DA may be hiked by 4% for central govt employees, pensioners soon; how much salary will increase

The Union government is likely to hike the dearness allowance (DA) and dearness relief (DR) for central government employees and pensioners soon. 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.

How much hike in dearness allowance can a central government employee expect this time?

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.

7th CPC DA% = [{12 month average of AICPI-IW (Base Year 2001=100) for the last 12 months – 261.42}/261.42×100]

Source: CPI-IW data published by Labour Bureau
The linking factor for the conversion of base year 2016=100 to base year 2010=100 is 2.88.

DA%=(372.20-261.42)/261.42×100 = 42.37

As you can see from the table that the average CPI-IW of the last 12 months will be 372.2. Following the formula, DA is coming to 42.37 per cent. So, the Union government is likely to increase the dearness allowance to 42 per cent (ignoring the decimal points).

At present, central government employees and pensioners get a 38 per cent dearness allowance and dearness relief, respectively. The central government announced the last DA hike on September 28, 2022. It was effective from July 1, 2022.

So, the likely increase in DA and DR will be around 4 per cent which will take the overall DA and DR to around 42%. This DA hike will be effective from January 1, 2023.

With 4% DA hike, how much will the salary of central government employees increase?
DA is calculated as a proportion of the basic salary. Every government employee and pensioner get dearness allowance and dearness relief.

For central government employees, a hike in DA increases their take-home salary. For example, a central government employee gets a basic salary of Rs 25,500 per month. At 38 per cent, his dearness allowance was Rs 9,690. Now, if DA jumps to 42 per cent, his DA will rise to Rs 10,710. So, with the latest hike, his salary will be raised by Rs 10,710 – Rs 9,690 = Rs 1,020.

Retired central government employees get dearness relief. It is similar to DA applicable for the central government employees. Dearness relief is also likely to increase by 4 per cent soon. With a hike in DR, central government pensioners will witness a hike in their monthly pensions. Suppose a central government pension gets a basic pension of Rs 35,400 per month. At 38 per cent dearness relief, the pensioner gets Rs 13,452 now. If his DR rises to 42 per cent, he will get Rs 14,868 every month. So, his pension will rise by Rs 1,416 per month.

Do note that these changes will be applicable to central government employees and pensioners with retrospective effect from January 1, 2023.