable and must be included in income tax filings.
Economic Impact
The combined expenditure of ₹6,614.04 crore annually for the hike in both DA and DR is a significant amount, but it will directly benefit a large segment of the population, cushioning the effects of inflation for those who are most impacted. Given the rise in prices across essential goods and services, this hike will provide much-needed relief to employees and pensioners.
The 2% DA hike approved by the Union Cabinet is a timely move that will benefit millions of government employees and pensioners, ensuring that their earnings keep pace with inflation. As the cost of living continues to rise, such adjustments are crucial to maintaining the financial well-being of central government workers and pensioners. With the next major revision expected through the 8th Pay Commission, the government is taking proactive steps to manage inflation’s impact on its workforce.
