Media reports suggest that the central government in India may increase the Dearness Allowance (DA) for its employees by an additional 4% in July 2023. This would follow a 4% increase in DA that was implemented in January 2023.
The DA and Dearness Relief (DR) are reviewed twice a year in January and July. It has been reported that the government may use a revised formula to calculate the hike in DA.
The Labour Ministry has revised the calculation formula for DA and updated the base year of DA in 2016. The Ministry also released a new series of Wage Rate Index (WRI) called the WRI-Wage Rate Index, which has a base year of 2016=100. The previous series had a base year of 1963-65. The Central Government follows a specific formula for revising the DA and DR for its employees. The formula differs for Central Public Sector employees.
The recent 4% hike in DA and DR will benefit approximately 47.58 lakh central government employees and 69.76 lakh pensioners, respectively. The DA is based on the employee's basic pay, and an increase in DA will result in a corresponding increase in take-home pay.
For example, an employee with a monthly take-home salary of around Rs 42,000 and a Basic Pay of approximately Rs 25,500 would have received Rs 9,690 as DA prior to the recent 4% hike. With the latest DA hike, this amount will increase to Rs 10,710, resulting in a monthly take-home pay increase of Rs 1,020.
The previous revision of DA was implemented on September 28, 2022, and took effect on July 1, 2022. Based on the percentage increase in the 12-month average of the All India Consumer Price Index for the period ending June 2022, the Centre increased the DA by four percentage points to 38%.
The government's move to revise the formula and increase the DA is expected to provide relief to government employees and pensioners who have been facing the impact of rising inflation. The revised formula and base year will ensure that the calculation of DA is in line with current economic conditions.
