Central government employees and pensioners may receive good news before Raksha Bandhan.
Based on current inflation trends, the government may announce another Dearness Allowance (DA) hike under the Seventh Pay Commission.
This hike is expected to be around 3 to 4 percent in July 2025, offering relief to crores of employees.
Currently, the DA rate stands at 55 percent after a 2 percent hike in March 2025. DA is provided to serving employees, while Dearness Relief (DR) is given to pensioners.
How and When DA Is Announced
DA increases are usually announced twice a year—once in February–March (effective from January),
and again in September–October (effective from July). These hikes help employees deal with inflation.
The DA amount is based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), which reflects changes in retail prices across 317 markets in 88 industrial centres.
The Labour Bureau under the Ministry of Labour and Employment monitors these price changes monthly.
In March 2025, the AICPI-IW stood at 143, and rose slightly to 144 in May.
Based on the average of the past 12 months’ CPI-IW figures and the formula under the 7th Pay Commission, a 3–4% DA increase is likely.
Formula for DA Calculation:
DA (%)=[12-month average CPI-IW−261.42261.42]×100\text{DA (\%)} = \left[\frac{\text{12-month average CPI-IW} – 261.42}{261.42}\right] \times 100
Here, 261.42 is the base index used under the 7th Pay Commission.
Inflation Trends in Rural Areas
While the CPI-IW data for June 2025 is still awaited, trends show a decline in rural inflation. In May 2025, retail inflation for agricultural workers (CPI-AL)
and rural labourers (CPI-RL) dropped to 2.84% and 2.97%, down from 3.5% in April. The index values also fell slightly to 1305 (CPI-AL) and 1319 (CPI-RL).
Although these indices aren’t directly used for DA calculation, they suggest a general decline in inflation that may influence CPI-IW.
If CPI-IW remains stable or increases slightly in June, the DA could go up to 58% or 59%. The exact hike will be confirmed after the CPI-IW data for June 2025 is released.
