Cabinet Clears 4% Dearness Allowance and Relief Increase, Introduces HRA and Gratuity Enhancements

Government Employees rejoice as the Union Cabinet sanctioned a 4% increase in dearness allowance (DA) for central government employees on Thursday, raising it to 50%. This decision is expected to benefit approximately 50 lakh employees and 68 lakh pensioners. The financial implication of this move is estimated at Rs 12,868 crore. The augmentation in DA has prompted the government to authorize supplementary benefits for House Rent Allowance (HRA).

The adjustment in dearness allowance is formulated by the central government, relying on the Consumer Price Index (CPI) data for industrial workers. The CPI-IW data is systematically published monthly by the Labor Bureau under the Ministry of Labour. The calculation follows a specific formula applicable to both employees and pensioners under the central government, particularly those receiving salaries as per the recommendations of the 7th Pay Commission.

According to reports, the current 12-month average for CPI-IW data stands at 392.83, resulting in a DA of 50.26% of the basic pay. All central government employees and pensioners receive dearness allowance (DA) and dearness relief (DR) as part of their salary to counteract the impact of inflation. These allowances are periodically adjusted to revise the effective salary of government employees, aligning with the formula derived from the 7th Central Pay Commission’s recommendations. The previous hike in DA took place in October 2023, with a 4% increase bringing it to 46%.

It is important to note that the hike in DA and DR will be applicable retrospectively from January 1, 2024. This means that employees and pensioners will receive arrears for the months preceding the decision.