Ahead of the festive season, the government on Wednesday increased the dearness allowance (DA) for government employees and pensioners by 4%, with effect from July 1, 2022. With this, the DA has been hiked from the existing 34% to 38%.
“The additional financial implications on account of this increase of Dearness Allowance to Central Government employees are estimated at Rs.6,591.36 crore per annum; and Rs.4,394.24 crore in the financial year 2022-23 (i.e. for a period of 8 months from July 2022 to February, 2023),” says the government.
Anurag Thakur, the minister of information and broadcasting said the central government employees and pensioners will now be entitled to both DA and dearness relief, respectively, from July 1, 2022. Both are calculated based on the retail inflation for industrial workers. While DA is given to government employees, DR is given to government pensioners.
“The additional financial implications on account of this increase of Dearness Relief to pensioners are estimated at Rs.6,261.20 crore per annum; and Rs.4,174.12 crore in the financial year 2022-23 (i.e. for a period of 8 months from July 2022 to February 2023)” the statement said.
“The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be of the order of Rs.12,852.56 crore per annum; and Rs.8,568.36 crore in the financial year 2022-23 (i.e. for a period of 8 months from July 2022 to February 2023),” it added.
The DA hike will likely provide a reliefs the domestic retail and wholesale inflation have remained above 6%, which is higher than the Reserve Bank of India’s upper tolerance limit for the past few months. In August, the retail inflation inched up to 7%, compared to 6.71% in July. Notably, to curtail inflation, the RBI is also likely to hike the repo rate by 35-50 basis points during the upcoming policy announcement on September 30.
How is DA calculated?
In 2006, the first UPA government revised the calculation of DA and DR. It is calculated as the percentage of the basic salary. The DA is calculated differently for central government and central public sector employees.
For Central Government Employees, it is calculated as:
DA %= ((Average of AlCPI (Base Year 2001=100) for the past 12 months -115.76)/115.76)x100. AICPI refers to the Average of the All-India Consumer Price Index.
For Central public sector employees it is calculated as:
DA%= ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 3 months -126.33)/126.33)x100.