Govt hikes dearness pay for staff, pensioners by 5%

NEW DELHI: Over eight million central government employees and pensioners will get an additional five per cent dearness allowance that will hit the exchequer by over Rs 2,900 crore this fiscal and Rs 4,355 crore in a full year.

The decision to hike the dearness allowance (DA) for the employees and dearness relief for pensioners just before the festive season, taken at the cabinet meeting on Thursday, will create additional demand and boost the economy which is being impacted by an erratic monsoon.

The additonal DA, to be given with effect from July 1 this year, will help these employees and retired people weather the impact of rising prices.

"The cabinet has decided to release an additional installment of DA to central government employees and DA to pensioners...representing an incerase of 5 per cent over the existing rate of 22 per cent of the basic pay, pension to compensate for price rise," Information and Broadcasting Minister Ambika Soni told reporters after the Cabinet meeting.

Even as the wholesale price inflation remains in negative zone for over three months in a row largely because of high inflation in a year-ago period, the rate of price rise based on retail prices of items consumed by industrial workers has crossed double digits, according to latest figures.



Inflation based on Consumer Price Index for industrial workers (CPI-IW) crossed the double-digit mark to touch 11.89 per cent in July, compared with 9.28 per cent in June, because of the sharply rising food prices. The CPI-IW is used for calculating DA given to central government employees.

This is the second bonanza announced for the central government employees and pensioners after the announcement the second and last tranche of arrears of the sixth pay commission recommendations. The payment of arrears will put an additional burden of over Rs 17,500 crore on the exchequer.

The government's finances are already facing the burden of stimulus packages and a slowing down economy with fiscal deficit is projected to touch 6.8 per cent of the GDP.

The Indian economy grew by 6.1 per cent in the first quarter of this fiscal and Finance Minister Pranab Mukherjee as well as many analysts expect the economy to grow at slower pace in the coming two quarters due to the impact of a weak monsoon.