DA hike: The central government employees anticipating a Dearness Allowance (DA) increase may receive an update soon. Reports suggest that a decision on the DA hike will likely be made at the upcoming Cabinet meeting chaired by Prime Minister Narendra Modi, typically held on Wednesdays.
However, government employees should note the All India Consumer Price Index for Industrial Workers (AICPI-IW) for January 2025 has been slashed by 0.5 points to 143.2, preceding the anticipated dearness allowance (DA) raise for central government employees. This marks the second consecutive month of decline, as in December 2024 the AICPI-IW fell by 0.8 points to 143.7.
The Shimla-based Labour Bureau of the Ministry of Labour and Employment gathers data for the consumer price index for industrial workers monthly, based on retail prices obtained from 317 markets located in 88 industrially significant centers across the nation.
"The All-India CPI-IW for January, 2025 decreased by 0.5 point and stood at 143.2 (one hundred forty three point two)," the Labour Bureau said in a press release dated March 13, 2025.
Dearness allowance (DA) is an additional amount provided to employees on top of their basic salary. It is calculated as a percentage of the basic salary and helps mitigate the impact of inflation on an employee's monthly earnings. For active employees, the allowance is referred to as Dearness Allowance, while for retired employees, it is known as Dearness Relief. Presently, central government employees receive 53% of their basic pay as dearness allowance.
According to the labour bureau, the consumer price inflation for industrial workers has decreased both on a monthly basis and significantly compared to the AICPI-IW data from January 2024. The year-on-year inflation for January 2025 was recorded at 3.10%, a decrease from 4.59% in January 2024.
AICPI-IW for December 2024 and January 2025
Serial Groups Dec 2024 Jan 2025 I Food & Beverages 151.3 148.3 II Pan, Supari, Tobacco & Intoxicants 162.9 163.5 III Clothing and Footwear 146.7 147.2 IV Housing 131.6 134.6 V Fuel and Light 148.6 148.6 VI Miscellaneous 138.3 138.6 - General Index 143.7 143.2
Expected DA hike
The central government utilises AICPI-IW inflation data for determining the dearness allowance rate increase for its employees, in accordance with the recommendations of the 7th pay commission. The expected 2% increase in DA effective from January 1, 2025, may be attributed to the declines in month-on-month and year-on-year AICPI-IW data.
An increase of 2% in Dearness Allowance (DA) would result in a rise of Rs 360 in the salary of an entry-level employee, such as a Multi Tasking Staff (MTS), who has a basic pay of Rs 18,000.
Currently, an employee with a basic pay of Rs 18,000 receives Rs 9,540 as DA (53%). With a 2% increase, their DA would go up to Rs 9,900, leading to a Rs 360 boost in their salary. If the hike were 3%, the increase would be Rs 540, bringing their DA to Rs 10,080.
The announcement regarding the DA hike will be effective starting from January 1, 2025. The employees will receive arrears based on the additional amount they are entitled to receive since January 1, 2025.
Dearness allowance is a bi-annual announcement made by the central government to assist its employees in managing the impact of inflation. It is a component of the employees' net salary, calculated based on a percentage of their basic pay. The government is expected to unveil a 2% increase in DA, raising it from 53% to 55%.
In July 2024, the government employees received a 3% DA hike, raising the DA from 50% to 53%.