DA Hike Cancelled? Over 1.2 Crore Government Employees and Pensioners Face Setback Amid Inflation Drop

Low CPI May Delay or Reduce Dearness Allowance Increase for Central Employees in 2025

NEW DELHI — A wave of disappointment may be heading toward nearly 1.2 crore central government employees and pensioners, as the much-anticipated Dearness Allowance (DA) hike may either be reduced, delayed, or entirely put on hold this time. Following a modest 2% increase in March that raised DA from 53% to 55%, the outlook for the next revision — expected around July 2025 — appears bleak.

Why Is the DA Hike Unlikely This Time?

The primary reason behind the possible pause in the DA hike is a sharp decline in retail inflation, as measured by the Consumer Price Index (CPI). Recent CPI data reveals a consistent drop:

• March 2025: 3.38%

• February 2025: 3.61%

This decline marks the lowest inflation rate in five years, weakening the case for increasing the allowance meant to offset the impact of rising prices.

The CPI-DA Connection

The Dearness Allowance is directly linked to CPI trends. When inflation rises, so does DA, to help government employees cope with increasing costs of living. However, a fall in CPI means lower perceived inflation, which the government uses as grounds to limit or freeze DA revisions.

Since 2021, the central government has steadily increased DA, often by 3% to 4% per cycle, after a temporary freeze during the COVID-19 pandemic. But since late 2023, the trend has shifted, with recent hikes capped at just 2%.

What Are the Possible Scenarios?

• July–December 2025 Period: Experts predict that the DA hike could be less than 2%, or even scrapped altogether.

• If inflation continues to hover below 4%, there’s no strong economic justification for a significant DA revision, say government sources.

• Worse case: A rare DA rollback of 1%–2%, though unlikely, is not impossible under current economic conditions.

Who Will Be Affected?

The potential decision impacts:

• 48 lakh active central government employees

• 74 lakh pensioners

These individuals were counting on the mid-year DA revision to offset daily expenses, especially amid rising costs in essential commodities, education, and healthcare.

Employee Reactions and Expectations

Many government employees’ unions are already preparing to raise concerns. According to union representatives:

“Employees were expecting at least a 3% hike to counter other rising living expenses. A delay or freeze will impact household planning and retirement savings.”

Conclusion: Fiscal Prudence vs. Employee Welfare

While the government’s cautious stance may be aligned with fiscal responsibility and stable inflation, it brings a significant psychological and financial impact on public sector workers. With the next DA review due before the festive season, all eyes are on whether the Centre will prioritize economic data or employee welfare.