With effect from July 1, 2025, the employees and pensioners of the Central Government shall be granted a 4% hike in D.A., which means raising the rate from 55% to 59%. This particular candidate price hike will be applied to over 1.15 crore members. The Union Government may announce it in early August 2025 in congruence with the Raksha Bandhan celebrations. Based on the recent trend of inflation, the salary disbursed from August shall reflect the increased DA, with arrears payable for July.
Salary and Pension Impacts
Dearness Allowance, published twice a year on January 1 and July 1, facilitates the alteration of salaries and pensions to counteract inflation and is calculated according to the Consumer Price Index for Industrial Workers (CPI-IW). A 4% increase will raise the salaries by ₹720 per month in case of ₹18,000 basic pay (total DA: ₹10,620) and by ₹2,364 in case of ₹59,100 basic pay. Pensioners, on the other hand, will see a similar increase in Dearness Relief (DR), and the monthly pension will be enhanced. This hike will also lead to increased House Rent Allowance (HRA) and other allowances linked to DA, maximizing the financial benefits of the recipient.
Expected Announcement Timeline
Governments typically begin to finalize the DA hikes after analyzing CPI-IW data between January and June. For July 2025, the CPI-IW touched 144 in May, in support of a 3% hike to 58%, though some sources opine that it should be 4% to 59%, should inflation continue to soar. This is likely to be approved by the Union Cabinet in early August 2025 and announced a fortnight before Diwali (October/November), making this a late salary adjustment.
DA Calculation Methodology
The formula for DA percentage is: DA% = (12-month avg. CPI-IW – 261.42) / 261.42 × 100. The CPI IW for May 2025, being 144, translated into a DA of around 57.95%, which will probably be rounded off to 58% or 59%. In this way, salaries rise in accordance with costs as reflected by the indices of the Labour Bureau concerning food, fuel, and house.
Beneficiaries and Larger Implications
48.66 lakh active employees and 66.55 lakh pensioners (including those in central PSUs and SEs) covered under the 7th CPC are beneficiaries of this increase. This will also lead to a revision in gratuity calculations and pension calculations for pensioners. States like Uttar Pradesh and Rajasthan might follow suit in hiking pay. The next revision, due in January 2026, can envisage another 3-4% over and above this increase, as per the upcoming 8th CPC.
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