Dearness Allowance Hiked By 3% To 34%, Effective From January 1, 2022

The cabinet has approved the proposal to increase the dearness allowance for central government employees and pensioners by 3 per cent to 34 per cent of the basic pay from 31 per cent previously, effective January 1, 2022.

That increase in DA is per the accepted formula, which is based on the recommendations of the 7th central pay commission.

The Union Cabinet chaired by the Prime Minister, Narendra Modi, has given its approval to release an additional instalment of dearness allowance (DA) to central government employees and dearness relief (DR) to pensioners effective January 1 this year.

That represents an increase of 3 per cent over the existing rate of 31 per cent of the basic pay/pension to compensate for the rise in prices.

Indeed, retail inflation, or the consumer price inflation, has remained above the upper-end of the Reserve Bank of India's target range of 2-6 per cent for two straight months this year.

That inflation data does not yet include the jump in crude prices from the Russia-Ukraine war, which economists say would push up prices pressures even further. 

The cabinet notification said the term “basic pay” means the pay drawn as per the 7th pay commission matrix and does not include any other type of pay like special pay.

The combined impact on the exchequer on account of both the dearness allowance and the dearness relief would be Rs.9,544.50 crore per annum.

This will benefit about 47.68 lakh central government employees and 68.62 lakh pensioners. It will be applicable for civilian employees and those employed in defence services.

The dearness allowance was hiked by a similar 3 per cent to 31 per cent last year, effective July 1, 2021.