Union Cabinet Approves 2% Hike in Dearness Allowance and Relief for Central Government Employees and Pensioners

The Union Cabinet, led by Prime Minister Narendra Modi, on March 28 approved a 2% increase in Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners. The revised rates will come into effect from January 1, 2025, raising the current rate from 53% to 55% of the basic pay/pension.

Financial Impact and Beneficiary Count

According to the official release, the combined financial burden on the government due to this increase is estimated at Rs 6,614.04 crore per annum. This move will benefit approximately:

48.66 lakh Central Government employees

66.55 lakh pensioners

Together, over 1.15 crore beneficiaries will receive enhanced compensation aimed at offsetting the impact of inflation.

Revision Based on 7th Central Pay Commission Recommendations

The hike in DA and DR is in line with the formula suggested by the 7th Central Pay Commission, which links these adjustments to the All India Consumer Price Index (AICPI). This mechanism ensures that employees and retirees maintain purchasing power despite inflationary trends.

Biannual Review to Combat Cost of Living Changes

The government traditionally reviews DA and DR twice a year—in January and July—to compensate for cost of living changes. These periodic adjustments help public sector employees and pensioners cope with rising consumer prices and maintain their standard of living.

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