The hike will benefit about 48.54 lakh central government employees and 68.71 lakh pensioners. (Unsplash)The Union government on Wednesday announced a three percentage point hike in dearness allowance (DA) and dearness relief (DR) over the existing rate of 60% of the basic pay and pension.This means the new rate will be 63%. DA and DR are provided to government employees and pensioners, respectively.The hiked rates, which will come into retrospective effect from July 1, 2026, are meant to benefit employees and pensioners ahead of Diwali, an official statement said.DA is provided by the government to its employees to cushion the impact of rising prices and the cost of living. Inflation erodes the buying power of money. This is the justification for DA. It is generally revised twice a year.To calculate the DA and DR, the government uses the latest Consumer Price Index for Industrial Workers (CPI-IW), which is released by the Labour Bureau every month.Also Read | How hike in Dearness Allowance can affect the economyThe last revision in DA was done on April 18 this year, and took retrospective effect from January 1, 2026. At that time, the Centre had increased the DA by two percentage points to 60% from 58% based on the percentage increase in the 12-monthly average of the All India Consumer Price Index.Story continues below this adBefore that, the DA was revised up by three percentage points on October 1, 2025, and took retrospective effect from July 1, 2025, taking the rate to 58% from 55%.Outgo for the exchequerWith this hike, the combined outgo for the exchequer would be Rs 10,016.10 crore per year, the statement said. The hike will benefit about 48.54 lakh central government employees and 68.71 lakh pensioners.“This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission,” it said.Aanchal Magazine is a Deputy Associate Editor with The Indian Express, serving as a leading voice on... Read More Tags:Express Explained