Central Government Employees likely to get 4% DA hike from July 2023
Central Government Employees will likely get a 4% hike in Dearness Allowance from July 2023. This is based on the calculations made based on the All India Consumer Price Index (AICPIN) released by the Labour Bureau for the month of May 2023, which increased by 0.5 points and stood at 134.7.
Since DA is revised based upon such changes, it can thus be assumed that the same will be hiked from 42% currently to 46%. Though this is still not fully confirmed as the value of June 2023 AICPIN has to be released yet, but as per the DA Calculator, a 4% hike is almost sure to happen.
This would be significant relief for all Central Government Employees as they would enjoy an additional salary package from next year onwards.
DA hike from July 2023
The government is exploring the possibility of a 4 percent hike in DA by July 2023. This would increase the current central government DA from 42 percent to 46 percent and will mean an additional financial benefit for all Central Government employees.
Unlike DR, which is applicable only to pensioners, DA applies to all employees. It forms an essential part of the employee’s salary and can have a major impact in terms of overall income.
The exact calculation for this DA hike isn’t yet known, as it depends on various external factors such as inflation and consumer price indices. However, if it goes through, it would be implemented in July 2023. Making such predictions is difficult at this stage but when the official confirmation from the Central Government comes out later in the year, we will know more about this possible development.
What is Dearness Allowance
Dearness Allowance (DA) is a cost-of-living adjustment that is offered to employees of government organisations and public firms. It helps the employees cope with stubbornly rising prices which is due to high inflation.
The allowance is paid as a percentage of salary or wages and is paid at regular intervals such as quarterly, half-yearly, or annually. In general, the higher inflation rate leads to an increase in dearness allowance for those employees who receive it as part of their remuneration.
The system of DA has been discussed time and again by both private and government bodies. The Planning Commission revises the rate based on the consumer price index for Industrial Workers or the All India Consumer Price Index every six months so that the impact of inflation on employees’ salaries can be moderated.
DA amount is added to the Fixed Pay component when determined payment components such as House Rent Allowance (HRA). It also serves as the basis for the calculation of various benefits like leave travel concession, compassionate appointment, compassionate permanent appointment, etc., from time to time.
Central Government Employees likely to get 4% DA hike from July 2023
How dearness allowance calculation done
Dearness allowance calculation:
Dearness allowance (DA) is an important component of the salary package received by central government employees and those in public sector units. It is calculated based on the average of the All-India Consumer Price Index (Base year – 2001 = 100) for predefined periods.
For central government employees, this period extends to 12 months while for public sector workers, it is 3 months. The discount rate or minimum point (currently 115.76 and 126.33 respectively) is deducted from the obtained average to arrive at the DA figure applicable each financial year.
For central government employees: The DA is calculated as — {(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 12 months -115.76)/115.76} x 100.
For central public sector employees, the DA is calculated as — {(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 3 months -126.33)/126.33} x 100.
Dearness Allowance hike: Factors that will affect DA from July 2023
Dearness Allowance is an added benefit extended to the employees of the Central Government. It helps employees in coping with hikes in the prices of essential commodities. In order to determine the DA, the Consumer Price Index Numbers For Industrial Workers (CPI-IW index) is taken into consideration. As per reports, the All-India CPI-IW had fallen by 0.1 points to 132.7 points during February 2023 but as per sources, a rise is likely to be recorded on the March figures being released today. This combined with inflation data from April, May, June, and July will pave the way for an increase in Dearness Allowance from July this year at a rate of 3%-4%.
The factors that will affect the Dearness Allowance hike from July 2023 include inflation figures based on changes over various months and Consumer Price Index Numbers for Industrial Workers (CPI-IW index). The inflation figures that are expected to be released soon along with the past month’s data will guide whether Dearness Allowance could witness a hike or not and if so, then what would be its percentage increase. If the current inflation trend continues and DA is indeed hiked, then it would come as good news for Central Government Employees.
This index revision helps account for inflationary effects and thereby aids a steady flow of income even when prices soar unexpectedly during a particular year. A complex set of formulae is thus determined in order to use these data points which aims to ensure that employees in varying grades receive fair compensation commensurate with their duties and responsibilities.
Though DA works differently when compared with other components of salary packages, it remains a significant part of financial security enjoyed by central government workers as well as those employed in public sector companies.
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