In what could be a major Diwali bonus for central government employees, the government is expected to announce a 3% hike in Dearness Allowance (DA). The official declaration is likely to come closer to the Diwali festivities, which fall on October 31, following a final decision in the next Cabinet meeting.
The Dearness Allowance, which is adjusted biannually based on the All India Consumer Price Index (AICPI), helps government employees manage the impact of rising inflation by reflecting changes in retail prices. A DA increase will result in a higher take-home salary for employees at a time when inflation is straining household budgets.
Currently, the DA stands at 50%, but if the expected hike is approved, it will rise to 53%, effective from July 1, 2024. This adjustment is set to benefit more than one crore central government employees and pensioners, who will also be entitled to arrears for the months of July, August, and September.
The government had previously announced a similar hike ahead of the festive season last year. Meanwhile, the Himachal Pradesh government has already provided its employees with an early Diwali gift, granting a 4% DA increase just before Dussehra. This move is expected to benefit 1.80 lakh employees and 1.70 lakh pensioners in the state.
How much salary will increase?
The upcoming Dearness Allowance (DA) hike is expected to provide a significant salary boost for central government employees across various pay grades. For instance, an entry-level government employee currently earning a basic salary of ₹18,000 per month could see their monthly salary increase by ₹540 to ₹720, depending on whether the DA hike is 3% or 4%. This increase will be applied retroactively from July 1, 2024.
For example, an employee earning ₹30,000 per month, with a basic pay of ₹18,000 and a current DA of ₹9,000 (50% of basic pay), will see their DA rise to ₹9,540 if the government approves a 3% increase, adding ₹540 to their total monthly salary. If the DA increase is 4%, the new DA would be ₹9,720, increasing their total pay by ₹720.
What is Dearness Allowance (DA)?
Dearness Allowance (DA) is a key part of the salary structure for government employees, designed to help offset the impact of inflation on their cost of living. While DA is provided to active employees, retirees receive a similar benefit called Dearness Relief (DR). These allowances are reviewed and revised twice annually, typically in January and July, based on the rise in living costs as reflected in the All India Consumer Price Index (AICPI).
Currently, over a million central government employees and pensioners benefit from a 50% DA, which was last raised by 4% in March 2024.
How is DA Calculated?
The DA percentage is calculated using a specific formula tied to the All-India Consumer Price Index (AICPI), which measures inflation. The formula used for central government employees is:
- Take the 12-month average of the AICPI (base year 2001 = 100).
- Subtract 115.76 from the result.
- Divide the difference by 115.76 and multiply by 100 to determine the DA percentage.
For central public sector employees, the calculation is slightly different, using the last three months’ AICPI average with a base figure of 126.33.
History of the 7th Pay Commission
The 7th Pay Commission, established in February 2014, made its recommendations effective from January 1, 2016, revising the pay scales of central government employees and pensioners every ten years. As its 10-year mark approaches, discussions about potential pay scale revisions are already underway.
There is growing speculation that government employees may soon receive a pay raise, with talks centered around using a fitment factor of 1.92. If implemented, the minimum basic salary could rise from ₹18,000 to ₹34,560. Pensioners may also see their minimum pensions increase, potentially reaching ₹17,280.
