Centre Announces 2% Increase In Dearness Allowance

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a 2% increase in Dearness Allowance (DA) for central government employees and pensioners, effective from 1st January 2025. This revision raises the DA from 53% to 55% of basic pay and is expected to benefit approximately 48.66 lakh employees and 66.55 lakh pensioners.

The move aims to provide relief against inflation, with an estimated annual financial burden of Rs 6,614.04 crore on the exchequer. The increase follows the standard formula prescribed by the 7th Central Pay Commission, which periodically revises DA to reflect rising living costs.

Dearness Allowance is a cost-of-living adjustment that helps government employees and pensioners cope with inflationary pressures. The percentage is determined based on the Consumer Price Index (CPI) and is revised twice a year, in January and July. The latest revision follows a 3% increase in October 2024, which had raised DA to 53% at the time.

With the 8th Pay Commission already approved in January this year, the government’s decision to enhance DA is seen as a part of broader efforts to adjust salaries and benefits in line with economic conditions. The hike ensures that employees and pensioners receive adequate compensation to counter the rising cost of essential goods and services.

For an employee with a basic salary of Rs 18,000, the 2% increase will translate to an additional Rs 360 per month, amounting to an annual increase of Rs 4,320. Given the substantial number of beneficiaries, this hike is expected to boost household income and consumer spending.