DA hike: Next Dearness Allowance increase to be 3%? Here's what employees expect from 8th Pay Commission

Last month the Finance Ministry announced that Dearness Allowance has been increased by 2% for central government employees and pensioners with effect from January. This takes DA as part of Basic Pay from 58% to 60%.

DA is a percentage of an employees' basic salary aimed at supporting households with increased inflation. It is revised twice a year by the All-India Consumer Price Index (AICPI) to match cost-of-living. New announcements generally occur in early March and October, with rollouts in January and July.

Notably, the 2% DA hike is calculated on the 12-month average as per the method prescribed by the AICPI under the 7th Pay Commission. Under this, since 2021, there have been 10 hikes, with the highest being 11% in July 2021. The past two hikes have been for 2% and 3% respectively, for January and July 2025.

Next DA hike to be 3%? Here's what the data says…

Now under the 8th Central Pay Commission (CPC), some employees expect that the next DA hike will be for 3% of basic salary, based on data from the Labour Bureau's All India Consumer Price Index for Industrial Workers (AICPI-IW).

According to the body, industrial CPI rose 0.6 points to 149.1 in March, and if the trend continues, DA calculation could be hiked by 3% of basic salary.

The index is updated monthly, and measures retail inflation based on rise and fall of prices of goods and services consumed by industrial workers.

Who benefits from DA hike?

DA is usually provided by the central government for its employees. The private sector in India has not offer the same for its employees or pensioners.

As many as 50 lakh central government employees, including defence personnel, and around 65 lakh retired central government pensioners, including defence retirees will benefit from the DA hike. Notably, there are 18 levels of employees, and the individual hikes will depend on the level of the employee or pensioner as basic pay of these employees differs from level to level.

What is the 8th pay commission?

Constituted by the Centre every 10 years to revise the allowances, pay and pensions of its employees, the CPC is responsible for decisions on contributions, retirement benefits and government spending. The 8th CPC is thus also set to make big decisions on salary hikes, dearness allowance, fitment factor and other allowances for central government employees.

The panel gathers views and inputs from employee unions, labour groups, ministries, pension bodies and other similar stakeholders, which will then be analysed to decide allowances, pension formula and salary structures for the relevant employee and retiree groups.

Discussions and feedback from stakeholders are also solicited before the Commission provides its final recommendations. Notably, it opened formal memorandum submissions and scheduled stakeholder consultations in March and April 2026. The CPC in a statement last week also said that it will hold more meetings in the national capital and in other states and union territories “in due course” over the next months.

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