The government might soon announce an increase in dearness allowance (DA) and dearness relief (DR) which would impact over 12 million central government employees and pensioners. According to various media reports, the government is expected to make an official announcement in the coming days before Holi.
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The government revises DA twice yearly—in January and again in July, though official announcements often follow later. While the January revision is typically declared around Holi to provide financial relief before the festival, the July revision is announced near Diwali in October or November.
The government adjusts these allowances to shield employees and pensioners from inflation’s impact on their purchasing power.
How much hike is expected this time?
As per December 2024 data, a 2% increase in DA is anticipated, which would likely put DA and DR at 55%.
However, the final decision will depend on the approval of the Union Cabinet, led by the Prime Minister.
How is DA calculated?
The DA rate is calculated based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), compiled by the Labor Bureau in Shimla. For central government employees, DA is calculated using the following formula:
DA (%) = [(Average AICPI for the past 12 months (Base Year 2001=100) – 115.76) / 115.76] x 100
For public sector employees, the formula used is:
DA (%) = [(Average AICPI for the past 3 months (Base Year 2016=100) – 126.33) / 126.33] x 100
Previous DA hikes
The Cabinet on March 7, 2024, hiked the DA to 50% of basic pay from the previous rate of 46%. The announcement came some days ahead of Holi on March 25, 2024.
After this, the Cabinet, on October 16, 2024, approved another 3% hike in DA for central government employees and DR for pensioners under the 7th Pay Commission. With this increase, both DA and DR went to 53%. This revised DA and DR were to be effective from July 1, 2024.
What’s next and 8th Pay Commission
With the 8th Pay Commission scheduled for implementation in 2026, many are wondering whether DA will be reset and merged into basic pay.
Given the current progress of the commission, its recommendations are expected to be finalised by the end of the ongoing financial year and may be implemented in the following fiscal year.
Before that transition, there will likely be three more DA hikes under the 7th Pay Commission—two in 2025 and one in 2026.
Read more here: 8th Pay Commission approved: How many employees and pensioners will benefit
First Published: Mar 6, 2025 10:10 AM IST
