Government hikes dearness allowance to 7% from 5%

The Union Cabinet on Wednesday announced an increase to the dearness allowance from 5 per cent to 7 per cent for its 11 million employees and pensioners. 

"The Union Cabinet chaired by 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 from January 1, 2018 representing an increase of 2 per cent over the existing rate of 5 per cent of the Basic Pay/Pension, to compensate for price rise," the official statement noted.

The government believes that that the hike will benefit around 48.41 lakh central government employees and 61.17 lakh pensioners.

The combined impact on the exchequer on account of both dearness allowance (DA) and dearness relief (DR) is estimated to be somewhere around Rs 6,077.72 crore per annum, and Rs 7,090.68 crore in 2018-19 (for a period of 14 months from January 2018 to February 2019) -- an increase which is in accordance with the accepted formula based on the recommendations of the 7th Central Pay Commission. 

(With inputs from PTI)