There’s a buzz among central government employees and pensioners—and for good reason. The subsequent Dearness Allowance (DA) increase is on its way, and it could increase by 2% to 3% in July 2025. The Consumer Price Index for Industrial Workers (CPI-IW) for the month of March 2025 has created hope after months of decline.
Signs of a Turnaround
March saw a modest increase in the CPI-IW, by 0.2 points to 143.0. Though still marginally below January’s 143.2, this increase is a welcome relief from four consecutive declines from February 2024 to February 2025. This small shift could push DA up by 2% or even 3% by July.
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The January Disappointment Still Fresh
Earlier this year, for the January to June 2025 period, the government raised DA by only 2%. That was the lowest hike in six and a half years, pushing DA up to 55%. Naturally, all attention has now shifted to the next revision, which covers July to December. What makes this round more important is that it will be the final update under the 7th Pay Commission, which wraps up on December 31, 2025. As of now, it
seems unlikely that the 8th Pay Commission will kick off in January 2026.
How DA is Calculated
DA under the 7th Pay Commission is revised half-yearly and on the basis of the 12-month average CPI-IW. The formula is straightforward:
DA (%) = [(12-month average CPI-IW – 261.42) / 261.42] × 100. Currently, on the basis of data up to March 2025, the estimated DA is approximately 57.06%. If CPI-IW data for April, May, and June stays steady—or rises slightly—this average could climb to 57.86%. That means the DA could be rounded up to 58%.
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Next Stop: July DA Decision
Everyone is looking forward to the next CPI-IW for April, May, and June. These numbers will determine if the upcoming DA increase lands at 2% or rises to 3%. If the index continues to show small gains, it’s good news for central staff and retirees. The final call will likely come in late July or early August, just in time to feel a little extra comfort in the paycheck.