DA Hike: Cabinet approves 2% raise in dearness allowance for central govt employees

DA Hike: The Union Cabinet, chaired by Prime Minister Narendra Modi, on Friday, March 28, approved the release of an additional instalment of dearness allowance (DA) to central government employees and dearness relief (DR) to pensioners with effect from January 1, 2025. The move will likely benefit 1.15 crore central government employees and pensioners.

“The Cabinet has approved the release of an additional instalment of DA to central government employees and DR to pensioners with effect from January 1, representing an increase of two per cent over the existing rate of 53 per cent of the basic pay/pension, to compensate against price rise, said Ashwini Vaishnaw, Minister of Information and Broadcasting after the meeting.

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With this revision, DA will rise from 53 per cent to 55 per cent, providing a salary boost for employees ahead of the anticipated 8th Pay Commission. The government’s 8th Pay Commission, which the Centre approved in January, revised the wages and allowances of central government employees.

Earlier, the DA was hiked by three per cent in October and four per cent in March 2024. The combined impact on the exchequer due to an increase in both DA and DR would be ₹6,614.04 crore per annum. The move will benefit 48.66 lakh central government employees and 66.55 lakh pensioners.

The increase is per the accepted formula of the rate, which is based on the recommendations of the 7th Central Pay Commission. DA and DR is paid to adjust the cost of living and protect employees and pensions from inflation.

What is DA?

Dearness Allowance is a financial benefit provided to government employees to offset inflation and ensure their salaries remain in line with rising living costs. While basic salaries are determined by a pay commission every 10 years, DA ensures periodic adjustments to help employees manage inflation.

This is the first DA hike after the announcement of the 8th Pay Commission. The government had announced the formation of the 8th Pay Commission on January 16, 2025, which will come into effect from January 1, 2026.

The government increases DA twice a year. The biannual revision of the DA rate is calculated as per the All India Consumer Price Index (Industrial Workers) reading for January and December. It serves as a key metric to determine the rate at which DA and DR are hiked. The index serves a key gauge to measure the impact of inflation on industrial workers.