The Union Cabinet recently approved the release of 2% dearness allowance (DA) hike with effect from January 2026 for Central Government employees. According to reports from The Economic Times, this decision comes as there has been a rising trend in key inflation data for calculating DA in recent months, with all eyes now focused on the next round of DA hikes for the year 2026.
The AICPI-IW for March 2026 increased by 0.6 points to 149.1 points, as reported by The Economic Times. Since July 2025, AICPI-IW has increased from 146.5 to 149.1, showing a consistent upward trajectory. The next three months' data will be crucial for determining the DA hike, with expectations that the trend may continue into April, May, and June 2026.
DA hike calculation is done as per the recommendation of the 7th Pay Commission, using the AICPI-IW data of the past. According to The Economic Times, the formula used for this calculation involves the last 12 months' average AICPI-IW data. The calculation process involves multiplying the average by 2.88, subtracting 261.41, dividing by 261.41, and then multiplying by 100 minus 60%.
Using the current trend assumption, the expected DA hike works out to be around 3% based on the projected AICPI-IW data. As reported by The Economic Times, the calculation shows an estimated DA hike of 3.6% for the next round. However, the actual DA hike will also need to factor in the AICPI-IW data for April, May, and June 2026, which could result in different final calculations.
