The union cabinet on Wednesday approved a 5 percent hike in dearness allowance (DA) raising it to 17 percent, cheering over 1 crore government employees and pensioners.

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Around 50 lakh central government employees and 62 lakh pensioners would benefit from the decision, union minister for information and broadcasting Prakash Javadekar said while addressing the media after the cabinet meeting.

The increased DA would be effective from July 2019.

"This is a Diwali gift to government employees," Javadekar said.

The raise in DA would cost the government Rs 16,000 crore in its wage bill.