DA hike formula: How the 2% April increase was calculated

The 2% dearness allowance hike announced in April for central government employees and pensioners was calculated using a formula tied to the All-India Consumer Price Index (AICPI). The adjustment took DA to 60% of basic pay from 58%, affecting roughly 50 lakh employees and 65 lakh pensioners.

DA is revised twice a year, in January and July, based on the 12-month average of the AICPI. The formula, prescribed by the 7th Pay Commission, works like this: DA percentage = [(Average AICPI for the last 12 months – 261.42) / 261.42] x 100. For the April hike, the calculation was (145.54 × 2.88 − 261.33) / 261.33 × 100, rounded down to 60%.

The 8th Pay Commission, constituted on November 3, 2025, is now meeting with employee unions and stakeholders. It is expected to submit final recommendations around 18 months from its formation, meaning the earliest possible submission is February 2027. Based on past trends, full implementation of those recommendations could take another 2-3 years, pushing the rollout to 2029 or 2030.

Wholesale inflation surged to 9.68% in May from 8.26% in April, driven by fuel, crude petroleum, and manufactured goods. Retail inflation rose to 3.93%, with food inflation at 4.78%. Vegetables like tomato, ginger, and raisins saw the strongest price pressure. Rising costs for milk, vegetables, CNG, diesel, and petrol are squeezing household budgets.

Reports suggest another DA hike could come in July or September as employees seek relief from rising living expenses. DA is fully taxable at the applicable slab rate.

UP employee unions seek direct talks with 8th Pay Commission