DA hike: Inflation-linked wage, DA merger, new formula—here are Dearness Allowance-related demands of employee groups

A significant number of India's public service employees are set to benefit from their various state governments' announcements on Dearness Allowance (DA) hikes. The Centre hiked DA by 2% in April, from 58% of basic pay to 60%, effective from 1 January this year.

The Centre usually updates DA biannually using data from the All-India Consumer Price Index (AICPI), new announcements are made in March and October, with rollouts in January and July. The move is aimed at countering the increasing cost of living expenses for employees and pensioners amid rising inflation.

More than one crore beneficiaries — about 50 lakh central government employees and nearly 65 lakh central government pensioners, including defence personnel and retirees, will benefit from the Centre's DA hike announcements across 18 employee levels.

What are DA demands put forward by employees?

Today, we take a look at some of the DA demands made by representative groups, unions and stakeholders who collectively represent a large number of employees and pensioners, including defence and railway staff.

Submissions made by these groups are expected to play an important role in shaping the 8th pay commission's final recommendations. Notably, the 8th CPC closed the memorandum submission window last month on 15 June, while submissions for data will close on 31 July. It has, in the meantime, scheduled meetings in Delhi, Chennai and Puducherry to facilitate stakeholder discussions.

Call for Inflation-linked wage model 

• The National Council – Joint Consultative Machinery (NC-JCM) has demanded that DA be updated to an inflation-linked wage model. The council has also suggested that minimum pay be hiked to ₹69,000 per month from the current ₹18,000.

• The Maharashtra Old Pension Organisation has suggested minimum DA hike of 4% and DA merger at 50%. It has also suggested that minimum pay be hiked to ₹65,000 per month.
• The All India Defence Employees Federation (AIDEF) is seeking inflation-adjusted compensation demands. It has also suggested that minimum pay be hiked to ₹69,000 per month.

Demands for DA merger

• Multiple employee unions and representative groups have demanded that the Centre make an official announcement on DA merger. This is because the 7th CPC stipulated that DA may be merged with basic salary if it exceeds 50% and as of the last update, the component now comprises 60% of basic pay.

Notably, the government has not officially announced a DA merger as of July 2026, but the issue has gained traction because basic salary determines other components of compensation i.e. provident fund contribution, pension, allowances, gratuity, and more. Thus, higher DA and, by association, basic pay mean an increase in overall salary and linked allowances.

Change in DA calculation formula sought

• The AIDEF, in a second memorandum submitted to the 8th CPC, also sought a change in how DA is calculated. It argued that the current formula assigns higher weightage to relatively stable expenditure categories, while employees, especially those on lower pay grades, spend a larger percentage of their salary on food, education, healthcare, house rent, medicines and other essentials.

The federation has suggested that the DA calculation formula must reflect relatively higher inflation on personal items and has called for a complete overhaul of the index, replacing it with an employee-specific cost-of-living index.

DA hikes announced so far in 2026: Snapshot

Notably, after the Centre's announcement came increases by the Indian Banks' Association (IBA) — which hiked basic salaries between ₹48,000 and ₹1,17,000 and DA from ₹435 to ₹1,050 for workmen and officer employees across levels for May, June and July 2026; and the Indian Railways — which hiked DA by 2%.

Various state governments also increased salaries to close the gap in payment with the central government. West Bengal hiked DA to 38% of basic salary, while Arunachal Pradesh, Assam, Odisha, Tamil Nadu and Uttar Pradesh each approved 2% hikes, taking the component to 60% of basic pay.

Meanwhile, Bihar implemented 2% hike for staff under the 7th pay commission, 5% hike for employees under the 6th CPC and 9% for staff under the 5th CPC; and Maharashtra greenlit payment of ₹800 crore DA arrears under the 5th, 6th and 7th CPCs for November and December 2025, and January 2026; and 2% DR hike for retired All India Services officers.

While there is no official word yet, debate over another DA revision by the Centre has also gained momentum. Employees and pensioners are increasingly looking forward to a 3-4% hike in the second half this year. The final revision, however, will depend on the June 2026 data from the Labour Bureau's All-India Consumer Price Index for Industrial Workers (AICPI-IW) and the government’s approval.