The Union Cabinet has approved a 4% hike in dearness allowance (DA) for central government employees and pensioners, effective from January 1, 2024. The move will boost the income and spending of over 10 million beneficiaries and stimulate the economy.
The Union Cabinet on Thursday approved the release of an additional instalment of dearness allowance (DA) to central government employees and dearness relief (DR) to pensioners to compensate against price rise. This would translate into a four percentage points increase in dearness allowance (DA) to 50% of basic pay from the existing rate of 46% effective from January 1 this year, benefitting over 10 million employees, commerce and industry minister Piyush Goyal said after a meeting of the cabinet chaired by Prime Minister Narendra Modi.
The combined impact on the exchequer on account of both DA and DR would be Rs 12,869 crore per annum. The impact would be Rs 15,014 crore during the year 2024-25 (January 2024 to February 2025). With the increase in DA, transport allowance, canteen allowance, and deputation allowance among others have been increased by 25%. House rent allowance has been raised to 30%, 20% and 10% of basic pay, respectively, from 27%, 19% and 9%, respectively. Benefits under gratuity have been increased by 25% with an increased ceiling of Rs 25 lakh against the existing Rs 20 lakh.
The increase in DA and DR is in accordance with the accepted formula, and is based on the recommendations of the 7th Central Pay Commission. The decision is likely to benefit 4.92 million central government employees besides 6.79 million pensioners.
Union Minister Anurag Thakur said that the total extra outgo on the exchequer would be Rs 12,815.60 crore per annum to fund the hike in DA. He also said that the move will benefit about 47.58 lakh central government employees and 69.76 lakh pensioners. The release of additional instalment of dearness allowance to government employees as well as dearness relief to pensioners will be effective from January 01, 2023.
The DA hike is a bonanza for central government employees and pensioners, who have been facing financial difficulties due to the Covid-19 pandemic and rising inflation. The DA hike will also boost consumer spending and revive economic growth.
According to experts, the DA hike will increase the disposable income of the beneficiaries by around Rs 10,000 crore per month, which will have a positive multiplier effect on the economy. The DA hike will also increase the tax revenue of the government by around Rs 2,000 crore per month. The DA hike will also help in reducing the gap between the nominal and real wages of the employees and pensioners, which had widened due to high inflation in recent months.
The DA hike is expected to benefit various sectors of the economy such as consumer durables, automobiles, real estate, hospitality, tourism, education and health care. The DA hike will also increase the demand for credit and savings products among the beneficiaries. The DA hike will also improve the morale and productivity of the employees and pensioners, who are an important part of the public service delivery system.
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