DA Hike: What Does the Rising AICPI-IW Mean for Central Government Employees?

Dearness Allowance (DA) for central government employees is likely to increase by 3%, as per news reports. This follows a significant rise in the All India Consumer Price Index for Industrial Workers (AICPI-IW), though this latest data won’t affect the immediate hike.

What is AICPI-IW and Why It Matters

The AICPI-IW, compiled monthly by the Labour Bureau, tracks retail price changes for a fixed basket of goods consumed by industrial workers across 88 major centres. It directly influences DA and dearness relief paid to government employees and pensioners.

The index rose from 145 points in June 2025 to 146.5 points in July 2025, a 1.5-point increase. Notably, prices in Housing and Food & Beverages rose by 2.30% and 1.41%, respectively, reflecting rising costs of essential items.

DA Hike Expected in September 2025

The 3% DA hike expected in September is based on AICPI-IW data from January to June 2025. If approved, the hike will be effective retroactively from July 1, 2025, with arrears paid alongside the September salary.

However, the July 2025 data won’t affect this hike. Instead, it will influence the DA revision from January 2026.

Role of July Data and the 8th Pay Commission

The second-half 2025 AICPI-IW figures, starting with July, will determine the DA rate effective January 2026. This rate will also impact the minimum pay structure under the upcoming 8th Pay Commission.

Though the government has yet to notify the commission’s chairperson and terms of reference, the report is expected within 1 to 1.5 years. After the 8th Pay Commission’s implementation, the DA rate will reset to zero.

Read more: 8th Pay Commission Calculator: How Much Will HRA Rise for Level 1–3 Govt Employees at 1.92x Fitment Factor?

Conclusion

While inflation is pushing up the cost of living, central government employees can expect a 3% DA hike effective July 1, 2025, to ease the burden. The rising AICPI-IW indicates the possibility of a higher DA increase starting January 2026, which will be key in shaping the 8th Pay Commission’s recommendations.

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