The wait for a hike in the dearness allowance (DA) of central employees and dearness relief (DR) of pensioners will end soon. This week, the Union Cabinet may take a final decision on this. If approved, the new DA will come into effect retrospectively from January 2025, which means the employees will get an increase in their salary for March and also receive two months’ arrears.
DA hike announcement comes around Holi, usually every year
In the last few years, the government has often announced DA hikes around Holi. But this time the only disappointment may be the quantum of increase. According to data from the All India Consumer Price Index (AICPI), DA is likely to increase by only 2%, which will be the lowest in the last 7 years. Since July 2018, the government has increased DA by at least 3% or 4% every time, and on some occasions it has been even more.
During the Covid-19 pandemic, the government put a halt on the DA hike for 18 months, from January 2020 to June 2021. Employee unions have since been demanding compensation for this period, as three DA hikes were not done during this period. As per tradition, DA hike happens twice a year—once in March for the January-June period and the second time in October-November for the July-December period.
Under the 7th Pay Commission, which came into existence in January 2016, the dearness allowance (DA) of 125% under the previous pay panel was merged with the basic pay. Thereafter, the first DA hike of 2% came in July 2016, and since then there have been two revisions every year in the dearness allowance and dearness relief for central government employees and pensioners. The exception was the 18 months from January 2020 to June 2021, when the DA hike was frozen by the government citing sluggish economic growth and financial crunch.
Since January 2016, when the 7th Pay Commission recommendations were implemented, the DA has now reached a 53% level after the last revision for the July-December 2024 cycle. The government announced a 3% hike in dearness allowance in October last year to take it to 53%. Now, based on the July-December AICPI data, it is expected that the DA hike may be 2% for the January-June 2025 cycle.
This 2% DA hike will be the lowest since July 2018 or in about 78 months. The last lowest hike was also 2% for the July-December 2018 period.
How is DA decided?
The DA rate is decided on the basis of the All India Consumer Price Index for Industrial Workers (AICPI-IW) released by the Labour Bureau. The DA hike for any six months is decided by analysing the AICPI-IW data for the previous six months.