7th Pay Commission Dearness Allowance Update: What Does July CPI Data Indicate? When Will Revised DA Come? How Much Will Salary Increase?

The central government employees and pensioners who are eagerly anticipating their raise in salary can estimate the quantum of DA hike based on the following calculation.

New Delhi: The Dearness Allowance (DA) and Dearness Relief (DR) for employees and pensioners are likely to increase, as the central government is expected to declare soon. DA and DR are anticipated to grow by 3% this time around as would be declared by the center. Serving government employees receive DA, while pensioners receive DR.

The government announces a DA/DR hike twice a year. However, the announcements are made in March and September. The hike is applied retroactively every year between January and July.

The central government employees and pensioners who are eagerly anticipating their raise in salary can find out how much it would be through the DA hike calculation. 

How is DA calculated for central government employees?

DA calculation is based on the latest Consumer Price Index for Industrial Workers (CPI-IW), which is published every month by the Labour Bureau under the Ministry of Labour. Under the 7th Pay Commission, the formula for calculating DA for central government employees is:

DA Hike: What Does July AICPI-IW Data Indicate? 

Consumer Price Index for Industrial Workers (2016=100) – June, 2024: The All-India CPI-IW for June, 2024 increased by 1.5 point and stood at 141.4 (one hundred forty one point four).  Year-on-year inflation for the month of June, 2024 moderated to 3.67% as compared to 5.57% in June, 2023. The Labour Bureau, an attached office of the M/o Labour & Employment, has been compiling Consumer Price Index for Industrial Workers every month on the basis of retail prices collected from 317 markets spread over 88 industrially important centres in the country.

7th CPC DA% = [{Average of AICPI-IW (Base Year 2001=100) for the last 12 months – 261.42}/261.42x100]

=[{400.90-261.42}/261.42x100]
= 53.35

The average CPI-IW for the previous year is 400.90, according to the latest data. Applying the statutory formula, the DA is estimated to be 53.35% of the base pay. In light of this, a DA increase of 53% for central government employees is anticipated to be announced by the union government.

How much will the salary of central government employees increase with a 3% DA hike?

The central government employees receive a DA of 50% of the basic salary. It is expected that there will be at least 3% hike in DA for government employees and DR for pensioners. 

The impending DA increase will result in an increase in take-home pay for central government employees. Consider the example of a central government employee who receives a monthly basic salary of Rs 55,200. At 50%, he received Rs 27,600 as Dearness Allowance. Now, if the DA increases to 53%, his DA will increase to Rs 29,256. If the DA increases by 3% in the next round, his pay will increase by Rs 29,256 - Rs 27,600 = Rs 1,656 

How much will the salary of central government pensioners increase with a 3% DA hike?

The central government pensioners receive a DR of 50% of the basic pension.

The pensioners are set to receive a 3% hike in Dearness Relief (DR). A pensioner with a basic pension of Rs 45,400 currently receives a DR of Rs 22,700 with 50% Dearness Relief. A hike of 3% in DR will increase it to Rs 24,062. This suggests a monthly pay rise of Rs 1,362.

When can the central government employees expect the next DA hike?

The projected increase in DA and DR for central government employees and pensioners is scheduled to take place soon. On March 7, 2024, the last DA hike was announced. It was effective from January 1, 2024.

Typically, DA/DR hikes are applied retroactively between January 1 and July 1 of each year. Therefore, central government employees and pensioners will be eligible for arrears for the previous months if the Center announces DA now.

The government increased the DA by 4% in January of this year, bringing the level to 50% of the basic. Upon reaching 50% of the baseline level, the DA led to a 25% increase in other allowances. Additionally, some speculations suggested DA would be merged with the basic and set to zero. However, the government refuted any such plans, stating that no such issue was being considered.