- India,
- 31-Jan-2026 02:37 PM IST
In the midst of the high-stakes Budget session, a wave of joy has swept across millions of central government employees and pensioners. The latest data released by the government has paved the way for a substantial increase in their monthly earnings. This development comes as a major relief for government personnel who have been grappling with the rising cost of living. The roadmap for the Dearness Allowance (DA) hike effective from January 2026 is now crystal clear.
AICPI Index Data Brings Clarity
The calculation of Dearness Allowance is primarily based on the All India Consumer Price Index for Industrial Workers (AICPI-IW). The Labour Bureau, under the Ministry of Labour and Employment, has officially released the figures for December 2025, while according to the report, the index remained stable at 148. 2 points in December, mirroring the level recorded in November. This stability in the index is a strong indicator for experts to finalize the projected hike in allowance.
5 Percent Hike: Total DA to Reach 63%
Currently, central government employees receive a Dearness Allowance of 58%, which was implemented in July 2025. Following the latest December data, it's almost certain that the government will announce a 5% increase. If this happens, the total DA will climb to 63%. Manjeet Singh Patel, President of the All India NPS Employees Federation, has confirmed that the. Current index trends strongly suggest a 5% increment, providing a much-needed financial cushion to the workforce.
Impact on Monthly Salary and Take-Home Pay
A 5% hike in DA translates into a significant jump in the take-home salary of employees. For instance, an employee with a basic salary of Rs 18,000 will see a direct monthly increase of Rs 900. On the other end of the spectrum, senior officials with a basic salary of around Rs 2, while 5 lakh will witness a substantial monthly hike of Rs 12,500. This increase isn't just limited to active employees; it also extends to pensioners in the form of Dearness Relief (DR), ensuring their purchasing power remains intact.
When Will the Official Announcement Happen?
Typically, the central government announces the DA hike for the January cycle around the festival of Holi in March. However, the hike is always implemented retrospectively from January 1st. This means that employees will receive the increased amount along with arrears for the months of January and February, while the timing of this news during the Budget session has added to the positive sentiment within government departments.
Understanding the DA Calculation Mechanism
The Dearness Allowance is determined using a specific formula based on the average AICPI-IW for the preceding 12 months. The formula used is: [{(Average of AICPI-IW for the last 12 months × 2, while 88) − 261. 41} / 261. 41] × 100. This data reflects the real-time inflation experienced by industrial workers, allowing the government to adjust. The salaries of its employees to mitigate the impact of rising prices of essential commodities.
A Boon for Pensioners
This update is equally significant for the country's approximately 6. 5 million pensioners. The Dearness Relief (DR) provided to them will also see a corresponding 5% increase, while for many elderly citizens, this extra income is vital for managing healthcare costs and daily expenses. The government's decision to maintain this biannual revision cycle serves as a critical social security measure against retail inflation.
Economic Perspective and Market Sentiment
Economic analysts suggest that an increase in DA leads to higher liquidity in the market. When millions of employees receive extra disposable income, it stimulates demand across various sectors of the economy. While this puts an additional burden on the national exchequer, it's considered a necessary step to maintain the morale and financial stability of the government's human resources. The move is seen as a balanced approach to managing employee welfare amidst global economic fluctuations.
