11% Increment in Dearness Allowance

Dearness Allowance (DA) was increased from 17% to 28% by the government for the central government employees after a halt of 1.5 years. The hike was paused for a long time due to the COVID-19 pandemic. 

On the 14th of July, the union cabinet sanctioned an increase of 11% in Dearness Allowance (DA) and Dearness Relief (DR) for central government employees wef 1st July 2021. 

Difference between Dearness Allowance (DA) and Dearness Relief (DR)

Dearness Allowance is for the current employees of the central government and Dearness Relief is for the pension holders or retired central government employees. 

Around 50 lakh employees and 60 lakh pension holders will get financial relief with the increment as it was long due. 

What is a Dearness Allowance (DA)? 

DA relates to inflation or expensiveness. The impact of inflation affects the prices of many commodities. Thus, the enhancement of salaries for employees is required on a regular basis. 

History of Dearness Allowance (DA) 

Dearness Allowance (DA) was introduced during the second world war and was called Dear Food Allowance in India. Even after independence, when employees demanded a raise in salaries, it was provided in the name of Dearness Allowance (DA). It was later associated with the Consumer Price Index (CPI).

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This works on the basis of pay commissions. Central government employees’ salaries are decided by it. 7 pay commissions have been put forward since India’s independence. The latest pay commission was enforced from 2016. It can give recommendations on each employee’s salary. 

Increment-in-Dearness-Allowance

The percentage of DA is based on a formula: 

% of DA={(Average of the All-India Consumer Price Index (Base Year-2001=100) for the last 12 months-115.76)/115.76}/100

The salary is raised twice a year to implement Dearness Allowance (DA) since the latest pay commission. The DA rate was reset to 0% in 2016 after the 7th pay commission. Every 6 months, the exact increment according to the DA rate is given on the salary from the beginning of the pay commission. 

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Due to lesser economic activity during the pandemic, DA was not implemented from January 2020. The government saved around Rs. 37,530 crore because of the halt. The freeze was announced till July 2021. Hence, the accumulative increase of 11% wef 1st July 2021 can be observed to make up for the 1.5 years break as announced by Anurag Thakur, Minister of Information and Broadcasting. The increment can cost the government around Rs. 34,401 crore.

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