Cabinet Greenlights 2% Increase of Govt. Employees’ Dearness Allowance: Changes To Cost Additional ₹6614 Crore Annually
The previous revision took place in July 2024, when the Dearness Allowance was raised from 50% to 53%.
The Union Cabinet headed by Prime Minister Narendra Modi, has approved a 2% increase in Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners which shall be in effect from January 1, 2025. This decision raises the existing DA from 53% to 55% of the basic pay/pension, in line with the government’s commitment to offset inflationary pressures....
The Union Cabinet headed by Prime Minister Narendra Modi, has approved a 2% increase in Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners which shall be in effect from January 1, 2025.
This decision raises the existing DA from 53% to 55% of the basic pay/pension, in line with the government’s commitment to offset inflationary pressures. The changes are expected to benefit approximately 48.66 lakh government employees and 66.55 lakh pensioners across the country while having an estimated financial impact of ₹6,614.04 crore per annum on the exchequer.
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The objective of DA is to ensure that the real earnings of government employees remain protected against rising inflation.
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The government periodically revises DA and DR rates based on inflationary trends and price indices, with adjustments typically announced twice a year. The latest increase follows the recommendations of the 7th Central Pay Commission and adheres to the established formula for periodic DA revisions.
The last revision of the dearness allowance took place in July 2024 when it was raised from 50% to 53%, which is in contrast with the percentage of increase this time round. Since July 2018, DA hikes have generally ranged between 3% and 4%, making this year’s 2% increment a notable departure from the usual pattern.
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The decision comes amid growing anticipation around the implementation of the 8th Central Pay Commission to reshape the salary structure of government employees. The 8th Central Pay Commission was announced on January 16, 2025, and is slated to come into effect from January 1, 2026.
For government employees and pensioners, the financial impact of the new DA rates will be reflected in their upcoming salary and pension disbursements and arrears, if any, for the months of January to March 2025 shall be paid out along with the April salary, offering financial relief in the face of inflation.
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The next DA revision for the July-December 2025 period is expected to be announced later this year, around Diwali, and will be the final revision under the 7th Pay Commission before the transition to the 8th Pay Commission framework.
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Experts and analysts contend that the comparatively lower DA increase is a sign of fiscal caution exercised by the Centre to ensure that wage adjustments keep pace with inflation.
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