India's Central Govt Employees May See 3% Dearness Allowance Hike

The April 2026 AICPI-IW data has raised expectations of a possible 3% dearness allowance (DA) hike for central government employees, though the final rate will depend on May and June inflation data. The 12-month average AICPI-IW from May 2025 to April 2026 stands at 147.51, translating to an estimated DA of 62.51%, which could be rounded to 63%. If approved, a 3% DA hike would increase the salary of a Level 5 employee by about Rs 876 per month.

The Labour Bureau has released the April data of All India Consumer Price Index – Industrial Workers (AICPI-IW), leading to speculation about the possible dearness allowance (DA) hike in June 2026. However, to know that, we will have to wait for AICPI-IW data for May and June 2026, but the April data gives us an indication about a possible hike of 3%. Know how!

AICPI-IW reading for April 2026

The Labour Bureau in a social media post on X (formerly Twitter) said: “All-India Consumer Price Index for Industrial Workers (2016=100) for April 2026 increased to 149.9 points from 149.1 points in March, 2026. The inflation during the month increased to 4.46 % from 4.27% in previous month.”

How does AICPI-IW data matter for DA calculation for June 2026?

DA for central government employees is calculated based on the 12-month average AICPI-IW data. For example, for the June 2026 DA hike, the average inflation of July 2025-June 2026 will be taken into account.

What is the current DA rate for central government employees?

The central government announced a 2% hike in DA in April 2026. The hike was announced for January 2026, after which DA reached at 60%.

What is 12-month average AICPI-IW data (from May 2025-April 2026)?

The average AICPI-IW index data from May 2025-April 2026 is 147.51.

Particulars

AICPI-IW index data

May-25

144

Jun-25

145

Jul-25

146.5

Aug-25

147.1

Sep-25

147.3

Oct-25

147.7

Nov-25

148.2

Dec-25

148.2

Jan-26

148.6

Feb-26

148.5

Mar-26

149.1

Apr-26

149.9

Average

147.51

How is DA for central government employees calculated?

DA is calculated based on a formula-

DA% = [{12-month average of AICPI-IW (base year 2001)– 261.42}/261.42x100]

However, we will first have to link the 2016 base values to the 2001 base values by multiplying it by 2.88.

The factor of 2.88 is 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 the old base (2001=100) was 33.8 and CPI-IW under the new base (2016=100) was 117.4, so the factor is calculated as 338 ÷ 117.4= 2.88.

What will be the current DA rate?

DA%= (147.51X2.88)– 261.42}/261.42x100]

= (424.83-261.42)/(261.42)X100

= 0.62508X100= 62.51%

Since the nearest whole number is 63%, DA can be 63%.

However, the rate of DA will be known only after AICPI-IW data for the next two months are released and the government makes an announcement regarding the same.

Example of how DA hike impacts the salary of an employee

Let’s take the example of a Level 5 employee whose minimum basic salary is Rs 29,200. At a 50% DA, their salary will be= Rs 29,200+(50% of Rs 29,200)= Rs 29,200+Rs 14,600= Rs 43,800.

At a 53% DA, their salary will be= Rs 29,200+(53% of Rs 29,200)= Rs 29,200+Rs 15,476= Rs 44,676.

It means because of a 3% DA hike, their salary will increase by Rs 876.