Calculating the expected DA hike
According to ET, the dearness allowance for central government employees is determined using the latest Consumer Price Index for Industrial Workers (CPI-IW), which is published monthly by the Labour Bureau, a division of the Ministry of Labour.This calculation is done according to a specific formula applicable to both employees and pensioners of the central government.
7th CPC DA% = [{12 month average of AICPI-IW (Base Year 2001=100) for the last 12 months – 261.42}/261.42×100]
It’s important to note that this formula applies specifically to central government employees and pensioners who receive salaries based on the recommendations of the 7th Pay Commission.
| Month | CPI-IW Base Year 2016=100 | *CPI-IW Base Year 2001=100 |
| Jan-23 | 132.8 | 382.46 |
| Feb-23 | 132.7 | 382.17 |
| Mar-23 | 133.3 | 383.90 |
| Apr-23 | 134.2 | 386.49 |
| May-23 | 134.7 | 387.93 |
| Jun-23 | 136.4 | 392.83 |
| Jul-23 | 139.7 | 402.33 |
| Aug-23 | 139.2 | 400.89 |
| Sep-23 | 137.5 | 396 |
| Oct-23 | 138.4 | 398.59 |
| Nov-23 | 139.1 | 400.60 |
| Dec-23 | 138.8 | 399.74 |
| Total | 4713.98 | |
| Average | 392.83 |
Source: CPI-IW data published by Labour Bureau as quoted by ET
*The linking factor for the conversion of base year 2016=100 to base year 2010=100 is 2.88.
DA%= (392.83-261.42)/261.42×100 = 50.26
Based on the calculation, with an average CPI-IW of 392.83 over the last 12 months, the DA is computed to be 50.26% of the basic pay. Therefore, it’s expected that the Union government will likely round up the dearness allowance to 50%, disregarding the decimal points.
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Currently, central government employees receive a dearness allowance of 46%, while pensioners receive dearness relief (DR) of the same percentage. The most recent DA hike was announced by the central government on October 18, 2023, and it became effective from July 1, 2023.
As of now, it is expected that both the dearness allowance (DA) and dearness relief (DR) for central government employees and pensioners will likely be increased by 4%. This change is expected to take effect from January 1, 2024.
Impact on salary for central government employees
All government employees and pensioners receive dearness allowance (DA) and dearness relief, which are components of their salary aimed at alleviating the impact of inflation. These allowances are periodically adjusted to revise the effective salary of government employees.
For instance, let’s consider a central government employee with a basic salary of Rs 53,500 per month. At a 46% DA rate, their dearness allowance amounts to Rs 24,610. If the DA rate increases to 50%, their DA would rise to Rs 26,750. Therefore, with a 4% increase in DA, their salary would increase by Rs 2,140, calculated as the difference between Rs 26,750 and Rs 24,610.
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Effect on pension for central government pensioners
Dearness relief for central government pensioners operates similarly to DA. It’s expected that DR will also increase by 4% soon, resulting in higher monthly pensions for pensioners.
For example, let’s consider a central government pensioner receiving a basic pension of Rs 41,100 per month. At a 46% DR rate, the pensioner currently receives Rs 18,906 in dearness relief. If DR increases to 50%, the pensioner would receive Rs 20,550 in dearness relief each month. Consequently, the pension would increase by Rs 1,644 per month with a 4% increase in DR.
Retrospective application and timing
It’s important to note that the DA and DR hike will be applicable to central government employees and pensioners with retrospective effect from January 1, 2024. Therefore, if the Centre announces DA now, employees and pensioners will receive arrears for the previous months.
Anticipating the next DA hike
Based on past occurrences, it’s probable that the central government will soon announce the DA hike. For instance, the DA hike effective from January 1, 2023, was announced on March 24, 2023. Similarly, the DA increase applicable from July 1, 2023, was announced on October 18, 2023. This change is expected to benefit over one crore central government employees and pensioners through an increase in DA and DR.
