Dearness Allowance (DA) hike: How much DA hike will central govt employees get and how is it calculated?

The Cabinet has approved a 2% rise in dearness allowance (DA) and dearness relief (DR) each for January 2026, ending the long wait for central government employees and pensioners, respectively. This implies that DA and DR will each increase to 60% from their existing rates of 58%. Both central government employees and pensioners will receive arrears from January 2026.

DA is calculated on the basis of the 12-month average reading of All India Consumer Price Index-Industrial Workers (AICPI-IW). For the January 2026 DA hike, the average AICPI-IW reading of January 2025-December 2025 has been taken into account.

The average of AICPI-IW inflation for the 12 months (from January 2025-December 2025) was 145.54.

DA% = [{12-month average of AICPI-IW (base year 2001)– 261.42}/261.42x100]
However, we will first have to link the 2016 base values to the 2001 base values by multiplying it by 2.88.

The factor of 2.88 is determined to equate the latest base year (2016) to 2001. Labour Bureau data show that for August 2020, the value of CPI-IW under the old base (2001=100) was 33.8 and CPI-IW under the new base (2016=100) was 117.4. So the factor is calculated as 338 ÷ 117.4= 2.88.

DA %= (145.54X2.88)– 261.42}/261.42x100]
= 419.15-261.42/261.42X100
= 0.6033X100= 60.33%
Since the government takes round figures, a 60.33% DA means 60%.