Union Cabinet Approves 2% Hike in Dearness Allowance for Govt Employees

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a 2% increase in Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners, effective from January 1, 2025. This decision aims to mitigate the impact of inflation and ensure financial stability for government personnel and retirees.

The additional instalment of DA and DR will raise the existing rate from 53% to 55% of the Basic Pay/Pension. This revision is expected to benefit approximately 48.66 lakh Central Government employees and 66.55 lakh pensioners. The financial burden on the exchequer due to this increase is estimated at Rs. 6,614.04 crore per annum.

This hike aligns with the established formula based on the recommendations of the 7th Central Pay Commission. The last revision in DA was implemented in July 2024, when it was raised from 50% to 53%.

The increase in DA comes as a significant financial boost for employees ahead of the anticipated implementation of the 8th Pay Commission. It underscores the government’s commitment to ensuring that public servants and pensioners receive adequate compensation to counterbalance rising living costs.

Understanding Dearness Allowance

Dearness Allowance (DA) is a financial benefit provided to government employees to offset inflation and maintain their purchasing power. While basic salaries are determined by a pay commission every ten years, DA is revised periodically to ensure that wages remain aligned with the cost of living. This mechanism plays a crucial role in safeguarding the financial well-being of government employees and pensioners amid economic fluctuations.