The Indian government has approved a 4% hike in inflation-adjusted pay and allowances for approximately 11.7 million employees and pensioners, aiming to counteract the impact of rising living costs. This adjustment to the 'dearness allowance', applicable to monthly wages and pensions, will be effective from January 1, 2024, according to Trade Minister Piyush Goyal.

The decision, expected to annually cost the exchequer 128.69 billion Indian rupees ($1.56 billion), coincides with the lead-up to national elections, where Prime Minister Narendra Modi seeks a rare third term. Typically, both federal and state governments announce biannual adjustments in inflation-linked wages, alongside an annual increment. The last such adjustment occurred in October.

Benefiting approximately 4.9 million government employees and 6.8 million pensioners, this move is seen as a strategic measure to appease a significant voter base ahead of the upcoming elections.