Central government employees and pensioners eagerly await a key announcement this July—the next revision of Dearness Allowance (DA) under the 7th Pay Commission. After a modest 2% hike in January 2025, which brought the DA to 55%, expectations are high for a more substantial increase this time. Backed by recent inflation data, there’s growing optimism that a bigger DA boost is on the horizon.
In the last adjustment cycle (January–June 2025), the central government approved only a 2% DA hike—the lowest increment in nearly 78 months. This came as a disappointment to millions of government employees and retirees. However, all eyes are now on the July–December 2025 DA revision, expected to be the final one under the 7th Pay Commission before the transition to the 8th Pay Commission begins.
This upcoming DA hike is especially significant because it marks the conclusion of the current pay commission’s cycle. The 7th Pay Commission is set to expire on 31 December 2025, and while the 8th Pay Commission is expected to take over, its implementation from January 2026 is still uncertain due to a lack of clear progress.
The Dearness Allowance (DA) is calculated based on the Consumer Price Index for Industrial Workers (CPI-IW) over a 12-month average. The Labour Bureau’s March 2025 data showed a 0.2-point increase in the CPI-IW, reaching 143.0, a modest improvement compared to the preceding months.
While the index is slightly down from January 2025’s figure of 143.2, it still marks a recovery from the continuous drop observed between November 2024 and February 2025. The moderation in food inflation played a crucial role in stabilizing the index. In March, the year-on-year inflation rate was recorded at 2.95%, a slight increase from February, but still within control.
According to the 7th Pay Commission formula, DA is calculated using:
DA (%) = [(Average CPI-IW of last 12 months – 261.42) ÷ 261.42] × 100
(Where 261.42 is the base index value.)
Based on CPI-IW averages available till March 2025, the estimated DA stands at 57.06%. If the CPI-IW figures for April, May, and June 2025 remain stable or improve slightly, the average could climb to around 57.86%.
In such a case, the central government may revise the DA to 58% in July 2025. However, if the average remains close to 57.50%, the hike may be limited to just 2%, raising DA to 57%. Hence, the final hike is expected to fall between 2% and 3%.
The DA hike’s fate will be decided once the CPI-IW data for April to June 2025 is released. These numbers will provide clarity on the final average, allowing the government to announce the updated Dearness Allowance (DA) and Dearness Relief (DR) figures for employees and pensioners.
The announcement is expected by the end of July or early August 2025. If the positive trend in inflation continues, the government could offer a meaningful increment—marking a fitting farewell to the 7th Pay Commission era.
Once the 7th Pay Commission concludes in December 2025, attention will turn to the 8th Pay Commission, although its rollout timeline remains speculative. For now, July’s DA revision is expected to bring much-needed relief and a financial boost to over 1 crore central employees and pensioners across the country.
