Dearness allowance for govt workers up from 42% to 46%

The government on Wednesday raised the dearness allowance (DA) for 4.86 million central government employees by four percentage points to 46% along with a similar increase in the dearness relief (DR) for 6.8 million pensioners ahead of the festive season and crucial assembly polls even as retail inflation eased substantially in September.

The new rates will be applicable retrospectively from July 1, 2023, Union information and broadcasting minister Anurag Thakur said after the Cabinet meeting. The decision will have an annual impact of ₹12,857 crore on the exchequer.

The Cabinet, chaired by Prime Minister Narendra Modi, took the decision in the view of the three-month long festive season that includes Navratra, Diwali, Chhat Puja, Gurupurab and Christmas, an official said requesting anonymity.

The decision to raise DA comes week after the Election Commission announced assembly polls in five states — Mizoram, Chhattisgarh, Madhya Pradesh, Rajasthan and Telangana — starting from November 7 and lasting through the month.

Experts said the move to increase dearness allowance (always expressed as a percentage of the basic salary) will bring double cheer as it comes a week after data showed retail inflation in September cooled off significantly due to a sharp correction in vegetable inflation. They, however, cautioned that the deteriorating geopolitical situation in the Middle East may again push up food and fuel rates globally, adversely impacting India. The country imports 87% of the crude oil it processes.

India’s retail inflation, as measured by the Consumer Price Index (CPI), jumped to a 15-month high of 7.44% in July from 4.87% the preceding month, with food inflation at its highest in 39 months because prices of vegetables, cereals and pulses spiked. It remained above the Reserve Bank of India’s (RBI) upper tolerance band of 6% in August at 6.83%, before easing to 5.02% in September. Benchmark Brent crude jumped over 3% to $92.61 a barrel in during the Wednesday trade on due to a blast at a Gaza hospital.

Both employees and pensioners will get the raised amount retrospectively from July 1, 2023, the official cited above said. “This increase is broadly in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission,” he 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 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).