dearness allowance According to reports, there is a possibility of a 3 percent increase in the (DA) and dearness relief (DR) benefits for central government employees from July. According to the report, it is also likely to be restored in September. This has come in the light of All India Consumer Price Index (AICPI) data. AICPI report was released with information about DA from January to May 2021 and the DA is likely to increase from this month. Under the 7th Pay Commission, the current situation is with central government employees and pensioners receiving 17 per cent DA. DA is a part of the salaries paid to government employees and pensioners, intended to aid in the fight against inflation by providing them a sort of buffer.
Reports indicate that this number will increase to 28 per cent once the three remaining DA installments are restored. DA was increased by 4 percent in January 2020 under the 7th Pay Commission. It was again increased to 3 per cent in June 2020. As per reports, late, in January 2021, the DA was increased by 4 per cent.
What is Dearness Allowance?
Dearness Allowance (DA) is an amount paid to central government employees and pensioners in an effort to offset rising inflation in the country. Despite all the efforts of the government, inflation continues to rise across the country. Then it is the responsibility of the government to protect its employees and pensioners from the impact of price hikes. Inflation drives prices across the country at different rates depending on location. Therefore, depending on the location of the employee and the rate of inflation at that time of the year, DA is calculated accordingly. These places can be broadly classified into urban, semi-urban and rural areas.
measuring dearness allowance
Given that DA is used every year to deal with rising prices brought on by inflation, DA is calculated and revised twice a year. Revisions take place in January and July. In 2006, the government revised the way DA is calculated and introduced a new formula for the same.
1) For Central Government Employees: DA Percentage = {(Average of AICPI (Base Year-2001 = 100) for the last 12 months -115.76)/115.76} x 100
2) For Central Public Sector Employees: DA Percentage = {(Average of AICPI (Base Year 2001=100) for last 3 months-126.33)/126.33} x 100
Taking into account these previous hikes as well as the DA amount allocated for central government employees and pensioners, the latest increase is estimated to be around 28 per cent. With an additional 3 per cent growth expected, the number is likely to reach an overall growth of 31 per cent by September of this year.
May 2021, AICPI figures are given but June figures have not been released yet. It should be noted that the index point moved up 0.5 points in May and is currently at 120.6. Reports suggest that a significant increase is not expected for June. According to Business Today, the index point is not expected to exceed 3 percentage points as it would mean that the index point would reach the 130-point mark, which the report said is unlikely. Earlier in July, news of resumption of DA from this month was doing rounds on social media platforms, however, the finance ministry clarified that it has not issued any such notice yet.
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