Dearness allowance hiked to 28% for govt staff, 10 million to benefit

Move expected to cost the exchequer Rs 34,400 cr, spur consumer spending

In a much-awaited relief for over 10 million central government employees and pensioners, the Union Cabinet on Wednesday approved the effective increase in dearness allowance (DA) and dearness relief (DR) — a move seen as stimulating demand in the economy.

The DA for central government employees and the DR for pensioners was hiked from 17 per cent of basic pay/pension to 28 per cent with effect from July 1. 

While the move is expected to cost the exchequer approximately Rs 34,400 crore, it is expected to increase disposable incomes and spur consumer spending ahead of the festival season and help revive the economy.

The hike will benefit 4.8 million central government employees and 6.5 million pensioners, Information and Broadcasting Minister Anurag Thakur said after the Cabinet meeting, chaired by Prime Minister Narendra Modi.

The DA hikes were put on hold with effect from January 2020 due to the Covid-19 pandemic.

“In view of the unprecedented situation which arose due to the pandemic, three additional instalments of DA to central government employees and DR to pensioners, which were due from January 1, 2020, July 1, 2020, and January 1, 2021, had been frozen,” said a government statement. 

The DA is paid to central government employees and pensioners in a bid to offset the impact of inflation in the country. With the hiked DA expected to be actually transferred to employees from September onwards, they will get arrears accruing from July 1. The rate of DA and DR for the period January 1, 2020, to June 30 this year will remain unchanged at 17 per cent. The DA is calculated twice every year — in January and June. The government had hiked the DA by 4 per cent in January 2020, 3 per cent in June 2020, and 4 per cent in January this year — an increase of 11 per cent.