Cabinet Hikes Dearness Allowance to 55% for Central Government Employees

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a 2% increase in Dearness Allowance (DA) for employees and Dearness Relief (DR) for pensioners. This hike is effective from January 1, 2025, raising the current rate from 53% to 55% of basic pay or pension.

Who Will Benefit?

The decision is set to benefit a vast section of the population:

48.66 lakh Central Government employees
66.55 lakh pensioners

With more than 1.15 crore individuals impacted by this revision, the government aims to help them cope with rising inflation through this periodic adjustment.

Cost to the Exchequer

The combined financial impact of this decision—covering both DA and DR—is estimated at ₹6,614.04 crore per annum. This increase follows the standard formula derived from the recommendations of the 7th Central Pay Commission, which links DA/DR revisions to the Consumer Price Index (CPI-IW), measuring changes in cost of living.

What is Dearness Allowance (DA) and Dearness Relief (DR)?

DA is a cost of living adjustment allowance paid to Central Government employees.
DR is the equivalent relief provided to pensioners to offset inflationary pressures.

Both are revised twice a year—in January and July—to ensure that public servants and retirees are protected against price rise.

Why This Matters

This DA hike might appear modest at 2%, but for those relying on government salaries and pensions, it provides a predictable buffer against inflation. Especially for pensioners, the DR component becomes critical for maintaining financial stability post-retirement.

Such increases are also closely watched as indicators of inflation trends and government fiscal planning.