DA Hike: Cabinet Clears 2% Raise Ahead Of 8th Pay Commission Setup

The Union Cabinet on Friday approved a 2% hike in the dearness allowance for central government employees and dearness relief for pensioners.

The revision, which will come into effect retrospectively from Jan. 1, 2025, comes ahead of the formal setup of 8th Pay Commission which will hold deliberations with various stakeholders over the next few months.

Earlier this month, NDTV Profit had reported, citing two major staff forums, that the allowance would be raised by 2% in this round of biannual revision.

With this set of revision, the DA has increased to 55% of the basic pay set under the 7th Pay Commission. Earlier, the allowance was raised by 3% in October and by 4% in March last year.

Notably, the Consumer Price Index for Industrial Workers data, released by the government on a monthly basis, serves as a key metric to determine the rate at which the dearness allowance and dearness relief are raised.

The index, which serves as a key gauge to measure the impact of inflation on industrial workers, declined by 0.8 points to 143.7 in December 2024. The year-on-year CPI inflation for industrial workers in December stood at 3.53%, as compared to 4.91% in the same month of the preceding year, the Labour Bureau said in a release issued on Feb. 18.

The data for the month of December is focussed upon because the DA and DR is revised with effect from January.

The relative slowdown in inflation for industrial workers during the month is the reason why the hike in allowance could be lower, as compared to the previous two revisions, employee unions leaders had suggested.

"As per our calculation, the dearness allowance will probably be of 2%," Rupak Sarkar, president of the Confederation of Central Government Employees and Workers, had told NDTV Profit on March 6.

Earlier, the staff side of National Council-Joint Consultative Machinery—an official forum comprising union leaders and bureaucrats—appealed the government to merge 50% of the DA with basic pay before the implementation of 8th Pay Commission.

The merger of DA with basic salary, once it rises to 50%, was a norm set under the 5th Pay Commission. However, it was discontinued under the 6th Pay Commission whose tenure lasted from 2006 to 2016. The norm was not reinstated under the 7th Pay Commission.

Amid the NC-JCM's demand for restoration of the rule, the government clarified in the Parliament that it is not planning to merge DA with basic pay. There is no such proposal under consideration, Minister of State for Finance, Pankaj Choudhary said on March 18.