The Indian government is considering a 3-4% increase in Dearness Allowance (DA) from July 1, a move that could bring great relief to central government employees, according to media reports. This would be the second increase this year, following last month’s 4% adjustment effective Jan. 1, 2023, which brought the allowance for central government employees to 42%.
The government grants DA and Dearness Relief (DR) to employees and pensioners to help them cope with the rising cost of living due to inflation. The allowance rate is based on data from the Consumer Price Index for Industrial Workers (CPI-IW) published by the Department of Labor under the Ministry of Labor and Employment. Although the retail inflation rate in March 2023 was reduced to 5.66% from the Reserve Bank of India’s 6% ceiling, it is still far from the Central Bank’s 4% target.
The revision of DA and DR happens twice a year, in January and July.DA is paid on the basis of basic salary of government employees, while DR is paid on the basis of basic pension of retirees. According to the latest data, there are 47.58 million central government employees and 69.76 million pensioners.
The proposed increase in DA is good news for government employees, who have been hit hard by inflation and rising prices of basic commodities. the increase in DA will translate into an increase in net salaries for central government employees and retirees. Moreover, the Jharkhand government has already increased the rate of allowances for its employees from 34% to 42% on the recommendation of the 7th Central Pay Commission.
Experts believe that the proposed increase in DA will have a positive impact on the economy as it will increase the purchasing power of government employees and retirees. This, in turn, will lead to increased demand for goods and services and boost economic growth.
Given the current economic situation, the proposed 3-4% increase in DA for central government employees and retirees is a much needed relief. As inflation remains a concern, the government’s initiative to provide additional support to its employees and retirees is a step in the right direction. The increase in benefits will not only benefit the recipients, but will also provide a much needed boost to the economy.