DA hike: Central govt employees, pensioners may see the lowest hike this time in 7 years; check details

This week, the Union Cabinet may take a final call on the Dearness Allowance (DA) hike this week.  If approved, the new DA will come into effect retrospectively from January 2025, which means the employees will get an increase in their salary for March and also receive two months’ arrears. 

According to recent news reports, central government employees and pensioners may be facing disappointment as they are expected to see a 2% increase in their Dearness Allowance (DA) instead of the 3% or 4% they have received in previous years. Data from the All India Consumer Price Index (AICPI) suggests that the DA hike is likely to be the smallest in the past seven years, the Financial Express reported. In contrast, the government has consistently raised the DA by at least 3% or 4% since July 2018, and sometimes even more.

The upcoming 2% increase in DA will mark the lowest raise since July 2018, spanning approximately 78 months. The previous lowest hike was also 2% for the period of July-December 2018.

The government regularly revises the Dearness Allowance (DA) and Dearness Relief (DR) twice a year, in January and July. The most recent increase in DA occurred in July 2024, rising from 50% to 53%. Prior to that, in March 2024, the cabinet approved an increase from 46% to 50%, which was officially announced on March 25, 2024.

Under the 7th Pay Commission, the government also raised DA and DR by 3% on October 16, 2024, bringing both to 53%, effective from July 1, 2024. The next announcement regarding DA and DR will follow this regular pattern of revisions.

DA hike under 7th Pay Commission

The 7th Pay Commission, implemented in January 2016, merged the dearness allowance (DA) of 125% from the previous pay panel with the basic pay. Subsequently, the first DA increase of 2% took effect in July 2016, followed by two revisions each year for central government employees and pensioners. An exception occurred from January 2020 to June 2021, when the government suspended the DA hike due to sluggish economic growth and financial constraints.

Since the implementation of the 7th Pay Commission recommendations in January 2016, the Dearness Allowance (DA) has steadily increased and has now reached a level of 53% after the latest revision for the July-December 2024 cycle. The government announced a 3% hike in the dearness allowance in October of the previous year, bringing it to the current level of 53%. Based on the data from the July-December All India Consumer Price Index (AICPI), it is anticipated that the DA hike for the January-June 2025 cycle may be 2%.

8th Pay Commission

The government recently announced the establishment of the 8th Pay Commission on January 16, 2025, with its recommendations set to be put into effect starting January 1, 2026. This means that only one more increase in Dearness Allowance (DA) will be carried out under the 7th Pay Commission, likely around Diwali this year.

It is important to note that the implementation of the new Pay Commission's recommendations typically takes time. The 8th Pay Commission is expected to take around a year, possibly until March 2026, to submit its report. As a result, there is a possibility of a final DA hike for the period of January-June 2026, which will fall under the previous system. Once the recommendations of the 8th Pay Commission are put into effect, the DA will be merged with the basic salary, effectively resetting it to zero.