Hike indearness allowance is likely to cost Rs 16,000 crore to the central government.

Government on Wednesday increased dearness allowance by 5 per cent to 17 per cent from 12 per cent, Union Minister Prakash Javadekar informed reporters after the cabinet meeting headed Prime Minister Narendra Modi approved the proposal.

The move is likely to benefit over 50 lakh central government employees and 65 lakh pensioners, Mr Javadekar said.

Hike in dearness allowance is likely to cost Rs 16,000 crore to the central government and will be paid from July.

5 per cent rise in dearness allowance in one go is the highest ever and comes at the eve of Diwali, Mr Javadekar said.

"This will bring cheers to working classes," he added.