Government employees rejoice as cabinet approves 4 percent rise in dearness allowance

In a move to counteract the impact of rising prices, the Union Cabinet, led by Prime Minister Narendra Modi, gave its nod on March 7 to release an additional installment of Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners, marking a 4% increase.

This hike will elevate DA and DR to 50 and will be effective from January 1, 2024. Union Minister Piyush Goyal, addressing the media during the Cabinet briefing, stated that approximately 49.18 lakh employees and 67.95 lakh pensioners will benefit from this decision. The increase adheres to the prescribed formula based on the recommendations of the 7th Central Pay Commission.

#Cabinet approves hike in Dearness Allowance to Government employees and Dearness Relief to pensioners by 4% from January 1, 2024

Around 50 lakh employees and 68 lakh pensioners to benefit from this: Union Minister @PiyushGoyal#CabinetDecisions pic.twitter.com/N7Ao405X2v

— PIB India (@PIB_India) March 7, 2024

The incremental rise is expected to incur an annual expenditure of Rs 12,868.72 crore for the exchequer, as per Goyal.

Previous increment 

It follows a previous increment just before Diwali in October 2023. During that revision, the government raised DA and DR by 4 percentage points to 46%, effective from July 1, 2023. This benefited 48.67 lakh central government employees and 67.95 lakh pensioners, with an estimated annual financial impact of Rs 12,857 crore due to the hike in DR and DA.

The Union Cabinet, presided over by Prime Minister Shri @narendramodi Ji, has given the nod to a 4% increase in Dearness Allowance for government employees and Dearness Relief for pensioners, effective from January 1, 2024. Approximately 50 lakh employees and 68 lakh pensioners…

— Nitin Gadkari (मोदी का परिवार) (@nitin_gadkari) March 7, 2024

DA serves as a cost-of-living adjustment allowance for the government's workforce, while DR aids central government pensioners in coping with increased living costs. The government revises these allowances twice a year.

What are 7th pay commission recommendations?

In line with the 7th Pay Commission's recommendations, once DA reaches 50%, there will be automatic increases in other benefits like house rent allowance (HRA), gratuity, children’s education allowance, and transport allowance. This will lead to a boost in the take-home salary of central government employees.

Goyal highlighted these consequential adjustments during the Cabinet briefing, emphasizing that with the 4% hike, HRA will increase from 9% to 10%, from 18% to 20%, and from 27% to 30%. Moreover, the upper ceiling for gratuity will rise to 25 lakhs, and other benefits will see a 25% increase.