What does Dearness Allowance (DA) compensate for?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Erosion in purchasing power due to inflation.
Dearness Allowance (DA) compensate for Erosion in purchasing power due to inflation.
Dearness Allowance is a compensation for erosion in the purchasing power of wage earner due to price rise. It is granted by the Government periodically as a percentage of (Basic Pay + Dearness Pay, if applicable).