7th Pay Commission: In a bid to address the impact of rising inflation, the Central Government had previously announced an increase in the Dearness Allowance (DA Hike) in March. Initially raised by 4 percent, the subsequent inflationary surge has led to expectations of another hike in the dearness allowance next month. This potential development could lead to yet another monthly salary increase for thousands of central employees.
Twice a year, adjustments are made to the allowance to mitigate the effects of inflation on central employees' earnings, as prescribed by the 7th Pay Commission. Although the usual review periods are in January and July, the first hike was announced in March. Despite the announcement being made in March, the increased allowance has been applicable since January 2023, resulting in a higher salary for employees. The anticipated next hike is expected to come into effect from July.
The determination of the dearness allowance rates hinges on a significant factor—All-India CPI data, specifically the AICPI Index (All India Consumer Price Index). The Ministry of Labor and Employment's Labor Bureau releases this index, which influences the allowance adjustment.
As of April, the AICPI index had risen to 134.2 points from 132.8 points in January, marking an increase of approximately 1.5 points since the January revision. The index for May is set to be released on June 30, with speculation suggesting a further increase. Based on available data, the dearness allowance is expected to rise by approximately 3 percent, while considering the upward trend observed in May, the possibility of a 4 percent increase strengthens.
Pensioners will also benefit from the dearness allowance adjustment, as the current rate stands at 42 percent. If another 4 percent increase is implemented, the dearness allowance will rise to 46 percent, resulting in increased monthly earnings for central government employees. Additionally, dearness relief (DR) will also be adjusted accordingly for pensioners.
Presently, around 47.58 lakh central government employees receive the dearness allowance, while approximately 69.76 lakh pensioners receive dearness relief. The DA is calculated as a portion of the basic salary, meaning an employee with a monthly basic salary of Rs 23,500 currently receives Rs 9,870 as dearness allowance, based on the existing 42 percent rate. Prior to the March hike, the employee received Rs 8,930 as DA, leading to an increase of Rs 940 in their monthly take-home salary. Similar calculations can be applied to other basic salaries or pensions.
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