Dearness Allowance

Indian Economy glossary

Also called: DA · Topic: Inflation and Index Numbers: CPI, WPI, IIP and the Deflator · NCERT: Beyond NCERT

Meaning

Dearness Allowance (DA) is an extra payment to central government employees that makes up for the rising cost of living. Pensioners get the same benefit under the name Dearness Relief (DR). DA is revised twice a year, in January and July, based on the CPI-IW (Consumer Price Index for Industrial Workers). The Labour Bureau compiles the CPI-IW, which has used a 2016 base since 2020. DA protects the real wage, which is what a salary can actually buy.

Example

If the CPI-IW has risen since the last revision, the government raises the DA rate in the next January or July revision. Salaries and pensions then keep pace with prices.

Don't confuse with

  • CPI-AL / CPI-RL: these are the Consumer Price Indices for Agricultural Labourers and Rural Labourers. They are used to revise agricultural and rural minimum wages, not the DA of government employees.
  • CPI-Combined: this is the index used for the RBI's inflation target, not for DA.

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