The Union Cabinet approved a 4% hike in Dearness Allowance (DA) to 21% for 48 lakh government employees and 65 lakh pensioners. The announcement was made by the Union I&B Minister Prakash Javadekar. The government will incur Rs.14,595 crore additional expenses due to the hike.
♦ DA is provided by the government to its employees as the impact of the rising cost of living. Inflation or the rate of increase in prices reduces the buying power of money.
♦ For instance, if the annual inflation is 5%, it means that the commodity would cost Rs.100 in the first year, Rs.105 in the second. If the employee has a salary that allows her to spend Rs.100 on that commodity, she will be able to buy that commodity in the first year.
♦ GoI calculates DA by using the All India Consumer Price Index-based inflation rate as a broad marker. In case of greater effectiveness, the DA is revised twice a year.