The Cabinet today approved additional 2 per cent hike in Dearness Allowance (DA) and Dearness Relief (DR), a move that will benefit about 1.1 crore central government employees and pensioners, an official release said.

The impact on the exchequer on account of both DA and DR would be Rs 6,112.20 crore per annum and Rs 4,074.80 crore in the financial year 2018-19 (8 months from July, 2018 to February, 2019).

The hike will be effected from July 1, 2018, the release said.

The decision was taken at the Cabinet meeting chaired by Prime Minister Narendra Modi here.

"The Union Cabinet...has approved to release an additional instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners w.e.f. July 01, 2018 representing an increase of 2 per cent over the existing rate of 7 per cent of the Basic Pay/Pension, to compensate for price rise," it said.

The hike will benefit about 48.41 lakh central government employees and 62.03 lakh pensioners.

As per the release, the increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission.