The employees of central government have yet another reason to cheer as the Union Government has announced to hike the dearness allowance of employees and pensioners by 6 percent from existing 16 per cent to 22 per cent with immediate effect.

The new DA rates would be applicable from January 1, 2009 according to Home Minister P Chidambaram, who was addressing a press conference after the cabinet meeting.

The decision is aimed to attract large number of central government employees having significant role to play in the forthcoming general elections. About 5 million employees and 3.8 million pensioners would be covered under the revised DA norms, leading to an extra spending of Rs 5,159.94 crore for the 12 months till December.

In yet another important decision, the government revised laws to raise their fiscal deficit target to 3.5% of their total value of economic output. Government allowed states to raise additional market borrowings of 0.5% of their Gross State Domestic Product (GSDP) in 2009-10.

The union cabinet is also meeting late evening and a slew of other populist decisions are likely to taken, keeping in view the forthcoming parliamentary elections.