In a major relief to millions of central government employees, the Union Cabinet has approved a 4% hike in Dearness Allowance (DA). This much-anticipated revision has taken the DA rate from 50% to 54%, effective from January 1, 2025. The hike comes as part of the government’s biannual policy to adjust the cost-of-living allowance in line with inflation and rising prices, directly impacting the take-home pay of over 47 lakh employees and 69 lakh pensioners.
A Financial Boost for Central Workers
With the revised rate, the DA component in salaries will increase significantly. For example, an employee drawing a basic pay of ₹18,000 will now receive ₹9,720 as DA instead of ₹9,000 earlier. This translates to an annual salary increment of approximately ₹24,000. Employees at higher pay levels stand to gain even more. The salary bump not only improves the financial comfort of employees but also boosts spending power across sectors.
Pensioners Also to Benefit
Alongside the increase in DA, the Dearness Relief (DR) for central government pensioners has also been increased by 4%. This ensures that retired employees will also benefit from the revised rate, cushioning them against inflation. The updated rate of DR will be reflected in their pension disbursements starting from the upcoming payment cycle.
Fiscal Impact and Budgetary Allocation
The government estimates that the additional financial burden from this DA hike will be around ₹12,868 crore annually. However, the move is being seen as fiscally manageable and socially beneficial, especially ahead of the upcoming festive and financial quarters. Experts also believe this will lead to a temporary rise in consumer demand, positively impacting the economy.
Employee Unions Welcome the Decision
Various central employee unions have welcomed the decision, stating that it reflects the government’s sensitivity to the needs of its workforce. However, some unions are still pushing for clarity regarding the implementation of the 8th Pay Commission and further rationalisation of pay structures.