3% Increase in Dearness Allowance Against the Expected 4%. Find Out Why

Central Government employees have been awaiting a jump in their Dearness Allowance Rates as the proposals of the 7th Pay Commission are set to be announced. However, experts ascertain the jump to be 3% and not 4% as expected. Find out why.

Dearness Allowance may be increased by 3% and not 4%

Dearness Allowance (DA) is offered to government employees to help them meet the escalating costs due to economic inflation. Every year, the 7th Pay Commission decides the DA rates payable to such employees. This year, the rates have been fixed and experts believe that there would be a jump of 3% in the DA rates. However, the general expectation was a 4% hike and employees are wondering why the hike has been limited to 3% only. But there’s a logic and reason behind the 3% jump. Find out why the DA rate has been increased by 3% quashing general expectations.


  • Central Government employees get Dearness Allowance to meet the impact of inflation.
  • The 7th Pay Commission fixes the rate of Dearness Allowance and also revises them regularly.
  • This year, the rates are expected to jump by 3% bringing the total allowance to 45% of the basic pay
  • While a 4% jump was expected, the 3% rate has been worked out keeping the AICPI – IW data in mind.

Presently, the rate of Dearness Allowance is 42% of the basic pay. For pensioners too, the rate is the same but they get a Dearness Relief (DR). If the expected hike is announced, the DA and DR rates will increase to 45%.

Also Read – Find out what Dearness Allowance is all about

Why is the Rate Limited to 3%?

While employees are expecting a 4% hike to bring their DA/DR rates to 46%, the expected hike of 3% is due to the calculations specified under the AICPI – IW. Let’s understand.

The AICPI – IW stands for All India Consumer Price Index for Industrial Workers. It is an inflation index that the Labour Bureau releases every month. The 7th Pay Commission uses the data from the AICPI – IW to calculate the Dearness Allowance payable to Central Government employees, both present and retired.

For the month of June 2023, the Labour Bureau released the AICPI – IW data on 31st July 2023. Using the data for DA/DR calculations shows a hike of a little over 3%. Since the decimal points are ignored, the hike would work out to be 3%.


What Happens Next?

To affect the proposed DA/DR hike, the Finance Ministry’s Department of Expenditure would create a relevant proposal and present it to the Union Cabinet for approval. The Prime Minister, Narendra Modi, heads the Cabinet and would take the final call on the approval.

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The Bottom Line

As the DA/DR gets a hike, more than a crore employees would benefit from increased salaries and be able to face the effect of rising inflation.

Also Read – Find out when the DA was expected to rise by 4% and why.



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