Dearness Allowance Raised Again: What 2% Hike Means for Salaries

In a move aimed at cushioning government employees and pensioners against persistent inflation, the Union Cabinet on Saturday approved a 2 per cent increase in Dearness Allowance (DA) and Dearness Relief (DR). The revision, effective from January 1, 2026, raises the rate from 58 per cent to 60 per cent of basic pay or pension, benefiting over 1.18 crore individuals and costing the exchequer ₹6,791 crore.

What has the government announced?

The Centre has increased Dearness Allowance for employees and Dearness Relief for pensioners by 2 per cent, taking the total to 60 per cent of basic pay. The decision was cleared during a Cabinet meeting and follows the established formula tied to inflation trends.

Briefing the media, Information and Broadcasting Minister Ashwini Vaishnaw said, "Another very big decision was taken today. I would like to extend my heartiest congratulations. DA and DR have been increased for all our central government employees and pensioners, which will cost the Government of India a total of Rs. 6,791 crore. Basically, DA and DR will become 60% of the basic pay from January 1, 2026. It has been increased by 2%, from 58% to 60%. It will become 60% of the basic pay. There are a total of about 50 lakh employees and 68 lakh pensioners of the Government of India. This will be a huge benefit for all of them."

Why is DA revised regularly?

Dearness Allowance is a key cost-of-living adjustment designed to offset the impact of inflation on fixed incomes. It is calculated as a percentage of basic pay and is revised twice a year—typically in January and July—based on the Consumer Price Index for Industrial Workers (CPI-IW), released by the Labour Bureau.

The current hike is in line with the recommendations of the 7th Central Pay Commission and reflects changes in inflation levels over recent months.

How does this compare with previous hikes?

The latest increase follows a 3 per cent hike announced in October 2025, which raised DA and DR from 55 per cent to 58 per cent, benefiting nearly 49.19 lakh employees and 68.72 lakh pensioners, with an annual fiscal impact of ₹10,083.96 crore.

At the state level, similar revisions have also been observed. For instance, in March this year, the Madhya Pradesh Cabinet approved a 3 per cent increase in DA and DR effective July 1, 2025, raising it to 58 per cent, alongside other development expenditures.

(With inputs from ANI)