Cabinet Approves 3% DA Hike for Central Govt Employees

In a significant move, the Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a 3% hike in the dearness allowance (DA) for central government employees and pensioners, bringing the total DA to 53% of the basic pay. This increase is aimed at compensating employees against rising prices and is effective from July 1, 2024. The decision, announced by Information and Broadcasting Minister Ashwini Vaishnaw, will result in an annual cost of ₹9,448.35 crore to the exchequer, benefiting approximately 49.18 lakh employees and 64.89 lakh pensioners.

Key Highlights

Impact of the Hike: The new DA will be applicable retroactively, allowing employees to receive arrears for July, August, and September.

Connection to Inflation: The increase aligns with the accepted formula based on the recommendations of the 7th Central Pay Commission and aims to adjust for the rising cost of living as measured by the All India Consumer Price Index for Industrial Workers (AICPI-IW).

Additional Measures: In conjunction with the DA hike, the Cabinet also approved a ₹150 increase in the Minimum Support Price (MSP) for key rabi crops, raising the wheat MSP from ₹2,275 to ₹2,425 per quintal.

Financial Implications

The increase will result in an annual cost to the exchequer of ₹9,448.35 crore, benefiting approximately 49.18 lakh central government employees and 64.89 lakh pensioners. This adjustment follows the accepted formula based on the recommendations of the 7th Central Pay Commission.

Background

The DA and DR are revised biannually, on January 1 and July 1, according to the average of the All India Consumer Price Index for Industrial Workers (AICPI-IW). As a result of this recent hike, employees will receive arrears for July, August, and September, enhancing their financial position during the festive season. Additionally, the Cabinet has raised the Minimum Support Price (MSP) for key rabi crops, further indicating the government’s commitment to support both its employees and the agricultural sector.