DA hike: 1.2 crore central government employees and pensioners may have to make do with only a minor increase in their salaries in the new year because this time only 2 percent increase in Dearness Allowance (DA) and Dearness Relief (DR) is expected. With this, DA will increase from 58 percent to around 60 percent. If this happens, it will be the lowest in the last seven years.
According to the data of All India Consumer Price Index (AICPI), central government employees and pensioners may definitely get a shock due to such a low DA hike this time. DA has never increased by less than 3 percent since July 2018.
Is DA revision of January 2026 necessary for this reason?
This will be the last increase in DA under the 7th Pay Commission Cycle. The 10-year term of the 7th Pay Commission is ending on December 31, 2025. The new pay commission will come into effect from January 2026. Even though the 8th Pay Commission has been formed, no clear date for its implementation has been mentioned in its Terms of Reference (ToR). The commission has 18 months to submit its report. After that, it usually takes about 2 more years to study, approve and implement the new pay scale. So actually, employees can get the benefit of 8th Pay Commission salary hike only in late 2027 or early 2028. The government had announced the formation of the 8th Pay Commission in the month of January this year.
What does CPI-IW data say?
Labor Bureau has released AICPI-IW numbers till October 2025 and the index is continuously increasing.
- July 2025 – 146.5 (up 1.5 points)
- August 2025 – 147.1 (up 0.6 points)
- September 2025 – 147.3 (up 0.2 points)
- October 2025 – 147.7 (up 0.4 points)
This means that the index has increased for four consecutive months, which shows increasing inflationary pressure. From July 2025 till now DA is 58 percent. Based on the data till October and the possible trend of November and December, the estimated DA from January 2026 is believed to be fixed at around 60 percent.
Why will DA increase only by 2 percent?
Why this time DA will increase only by 2 percent? To understand this, understand two simple scenarios based on the CPI-IW pattern of November and December 2025.
Scenario 1: The index remains at 147.7 in November and December. DA is calculated on the basis of AICPI-IW average of last 12 months. The formula of 7th CPC is as follows – DA (%) = ((CPI-IW average of last 12 months) – 261.42) ÷ 261.42 × 100. Here 261.42 is the base value. The higher the average index, the higher the DA is fixed. Under the same formula, DA for January 2026 comes to about 60.21 percent because the government decides on a percentage based on this average, which is rounded to the nearest whole number. For example, if the average DA of a month is 57.86 percent, then it is rounded to 58 percent. If seen this way, 60.21 percent will be rounded up to 60.
Scenario 2: The index increases by 1 point each in November and December.
November 2025- Index rises to 148.7
December 2025- Index rises to 149.7
At the same time, the average index for the year is even better, and the DA calculation shows a figure of around 60.50 percent, but again due to rounding rules, this can also be rounded off to 60 percent DA.
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