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New Delhi: The Union Cabinet on Wednesday approved a 3 per cent increase in Dearness Allowance (DA) and Dearness Relief (DR), benefitting nearly 49.19 lakh Central Government employees and 68.72 lakh pensioners.
With this revision, effective July 1, 2025, the DA/DR rate rises from 55 per cent to 58 per cent of the basic pay or pension. The step aims to provide relief against the rising cost of living and inflationary pressures.
Briefing the media after the Cabinet meeting, Information and Broadcasting Minister Ashwini Vaishnaw said the decision would impose an additional annual burden of ₹10,083.96 crore on the exchequer.
Biannual Revision Linked to 7th CPC Formula
The increase is in line with the formula recommended by the 7th Central Pay Commission (CPC), under which DA and DR are revised twice every year — in January and July — to offset the impact of inflation on employees and pensioners. The last hike of 4 per cent was announced in March 2025, effective from January 1.
Relief Amid Price Rationalisation
The announcement comes just days after the government rationalised GST slabs, making several mass-consumption items cheaper. Goods such as ghee, paneer, butter, namkeen, ketchup, jam, dry fruits, coffee and ice creams saw a reduction in tax burden. Additionally, aspirational consumer durables like televisions, air conditioners, and washing machines are also set to become more affordable.
By coupling price rationalisation with an increase in DA/DR, the government seeks to ease household budgets and bolster consumer demand during the festive season.
Wider Policy Context
The DA/DR hike follows a series of welfare-oriented decisions by the Cabinet. Last month, it had approved a performance-linked bonus for railway employees, underlining the Centre’s focus on rewarding productivity and providing inflation relief.
Officials said the move not only benefits government staff and pensioners but also has a multiplier effect on the economy, as higher disposable income in the hands of nearly 1.18 crore individuals is expected to boost consumption across sectors.
