DA hiked by 3%: How will it impact salary of central government employees

This decision to hike the DA was taken on Wednesday during a Cabinet meeting chaired by Prime Minister Narendra Modi, and was confirmed by Union Information & Broadcasting Minister Ashwini Vaishnaw.

In Short

• DA increase benefits over 1 crore employees, pensioners
• Financial impact of DA hike is Rs 9,448 crore for government
• DA calculated based on All India Consumer Price Index

The central government has announced a 3% increase in Dearness Allowance (DA) for central government employees and Dearness Relief (DR) for pensioners, effective from July 1, 2024.

This decision, made on Wednesday during a Cabinet meeting chaired by Prime Minister Narendra Modi, was confirmed by Union Information & Broadcasting Minister Ashwini Vaishnaw. The increase in DA brings it up from 50% to 53% of the basic pay.

BENEFITING OVER 1 CRORE EMPLOYEES AND PENSIONERS

The DA hike will benefit over one crore central government employees and pensioners across the country. The increase in DA and DR is aimed at helping employees and retirees cope with rising living costs, as these allowances are directly linked to inflation. The decision is expected to have a financial impact of Rs 9,448 crore on the central exchequer, according to the government’s official announcement.

In addition to the DA for employees, pensioners will also see a 3% increase in their DR, providing them with additional financial relief. Both DA and DR are revised twice a year, typically in January and July, and this latest hike follows the previous 4% increase announced in March 2024.

HOW MUCH SALARY HIKE WILL CENTRAL GOVERNMENT EMPLOYEES RECEIVE?

The key question for most employees is how much their salary will increase with this 3% DA hike. To explain, if an employee has a monthly salary of Rs 30,000, with Rs 18,000 as the basic pay, they currently receive Rs 9,000 as DA, which is 50% of their basic pay. With the new 3% increase, this employee’s DA will now be Rs 9,540, which is an additional Rs 540 per month.

Therefore, employees with similar pay structures can expect their monthly salary to increase by Rs 540. The higher the basic pay, the greater the rise in DA, meaning that employees with higher basic salaries will see larger increases in their take-home pay.

HOW IS DA HIKE CALCULATED?

The government calculates the DA and DR increases based on the All India Consumer Price Index (AICPI), which measures changes in the cost of living. Specifically, the percentage increase in the 12-month average of the AICPI, ending in June each year, determines the DA hike. Though the allowances are adjusted in January and July, announcements are typically made a few months later, in March and September.

The formula to calculate the DA was revised by the government in 2006. According to this formula:

Dearness Allowance Percentage = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 12 months - 115.76) / 115.76) x 100.

For central public sector employees, the formula is slightly different:

Dearness Allowance Percentage = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 3 months - 126.33) / 126.33) x 100.

In March 2024, the government increased DA by 4%, raising it to 50% of the basic pay at the time. This was part of the regular review to adjust for inflation, and the latest 3% hike brings the total DA to 53%. These increases aim to ensure that government employees and pensioners maintain their purchasing power amid rising prices for essential goods and services.