Modi govt approves 3 per cent DA hike ahead of Diwali: What does it mean? Explained

In a significant move aimed at boosting the morale of central government employees, the Union Government has approved a 3 per cent increase in the Dearness Allowance (DA) ahead of the Diwali festivities. This decision is expected to directly benefit millions of central government employees and pensioners in the country. During a press briefing after the Cabinet meeting on Wednesday, Union Minister Ashwini Vaishnaw said that the DA hike was effective from July 1, 2024. 

The Dearness Relief for pensioners has also been revised by 3 per cent. The combined impact on the exchequer on account of both DA and DR would be Rs .9,448.35 crore per annum, it added. As per the release, this increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission. This will benefit about 49.18 lakh central government employees and 64.89 lakh pensioners.

Understanding the Dearness Allowance 

The Dearness Allowance is a cost of living adjustment allowance paid to government employees, which is designed to offset the impact of inflation. It is calculated based on the Consumer Price Index for Industrial Workers (CPI-IW) and is revised twice a year, usually in January and July. In March 2024, the Centre had hiked the DA of employees by 4 per cent to 50 per cent of the basic pay and then increased dearness relief (DR) by 4 per cent. This latest increase will bring the total DA to 42 per cent of the basic salary, a considerable rise from the previous percentage.

Implications of the DA hike

The 3 per cent hike in DA will result in increased financial relief for government employees, especially with the upcoming festival of Diwali, a time when families usually incur extra expenses for celebrations, gifts, and festivities. This increment will provide employees with more disposable income. For instance, an employee with a basic salary of Rs 30,000 will see an increase of Rs 900 in their monthly salary, bringing their total monthly salary to Rs 12,600, in addition to the basic pay. Similarly, pensioners will also receive the same increase, ensuring that retired government employees are equally supported.