DA hike: Second dearness allowance increase to come during Diwali this year? Here's what past announcements indicate...

Dearness Allowance (DA) is a percentage of basic salary aimed at offsetting the impact of inflation for government employees and pensioners. Reviewed twice a year, new announcements are usually made in March and October, with rollouts in January and July.

Notably, the latest DA hike was announced in April by the Finance Ministry, which increased the component from 58% to 60% of basic salary, effective 1 January. Over 1 crore individuals, comprising nearly 50 lakh central government employees and close to 65 lakh central government pensioners, including defence and railway personnel, benefitted from the DA and corresponding increase in Dearness Relief (DR).

In the following months, the Indian Banks' Association (IBA) announced revised DA and DR for workmen and officer employees across levels for the months of May, June and July 2026. It hiked basic salaries between ₹48,000 and ₹1,17,000 and DA from ₹435 to ₹1,050. Later, the Indian Railways also announced a 2% DA and DR hike for its personnel.

Can we expect a second DA hike this year?

Employees and pensioners are expecting another hike announcement this year. There was hope that a hike would come in July after monthly data from the Labour Bureau's All-India Consumer Price Index for Industrial Workers (AICPI-IW) is released. The index measures retail inflation by tracking fluctuations in the prices of goods and services consumed by industrial workers.

Based on data trends over the past months' expectation was for a 3-4% DA hike — AICPI-IW for March stood at 149.1, April at 149.9 and May at 150.8, while for June is estimated at 151.7 if the rate of growth remains constant. Further, the latest government data shows retail inflation rose to 4.38% in June 2026, while food inflation climbed to 5.32%. The final revision, however, will depend on the June 2026 AICPI-IW data and the government’s approval.

Diwali gift: Second DA hike to come in November?

Even if no DA hike is announced this month, beneficiaries could still see a second increase sometime in the second half of the year. According to past precedents, Union Labour Minister Ashwini Vaishnaw in October 2025 said the Cabinet cleared 3% DA hike, increasing the component to 53% of basic pay.

The year prior, in 2024 too, the Centre announced an increase ahead of the Diwali festive season. This year, Diwali is in November, so beneficiaries could expect a “Diwali gift” sometime in October or November this year.

Why is DA hike important?

DA is a component of the salary break-up for central and public sector employees, aimed at mitigating the rising cost of living. Notably, the basic salary also determines other components of compensation, such as provident fund contributions, pension, allowances, gratuity, and more. Thus, higher DA, especially given DA merger demands, could lead to a substantial and automatic increase in overall pay and, consequently, in the other dependent allocations.

Hikes are calculated based on the AICPI's 12-month average as prescribed under the 7th pay commission. There have been 10 hikes since 2021 — the highest at 11% in July 2021 and the last being 3% in July 2025.

The formula used is as follows, according to Clear Tax:

• For Central Government Employees: DA percentage = [(Average of AICPI (Base Year 2001 = 100) for the last 12 months – 261.42) / 261.42] x 100
• For Public Sector Employees: DA percentage = [(Average of AICPI (Base Year 2001 = 100) for the last three months – 126.33) / 126.33] x 100

When is 8th CPC announcement expected?

As per usual timeline, the commission is expected to announce recommendations around 18 months after its constitution, which means that the earliest we can expect an announcement is February or April 2027.

Further, based on past trends, once the pay commission's recommendations are made, the rollout takes another two to three years to complete. This means that hikes announced in 2027 may only be fully implemented by 2029 or 2030.