The Labour Bureau under the Ministry of Labour and Employment reported a 0.8-point increase in the All India Consumer Price Index for Industrial Workers (AICPI-IW) for April 2026, as per the latest press release dated May 29, 2026. The AICPI-IW for April 2026 stood at 149.9 points, representing a significant increase from 149.1 in March 2026. This data will be relevant for calculating the Dearness Allowance (DA) hike for central government employees with effect from July 1, 2026, under the 7th Central Pay Commission (CPC). The year-on-year inflation for April 2026 stood at 4.46% compared to 2.94% in April 2025, indicating rising cost-of-living pressures.
According to the analysis from Mint, Dearness Allowance (DA) and Dearness Relief (DR) are often used when discussing salary increases for central government employees, public sector staff, defence personnel, bank employees and pensioners. Both are components of employees' and retirees' salary break-up aimed at countering inflation, with the same calculation and application process for employees and retirees. However, DA affects employee salaries while DR impacts pension payouts, creating the primary distinction in who benefits and when. House Rent Allowance (HRA) is a separate component that assists employees with housing expenses and is taxable under different heads compared to DA and DR.
As reported by Mint, DA is revised bi-annually by the All-India Consumer Price Index (AICPI) to mitigate cost-of-living expenses, with new announcements made in March and October and rollouts scheduled in January and July. The Finance Ministry announced a 2% revision in DA and DR from 58% to 60% of Basic Pay with effect from 1 January 2026. On 2 May, the Indian Banks' Association announced revised DA and DR for workmen and officer employees across levels, hiking basic salaries between ₹48,000 to ₹1,17,000 and DA from ₹435 to ₹1,050. This was followed by a 2% DA and DR hike announced by Indian Railways on 13 May.
The DA hike is calculated using the AICPI-IW data of the past 12 months using the following formula: DA = [{(AICPI-IW x 2.88)−261.41}/261.41]×100%−60%. Based on the latest AICPI-IW data, the last 12-month average AICPI-IW data is 148.61. Using this calculation methodology, the expected DA hike could be 3.72%, though this is typically rounded down to the nearest lower value. The actual hike will depend on the AICPI-IW numbers for May and June 2026, with the final decision on DA hike cleared by the Union Cabinet chaired by the Prime Minister.
According to Mint reports, following the central government's lead, various states including Arunachal Pradesh, Bihar, Odisha, Tamil Nadu and Uttar Pradesh announced 2% hikes each for their respective state government employees and pensioners. Tripura announced a 5% hike, while West Bengal last week approved in principle the formation of its 7th state pay commission to decide salary and DA hikes for state government employees, educational institutions, government corporation and board staff, and state government-aided bodies.
