Dearness Allowance expected to increase by 4%. All you need to know.

DA to increase by 4%.

Increase in Dearness Allowance

Our government plans to increase the dearness allowance for over a crore pensioners and employees by 4%. It would increase the DA from 38% to 42%. The dearness allowance is calculated half-yearly twice a year as the basic salary percentage.  

Also ReadWhat is the difference between personal and CPI inflation?

What is Dearness Allowance?

Dearness allowance is the adjustment for the cost of living that employees are offered. The government provides a dearness allowance to cope with rising inflation. However, the CPI (consumer price index) inflation has experienced a relief recently. 

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Shiva Gopal Mishra says that December 2022's CPI-IW was announced on January 31, 2023, and the hike comes out at 4.23%. However, the government doesn't hike the DA beyond decimal points. Thus, the DA will increase by 4%. Generally, DA payment involves 50 paise fractions and rounds off to the next higher rupee. Less than 50 paise fractions are ignored. Mishra said the Ministry of Finance's expenditure department formulates the proposal to increase the DA. It looks at its implication on revenues and proposes to the Union Cabinet for approval. 

Read: Should you purchase gold during inflation?

Calculation Of Dearness Allowance

The dearness allowance for central government employees is calculated as follows: 

{(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 12 months -115.76)/115.76} x 100.

The dearness allowance for central public sector employees is calculated as follows: 

{(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 3 months -126.33)/126.33} x 100.

The government increased the DA from 34% to 38% last September. The DA on salary will increase with the DA hike. The DA is higher if your pay matrix is higher, as it depends on the employee's pay matrix level. 

The DA is revised by the Labour Ministry, considering inflation and other important AICPI things. The inflation in India is currently at 5.72% as of December 2022. It is the second time consecutively that the CPI is below the upper tolerance limit of 6% set by the RBI. The CPI reading is the lowest since December 2021. 


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