Dearness Allowance Hiked by 2% for Central Government Employees from January 2025

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.

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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.

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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.

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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.