New Delhi: The Union Cabinet, led by Narendra Modi, has approved a 2 per cent increase in Dearness Allowance (DA) for central government employees, raising it from 58 per cent to 60 per cent.

The decision, taken during a Cabinet meeting on Saturday, will also apply to Dearness Relief (DR) for pensioners, offering relief amid rising inflation.

Effective from January with arrears

The revised DA and DR rates will come into effect from January 1 this year. As a result, both employees and pensioners will receive arrears for the intervening months.

The government has estimated an additional financial burden of ₹6,791 crore annually due to the hike.

What is Dearness Allowance?

Dearness Allowance is a cost-of-living adjustment provided to government employees and pensioners to offset the impact of inflation. It is calculated as a percentage of basic pay and is revised periodically to help maintain purchasing power.

The allowance plays a crucial role in ensuring that salaries keep pace with rising prices of essential goods and services.

How DA is calculated

DA revisions are based on the Consumer Price Index for Industrial Workers, which is released monthly by the Labour Bureau under the Ministry of Labour and Employment.

The index tracks changes in retail prices for a basket of goods consumed by industrial workers, making it a key benchmark for inflation adjustments.

Twice-a-year revision cycle

The Centre typically revises DA twice a year in January and July depending on inflation trends. The latest hike reflects recent movements in the CPI-IW and aims to provide timely relief to employees.

Impact on employees and pensioners

The increase will benefit lakhs of central government employees and pensioners across the country. The arrears component is expected to provide an additional financial boost in the coming months.

Conclusion

The 2 per cent DA hike underscores the government’s effort to cushion employees and pensioners against inflation. While modest, the increase, along with arrears, is expected to support household finances and maintain income stability.