Central government employees and pensioners may receive a major boost to their pay and pensions as early as January, with a possible hike in Dearness Allowance
(DA) and Dearness Relief (DR). The update comes after the Union Ministry of Labour and Employment released the All India Consumer Price Index for Industrial Workers (AICPI-IW) for November 2025 at 148.2. DA and DR are directly linked to movements in the AICPI-IW, which tracks changes in the cost of living for workers across the country. 8th Pay Commission begins work The Union government has formally constituted the Eighth Pay Commission, which has already started functioning. Former Supreme Court judge Justice Ranjana Prakash Desai has been appointed as its chairperson. Professor Pulak Ghosh has been named a part-time member, while Pankaj Jain will serve as the member-secretary. The commission’s Terms of Reference (ToR) have also been finalised. As per the existing timeline, the recommendations of the Eighth Pay Commission are scheduled to come into effect from January 1, 2026. However, experts caution that it may take up to two years for the commission to submit its report and for the government to implement the recommendations. Until then, salaries and pensions will continue to be governed by the Seventh Pay Commission framework. Why DA hike is likely in January The AICPI-IW reflects changes in prices of essential items such as food, housing, clothing, fuel, healthcare, transport and education. Based on the November 2025 index level of 148.2, estimates suggest that DA and DR could rise by as much as 5 percentage points. In July 2025, the government had raised DA by 4%, taking it from 54% to 58%. If a 5% hike is approved in January, the DA could climb to around 61%–63%. The final decision, however, will depend on the AICPI-IW data for December 2025 as well. If approved, the increase would significantly raise monthly salaries and pension payouts for millions of central government employees and retirees, offering relief amid persistent inflation pressures.
