DA hike: Central government employees may face a major setback in January, as DA is expected to see the lowest increase in the last seven years. Such a low dearness allowance will bring tears to the eyes of central government employees.

DA hike: 12 million central government employees and pensioners may have to make do with a meager salary increase in the new year, as only a 2 percentage point increase in Dearness Allowance (DA) and Dearness Relief (DR) is expected this year. This will increase DA from 58% to around 60%. If this happens, it will be the lowest in the last seven years.

According to All India Consumer Price Index (AICPI) data, central government employees and pensioners may be shocked by such a low DA hike this time. Since July 2018, DA has never increased by less than 3%.

Is the January 2026 DA revision necessary?

This will be the last DA increase under the 7th Pay Commission cycle. The 7th Pay Commission's 10-year term ends on December 31, 2025. The new Pay Commission will be implemented from January 2026. Although the 8th Pay Commission has been formed, its Terms of Reference (ToR) does not specify a clear implementation date. The Commission has 18 months to submit its report. After that, it typically takes about two more years to study, approve, and implement the new pay scales. So, in reality, employees may only benefit from the 8th Pay Commission's salary hikes in late 2027 or early 2028. The government announced the formation of the 8th Pay Commission in January this year.

What does the CPI-IW data say?

The Labor Bureau has released the AICPI-IW numbers for October 2025, and the index is steadily rising.

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 the index has risen for four consecutive months, reflecting rising inflationary pressures. The DA has been 58% since July 2025. Based on data through October and expected trends for November and December, the projected DA from January 2026 is estimated to be around 60%.

Why will the DA increase by only 2%?

To understand why the DA will only increase by 2% this time, consider two simple scenarios based on the CPI-IW pattern for November and December 2025.

Scenario 1: The index remains at 147.7 in November and December. DA is calculated based on the AICPI-IW average of the previous 12 months. The formula for the 7th CPC is: DA (%) = [(CPI-IW average of the previous 12 months) – 261.42] ÷ 261.42 × 100. Here, 261.42 is the base value. The higher the average index, the higher the DA. Under this formula, the DA for January 2026 comes to approximately 60.21%, as the government determines the percentage based on this average, rounded to the nearest whole number. For example, if the average DA for a month is 57.86 percent, it is rounded up to 58 percent. Thus, 60.21 percent would be rounded up to 60.

Scenario 2: The index increases by 1 point each in November and December.

November 2025 - Index increases to 148.7

December 2025 - Index increases to 149.7

Consequently, the average index for the year improves further, and the DA calculation shows a figure of approximately 60.50 percent, but again, due to rounding rules, this can also be rounded down to 60 percent DA.