There is a likelihood that as Diwali draws near, there will be another upward review of the Dearness Allowance (DA), one of many components in the compensation package of over one crore employees and pensioners in the central government. The DA, currently pegged at 50% of basic pay could be adjusted by 3-4%, which would be comping handy given current inflationary pressures.
What is Dearness Allowance?
Dearness Allowance remains a compulsory component of payroll that seeks to assist government employees and pensioners offset inflammation. It is pegged on the Consumer Prices Index (CPI), though it is reviewed twice a year. The allowance ensure that when salaries are given the cost is able to remain manageable so that it can cover the increasing prices for the necessities in life.
Predicted DA Increase and Its Consequence
While the actual announcement is still pending, the expected DA could range between 3- 4 % which is again very much in the favor of the government employees and pensioners. For instance, an employee with a basic salary of Rs.22,000 gets a hike of Rs.660 with 3% hike it results into Total DA of Rs.11220. A 4% increase would raise the DA to Rs 11,440 benefits the employees financially more than anything else.
Even the pensioners will be happy with this hike through the enhancement of Dearness Relief (DR) that is directly proportional to DA. This increment will service the needs of retirees who depend more so on pension payouts thereby improving their ability to contain inflation.
Why This DA Hike Matters Now
Consideration of the above inflationary effects on the cost of living especially on food, housing, and transport cost, this DA hike could not have come at a better time. The hike will help to ease the burden of cost addition on millions of families who are affected by the increase in prices, today.
The reviews of the DA are made in reference to the 12-month average of the All India Consumer Price Index (AICPI) and this make any adjustment being made in relation to the real economic factors. These increases occur every two months and the increase to be made in the next adjustment is expected due to a high inflation rate in the preceding months.
Looking Ahead: 8th Pay Commission?
Although, there has been some speculation about the government beginning to implement the 8th Pay Commission there is clear word going around now that the government has no such plans for now. Until now, DA adjustment is still the only means through which government employees and pensioners are assisted in fighting inflation.
The formal hike in the DA rate is likely to be announced soon, perhaps before Diwali, so that those in the payroll — employees and pensioners alike — will be able to enjoy the additional money during the festive season.
