DEARNESS ALLOWANCE

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Context

• The Union Cabinet has decided to increase the Dearness Allowance by four per cent to 42 per cent for central government employees and pensioners.

Background

About DA

• The Dearness Allowance (DA)is a calculation on inflation and allowance paid to government employees and pensioners in India, Bangladesh and Pakistan.
• Dearness Allowance is calculated as a percentage of an Indian citizen's basic salaryto mitigate the impact of inflation on people.
• The DA for the central government employees is calculated based on the latest Consumer Price Index for Industrial Workers (CPI-IW). The Labour Bureau, a wing of the Labour Ministry, publishes the CPI-IW data every month.
• There is a set formula to calculate the Dearness Allowance of central government employees and pensioners.
• At present, central government employees and pensioners get a 38 per cent DA and Dearness Relief, respectively.

DA Revision

• To fight against rising inflation, the central government increases the Dearness Allowance periodically.
• It is usually revised twice every year — in January and July.
• The announcement of the hike in DA and the payout is usually done in March.

Recent Hike in DA

• The Union Cabinet has given its approval to release an additional instalment of Dearness Allowance to Central Governments employees and Dearness Relief to Pensioners with effect from 01.01.2023.
• The additional instalment will represent an increase of 4% over the existing rate of 38% of the Basic Pay/Pension, to compensate against price rise," said a government press release.

Significance

• This will benefit about 47.58 lakh Central Governments employees and 69.76 lakh pensioners. This increase is in accordance with the accepted formula which is based on the recommendations of the 7th Central Pay Commission.

https://economictimes.indiatimes.com/news/economy/policy/cabinet-hikes-da-by-4-to-42-for-central-government-employees/articleshow/98976863.cms

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1910513