The states, which conventionally follow the Union government’s pattern on DA/DR, are also expected to spend another about Rs 52,000 crore among themselves in the current fiscal between July-March of FY22.
The Union Cabinet on Wednesday hiked dearness allowances (DA) and dearness relief (DR) for government employees and pensioners by 11 percentage points to 28% of basic pay/pension, which will cost the exchequer an additional about Rs 25,800 crore for July-March period of FY22.
The combined impact on the exchequer on account of both DA and DR would be Rs 34,400 crore per annum, Union information and broadcasting minister Anurag Thakur said. The revised DA/DR will be paid prospectively from July 1, 2021, i.e., for nine months in FY22. The revised DA/DR will benefit 48.34 lakh union government employees and 65.26 lakh pensioners.
In view of the unprecedented situation which arose due to the Covid-19 pandemic, three additional instalments of DA and DR due from January 1, 2020, July 1, 2020 and January 1, 2021, had been frozen. So, the increase reflects the three additional installments that were frozen. The rate of DA/DR for the period January 1, 2020 to June 30, 2021 would remain at 17%, meaning no arrears are due on account of restoration of frozen DA/DR rates. Ahead of the festival season in November, the government will announce another DA/DR hike which is due from July 1, 2021.
The decision to enhance DA/DR will give consumption a boost to the economy. The states, which conventionally follow the Union government’s pattern on DA/DR, are also expected to spend another about Rs 52,000 crore among themselves in the current fiscal between July-March of FY22.
To reduce the fiscal stress after the Covid-19 outbreak, DA increases for central government staff and DR for pensioners, as recommended by the 7th Pay Commission, were frozen for the period between January 2020 and June 2021. As a result, the Centre was estimated to save Rs 25,000 crore in FY21. The states were expected to save another Rs 55,000 crore among themselves in FY21, taking total savings for general government budget in FY21 to a considerable Rs 80,000 crore.
Another Rs 40,000-crore savings were expected for both the Centre and states in April-June of FY22 (including March dues paid in April).