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Centre okays 4% hike in DA to its employees
Ahead of the Diwali, the Union Cabinet on Wednesday raised the dearness allowance (DA) by four percentage points to 38% for 4.77 million central government employees.
Ahead of the Diwali, India’s biggest festival, the Union Cabinet on Wednesday raised the dearness allowance (DA) by four percentage points to 38% for 4.77 million central government employees along with a similar increase in the dearness relief (DR) for 6.86 million pensioners, shielding them from the high inflation.
The combined impact on the exchequer on account of the decision would be ₹12,852 crore a year, Union information and broadcasting minister Anurag Thakur said after the Cabinet meeting.
Thakur added that the Cabinet, chaired by Prime Minister Narendra Modi, took two key decisions in the view of the three-month long festive season, involving Navratra, Diwali, Chhat Puja, Gurupurab and Christmas. While the first major announcement involved extension of free dry ration to 800 million poor people for another three months with an expenditure of ₹44,762 crore (HT reported this first on August 22), and the second related to enhancing DAs.
The decision to raise DA has been taken in the light of surging prices of essential commodities, especially during the festive season, two officials said requesting anonymity. Inflation has stayed above the Reserve Bank of India’s upper tolerance limit of 6%, which called for some relief to the government employees, one of them said.
The Cabinet approved the release of additional instalment of DA and Dearness Relief (DR) at the rate of 4% to central government employees and pensioners with effect from July 1, based on the percentage increase in 12 monthly average of All India Consumer Price Index (CPI) for the period ending June, 2022, an official statement said.
After hitting a peak of 7.8% in April, India’s retail inflation – measured by the consumer price index (CPI) – gradually moderated to 6.71% in July, only to rise again to 7% in August mainly due to an increase in food and fuel prices.
Experts say that the DA relief will help employees manage household budgets. “Household budgets would be adversely affected especially the lower income segments because of the relatively higher share of food and related items in their consumption baskets,” DK Srivastava, Chief Policy Advisor at consulting firm EY India said.
“Driven largely by domestic causes especially due to uneven monsoon and a heatwave having an adverse impact on food prices, overall CPI inflation has risen back to 7% in August , the level that was seen in May and June 2022. While the underlying pressures on inflation have persisted due to continuing high levels of global crude prices and supply side constraints, inter-month volatility is due to domestic developments,” he added in the latest edition of Economy Watch released on Wednesday.
Both employees and pensioners will get the raised amount retrospectively from July 1, 2022, a second official said.
The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be of the order of Rs. 12,852.56 crore per annum; and Rs. 8,568.36 crore in the financial year 2022-23 (i.e. for a period of 8 months from July, 2022 to February, 2023), the official statement said.
“This increase is broadly in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission,” the second official said.
Central Pay Commissions are periodically constituted to go into various issues of emolument structure, retirement benefits and other service conditions of central government employees and to make recommendations on the required changes.
According to the Commission’s report, DA is paid to central government employees to adjust the cost of living and to protect their basic pay from erosion in the real value on account of inflation. The allowance is currently based on the consumer price index-industrial workers (CPI-IW).
