Cabinet approves 2% hike in Dearness allowance

It has been reported that the hike in DA is lower than that demanded by the trade unions.

In what appears to be Diwali gift to many, Union cabinet has approved 2 percent hike in Dearness Allowance (DA) at a meeting held on Thursday October 27. The hike will be effective from July 2016. This is expected to benefit about 50 lakh central government employees and 58 lakh pensioners in the country.

"The proposal to provide 2% dearness allowance and dearness relief to central government employees and pensioners respectively, is listed on agenda of the Union Cabinet meeting scheduled for tomorrow,"  a report in International Business Times quoted an official familiar with the matter as saying.

It has been reported that the hike in DA is lower than that demanded by the trade unions.

"The 12-month average of Consumer Price Index for Industrial Workers from 1 July 2015 to 30 June 2016, works out to be 2.92%. Therefore the unions had pressed for 3% DA. We are not satisfied with this," president of confederation of central government employees K K N Kutty said in a report on Wednesday October 26.

However, the government is yet to decide on hike in allowances as proposed by the 7th Central Pay Commission (CPC). A committee had been appointed by the government to look into the recommendations on allowances in June and was supposed to give its view within four months.

According to the reports, the CPC had examined 196 allowances and given its recommendations on abolishing or raising some of them while recommending others to be subsumed with other perks.

It is to be known that the recommendations of the 7th CPC cover 47 lakh Central government employees and 53 lakh pensioners, of which 14 lakh employees and 18 lakh pensioners are from the defence forces.

The reports tell that the 7th CPC had proposed 138.71 percent hike in HRA and 49.79 percent for other allowances while submitting its voluminous report last November.

In befitting reply to concerns that the recommendations of the CPC will spike inflation, the RBI's Monetary Policy Committee (MPC) at its first meeting early this month shrugged off such fears.

"Some of the upside risks to inflation discussed in the MPC meeting on October 3 and 4, 2016, particularly arising out of the award of the 7th Pay Commission, are largely statistical according to me. Looking forward, in my opinion, the probability of inflation turning up from the current level is reasonably less," Ravindra H. Dholakia said, meeting minutes mentioned.

The MPC has six members, three of whom have been nominated by the Central government.