Centre Plans to Increase Dearness Allowance by 3% to 45% for 10 Million Employees

Centre Plans to Increase Dearness Allowance by 3% to 45% for 10 Million Employees

The central government’s decision to increase the dearness allowance (DA) for its employees and pensioners by three percentage points to 45 per cent is a welcome move to offset the impact of inflation on their purchasing power. The DA is an essential component of the compensation package for government employees and plays a crucial role in maintaining their standard of living amid rising prices of essential goods and services. By aligning the DA with the prevailing inflation rates, the government aims to provide some financial relief to its workforce and retirees.

The calculation of dearness allowance based on the Consumer Price Index for Industrial Workers (CPI-IW) ensures that the adjustments are made in line with the changes in the cost of living index. This dynamic approach helps in keeping the DA in sync with the current economic conditions and helps the government fulfill its commitment to supporting its employees and pensioners during times of economic uncertainty. The increase in DA is likely to boost the morale of government employees and pensioners, as it acknowledges their valuable contributions while addressing the impact of inflation on their overall income.

The All India Railwaymen Federation’s demand for a four percentage point hike in dearness allowance (DA) is likely to be partially fulfilled, with the government considering a three percentage point increase. The calculation of DA based on the Consumer Price Index for Industrial Workers (CPI-IW) released by the Labour Bureau plays a crucial role in determining the final percentage.

While the demand for a higher hike is not fully met, the government’s decision to raise the DA by three percentage points to 45 per cent is expected to provide some relief to over ten million government employees and pensioners in coping with the rising cost of living. Despite the difference in the proposed hike, the increase in DA remains a significant step towards supporting the financial well-being of the workforce.

After the Labour Bureau released the Consumer Price Index for Industrial Workers (CPI-IW) for June 2023, indicating a rise in the cost of living, the All India Railwaymen Federation demanded a four percentage point hike in dearness allowance (DA) for government employees and pensioners. However, as per the government’s practice of not considering hikes beyond the decimal point, the DA is likely to be increased by three percentage points to reach 45 per cent.

The expenditure department of the Finance Ministry will prepare a proposal outlining the revenue implications of the DA hike, which will then be presented to the Union Cabinet for approval. Once approved, the increased DA will be effective from July 1, 2023, providing some relief to the millions of government employees and pensioners facing the impact of rising inflation.

As of now, more than ten million central government employees and pensioners are receiving a dearness allowance of 42 per cent. The last revision in DA was implemented on March 24, 2023, and it was effective from January 1, 2023. With the recent increase in the Consumer Price Index for Industrial Workers (CPI-IW), it is expected that the dearness allowance will be raised by three percentage points to 45 per cent, benefiting the government employees and pensioners from July 1, 2023. The proposal for this DA hike will be presented to the Union Cabinet after considering its revenue implications.

The central government had previously increased the dearness allowance (DA) by four percentage points to 42 per cent, which was based on the percentage increase in the 12 monthly average of the All India Consumer Price Index (CPI) for the period ending December 2022.

The purpose of providing DA to employees and pensioners is to compensate them for the impact of rising prices and inflation, ensuring that their real wages and pension amounts are protected against the increasing cost of living. The forthcoming DA hike, expected to be three percentage points, will further address the inflationary pressures faced by government employees and pensioners from July 1, 2023.

The dearness allowance (DA) is revised periodically to compensate for the changes in the cost of living, which is measured through the Consumer Price Index for Industrial Workers (CPI-IW). The CPI-IW is calculated by the Labour Bureau on a monthly basis and reflects the average price changes in a basket of goods and services commonly consumed by industrial workers.

Based on the percentage increase in the 12 monthly average of the CPI-IW, the DA for central government employees and pensioners is revised twice a year, usually in January and July. This revision ensures that the DA keeps pace with inflation and helps maintain the purchasing power of the salaries and pensions of government employees.