This year, government employees may receive an early Diwali gift from the Centre as they eagerly await an announcement regarding the hike in Dearness Allowance (DA). While the exact date of the DA increase has not been disclosed, it is anticipated to be announced before Diwali.

Currently, Central employees are receiving a 42 percent DA, and there are speculations of a 3 percent increment. If this hike is implemented, the DA will rise to 45 percent, leading to a substantial salary increase for these employees.

It’s worth noting that the Centre revises DA twice a year. The first hike was enacted on March 24, 2023, with retroactive effect from January 1, 2023, increasing it from 38 to 42 percent. This time, central government employees are seeking a 4 percent raise, but reports suggest the government may settle on a 3 percent increase, effective from July 1, 2023.

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The determination of DA hikes typically relies on inflation rates, where higher inflation rates lead to higher expectations for employee DA increments.

The DA for central employees is adjusted based on data from the Consumer Price Index for Industrial Workers (CPI-IW). In July, the CPI-IW index increased by 3.3 points to reach 139.7, indicating a 0.90 percent rise compared to the same period in the previous year.

Interestingly, there exists a specific formula for calculating the dearness allowance for central government employees and pensioners.

If the Central government implements a DA hike during Diwali, it will benefit over one crore employees and pensioners, including 47.58 lakh central employees and approximately 69.76 lakh pensioners.