Last DA hike of 3% or 4% under 7th CPC in July 2025? Central government employees can get this much increase in dearness allowance
This will also be the final DA and DR hike for around 33 lakh central government employees and 66 lakh pensioners under the 7th Pay Commission, which came into effect from January 2016 and is set to end in December this year.
Even though the DA hike typically takes effect from July, it's announced with a lag and is usually credited in the accounts of central government employees and pensioners around October, aligning with the festive season in the country. So, will government employees see a substantial salary bump to celebrate around October? What kind of a DA hike can they look forward to this time? ET Wealth Online breaks it down for you What was the last hike in DA announced by the government under the 7th Pay Commission? In March of this year, the government announced a 2% hike in the dearness allowance, effective from January 2025, to be paid to central government employees and pensioners, raising it to 55% of their basic pay. Prior to this hike, the DA was at 53% of basic pay. DA is a crucial factor in a government employee's salary, as it helps them offset the impact of inflation on their earnings. How much DA hike can employees expect from the July 2025 DA hike announcement? The DA hike is calculated using the Consumer Price Index for Industrial Workers (CPI-IW), released monthly by the Labour Bureau, which falls under the Ministry of Labour. Every month, the bureau shares these index values that track the relative changes in retail prices for a fixed basket of goods and services that are consumed by industrial workers over a specific time frame. The formula for calculating Dearness Allowance for central government employees under the 7th Pay Commission is:7th CPC DA% = [{12-month average of AICPI-IW (base year 2001) for the last 12 months – 261.42}/261.42x100]According to data available on the Labour Bureau website, these are the CPI-IW index values for the last 12 months, from June 2024 to May 2025. Month CPI-IW Index Value
June 2024 141.4 July 2024 142.7 August 2024 142.6 September 2024 143.3 October 2024 144.5 November 2024 144.5 December 2024 143.7 January 2025 143.7 February 2025 143.2 March 2025 142.8 April 2025 143 May 2025 143.5 June 2025 144 Average of AICPI-IW over the last 12 months 143.3 Source: Labour Bureau, Ministry of LabourHowever, we will first have to link the 2016 base values to the 2001 base values by multiplying it by a factor (2.88). This will come to 412.70 (143.3 x 2.88) How does one arrive at this factor? Explains RIA Abhishek Kumar, RIA and founder of Sahaj Money: 'This factor of 2.88 has been arrived at to equate the latest base year (2016) to 2001. Labour Bureau data shows that for August 2020, the value of CPI-IW under old base (2001=100) was 33.8 and CPI-IW under new base (2016=100) was 117.4, so the factor is calculated as 338 ÷ 117.4 or 2.88. Now, inputting everything in the formula, the potential DA hike % under the 7th Pay Commission comes to: 412.70-261.42/261.42 X 100= 0.578This comes to 57.8%, or around 58%. Based on these calculations, the central government may go for a 3% hike in DA and DR from the present 55% to around 58%. This means that if an individual has a base pay of Rs 25,000, their DA will go up from Rs 13,750 at present to approximately Rs 14,500. When can central government employees expect the 8th Pay Commission to be implemented? The government hasn't yet finalized the commission's terms of reference (TOR), nor has it appinted a chairman or other members yet. Many experts believe that it could take another 1.5 to 2 years for the commission to come into effect. However, this commission will be effective starting January 2026. This means that for the intervening period from January 2026 till the commission is actually implemented, central government employees and pensioners will get arrears. According to an Ambit Capital report, if we assume a current basic pay of Rs 50,000, and if the DA is raised to 60% of the basic pay from the present 55% before the conclusion of the 7th Pay Commission, then salaries could go up by around 14% under the upcoming 8th Pay Commission. Even with that, it would still be the lowest income growth central government employees and pensioners have seen over the last 4 pay commissions (including the 7th Pay Commission). Before the recommendations of the 7th Pay Commission kicked in back in January 2016, the DA stood at 125% of basic pay. So, for someone earning a basic pay of Rs 7,000 under the 6th Pay Commission, their DA amounted to Rs 8,750, bringing their total pay to Rs 15,750. Plus, they also received Rs 4,550 in allowances.But here's the catch: once a Pay Commission wraps up, the dearness allowance (DA) drops to zero because the index gets completely re-based. This means that under the 8th Pay Commission, the DA will reset to zero as well. The DA increase in July 2025 will be the last hike for central government employees before the conclusion of the 7th Pay Commission. And even though the recommendations of the 8th Pay Commission will be effective from January 2026, many reports suggest that its implementation is at least 1.5 years away.
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