While the global coronavirus disease (COVID) pandemic has dealt a blow to the economy across the world including India, on Thursday, the Indian government decided not to increase the dearness allowance of central government employees until 1 July 2021. According to the Finance Ministry order, the central government employees and pensioners who were supposed to get dearness allowance instalments from 1 January 2020 will not get it as of now.
The additional instalment between 1 July of this year and 1 January 2021 has been blocked. By banning this instalment, the government will save about Rs 37,000 crore.
This government decision will not change until 1 July 2021. This order applies to central government employees and pensioners.
To meet the COVID crisis, the union government has been reducing its expenditure across its grants and schemes.
Earlier on Thursday, sources had said the defence budget would be curtailed too, with the purchase of new projects put on hold for the time being. The decision may have an impact on the purchase of Rafale aircraft and the S-400 missile system.
The union government had announced a reduction of up to 30% in the salaries of the president, the prime minister, ministers and members of the parliament. The MP Nidhi fund was repealed for two years too.
While the additional cost of healthcare and compensations for the poor in the 40-day lockdown-hit national economy has left little room for the exchequer to spoil employees generously, a quantum dip in the GDP growth and revenue figures will soon be visible.
What is dearness allowance?
The dearness allowance is a calculation on inflation and allowance paid to government employees, public sector employees (PSE) and pensioners in India, Bangladesh and Pakistan.
Dearness allowance is calculated as a percentage of an Indian citizen’s basic salary to mitigate the impact of inflation on people. Indian citizens may receive a basic salary or pension that is then supplemented by housing or a dearness allowance, or both.
The guidelines that govern the dearness allowance vary according to where one lives. DA is a fully taxable allowance.
There are two types of DA: that given under terms of employment and that not given under the terms of employment.