What The FAQ: What does the DA and DR hike mean for India and its economy?

The Union Cabinet on Wednesday decided to restore Dearness Allowance (DA) and Dearness Relief (DR) for central government employees and pensioners from July 1, 2021 while increasing the rate of allowance to 28 per cent. Here's all you need to know:

What are DA and DR?
Dearness Allowance (DA) is the cost of living adjustment allowance which the government pays to the employees of the public sector as well as pensioners of the same. DA component of the salary applies to both employees in India and Bangladesh. Dearness Relief (DR) is the same as allowance and is given to central government pensioners.

Why is this making news?
In view of the COVID-19 pandemic, the Union Government had frozen the three additional instalments of the DA and DR which were due from January 1, 2020, July 1, 2020 and January 1, 2021.

What impact will the move have?
The move, Minister of Information and Broadcasting Anurag Thakur said, will benefit about 48.34 lakh central employees and 65.26 pensioners. "The government has decided to increase DA to central government employees and DR to pensioners with effect from July 1, 2021 representing an increase of 11 per cent over the existing rate of 17 per cent of the basic pay/pension," said a release.

Will it put pressure on the government?
The increase in the DA and DR will impose an additional annual burden of Rs 34,401 crore on the exchequer, Thakur told reporters after the cabinet meeting.