Dearness Allowance Hike Likely in September 2025: Relief Expected for Crores of Government Employees

National News: There’s welcome news for millions of central and state government employees and pensioners. The dearness allowance (DA) is expected to increase by 3% to 4% between September and November 2025. Based on recent economic indicators and inflation data, it is highly likely that the government will revise the DA upwards.

Understanding Dearness Allowance: Its Role and Significance

Earnest allowance is a periodic financial benefit provided to government employees and pensioners to offset the impact of inflation. It is calculated as a percentage of the basic salary or basic pension and is revised twice a year—first in January and then again between July and September.

The rate of increase is determined by the Consumer Price Index for Industrial Workers (CPI-IW), which is published monthly by the Labour Bureau of India.

What Does the CPI-IW Indicate?

As per the Labour Bureau’s latest data:

• March 2025 CPI-IW: 143
• April 2025 CPI-IW: 143.5
• May 2025 CPI-IW: 144

The consistent upward trend suggests rising inflation, which typically leads to a corresponding increase in DA.

How Is Dearness Allowance Calculated?

The following formula is used to calculate DA:

[(12-month average of CPI-IW – 261.42) ÷ 261.42] × 100

At present, the 12-month average CPI-IW has reached 144.17, which translates to an estimated DA of 58.85%. Currently, DA stands at 55%, meaning the government may raise it to 58% or 59%, resulting in a 3% to 4% hike.

Who Stands to Benefit?

If approved, the DA increase will benefit:

• Over 50 lakh central government employees
• More than 65 lakh pensioners
• Employees of several state governments that follow the central DA pattern
• Indirectly, many employees in PSUs and public sector banks may also benefit

Estimated Financial Impact on the Government

The hike could cost the central government approximately ₹30,000 to ₹35,000 crore annually. While substantial, such allocations are part of the routine fiscal planning, as they help mitigate inflationary pressure on public servants.

A Festive Gift Ahead of Dussehra and Diwali

If the DA hike is announced in September or October, it could serve as a significant festive bonus for employees, just in time for Durga Puja, Dussehra, and Diwali. Beyond individual relief, it may also boost consumer spending, giving a positive push to the retail and services sectors.