The Union Cabinet on Saturday approved a 2 per cent increase in dearness allowance (DA) for central government employees. The decision, which was taken during the Cabinet meeting, requires raising the bonus from 58 percent to 60 percent.
The amendment addresses the long wait by the workforce to review their compensation structure. The 2 per cent increase also applies to Dearness Relief (DR) for pensioners, which similarly increases from 58 per cent to 60 per cent.
According to a statement issued by the Council of Ministers, the increase will be applicable from January 1 of this year, which means that central government employees and retirees will receive some back salaries. The government has allocated an additional Rs. 6,791 crore in annual visits due to this decision.
The aim of this increase, which aims to compensate for the impact of inflation, was to benefit about 49.19 thousand central government employees and 68.72 thousand retirees.
What is dignity allowance?
The dearness allowance is a basic cost-of-living adjustment designed to support government employees and retirees. It specifically offsets the impact of inflation on fixed income. The allowance is calculated as a percentage of the basic salary and is subject to periodic reviews based on specified inflation indicators to maintain the purchasing power of the workforce.
Inflation-linked provisions are reviewed twice a year, usually in January and July. It is prepared based on the Consumer Price Index for Industrial Workers (CPI-IW), which is released monthly by the Labor Bureau of the Department of Labor.
When was the DA last lifted?
The Union Cabinet, headed by Prime Minister Narendra Modi, last approved a 3 per cent hike in gratuity allowance for central government employees and gratuity relief for pensioners in October 2025, with the decision being made retrospective from July 1, 2025.
The decision raised the current rate from 55 percent to 58 percent of the basic salary or retirement pension, according to a Cabinet statement. The total financial impact of the decision on the treasury was estimated at $Rs 10,083.96 crore annually.
