This move will increase the DA from the current 55% to 59%. While the hike will be effective from July, the official announcement is expected to be made in August or closer to the festive season in September or October.
DA LIKELY TO REACH 59% BASED ON CPI DATA
The All India Consumer Price Index for Industrial Workers (AICPI-IW), which is the basis for DA calculation, rose by 0.5 point in May 2025 to 144. The index has shown a steady increase over the past three months, it was 143 in March, 143.5 in April, and now stands at 144 for May.
If the index continues this upward trend and rises to 144.5 in June, the 12-month average of the AICPI-IW is expected to reach around 144.17. When adjusted using the 7th Pay Commission's formula, this will translate into a DA rate of approximately 58.85%. Rounded off, the government could approve a 59% DA from July 2025.
DA HIKE FORMULA UNDER 7TH PAY COMMISSION
Dearness Allowance is revised twice a year, in January and July. It is based on the average of AICPI-IW data over the past 12 months. The formula for calculating DA is:
DA (%) = [(Average CPI-IW for past 12 months - 261.42) 261.42] 100
Here, 261.42 is the base value for calculation. Using this method, the expected hike is currently estimated at 4%.
ANNOUNCEMENT EXPECTED IN SEPTEMBER OR OCTOBER
Although the DA hike will be effective from July, it is usually announced later. In previous years, the government has announced such revisions in September or October, often around the festive period. This year, the announcement is also expected around Diwali.
This will be the final DA hike under the 7th Pay Commission, whose term ends on 31st December 2025. The 8th Pay Commission was announced earlier this year in January, but there has been no further progress. The government is yet to appoint a chairman and members for the new commission. The Terms of Reference (ToR) are also pending.
IMPLEMENTATION OF 8TH PAY COMMISSION MAY TAKE TIME
Going by past trends, a new pay commission usually takes about 18 to 24 months to submit its report and have it implemented. If the same timeline is followed, the recommendations of the 8th Pay Commission are likely to come into effect only by 2027.
This means central government employees and pensioners will continue to receive DA hikes based on their current basic pay until then.
ARREARS LIKELY TO BE PAID FROM 2026
While the implementation of the 8th Pay Commission may be delayed, the government is expected to make the new pay structure effective from January 1, 2026.
This means that any salary or pension hike under the new commission will be paid as arrears for the period between January 2026 and the actual rollout date.
The expected DA hike in July 2025 will bring some relief to government employees as they await clarity on the timeline for the next pay commission.