NEW DELHI, (Reuters) –India’s more than 11 million federal employees and pensioners will be granted a $1.3 billion annual wage hike to offset rising prices prior to the festival season. This was announced by a Cabinet minister on Thursday.

Federal and state governments typically announce two-year adjustments to inflation-linked wages, on top of the annual increase.

Anurag Thakur was India’s information minister and reported that the Indian cabinet had approved a 3% rise in the dearness’ allowance. It is an extra part of the monthly salaries and pensions to help cushion rising costs.

He stated that the hike would be effective July 2021 and cost the government 94.89 trillion rupees ($1.27 million) per year.

A rise in wage could increase consumer spending ahead of Diwali, which falls in November this year and is the country’s busiest consumer shopping season.

After the COVID-19 pandemic, both federal and state governments had stopped inflation-linked rises in salaries and pensions. This was to ensure that more than $10 billion could be spent on pandemic relief.

When the federal government announced that the dearness allowance would be increasing by 11%, the freeze was lifted.

India’s retail inflation eased to a five-month low of 4.35% year-on-year in September, amid softer food prices and demand, while rising petrol, cooking gas and other manufacturing prices have dampened consumer sentiment https://www.reuters.com/world/india/soaring-prices-dampen-consumer-mood-indias-festival-season-2021-10-21.

However, most workers working in the farm and small-business sectors – 90% of the total workforce in the country – have experienced a decline in wages since last year’s pandemic.

($1 = 74.925 Indian rupees