One more round of Dearness Allowance (DA) hike is on the cards since December 2025 when the 7th Pay Commission ends. According to recent measurements on inflation the DA will be increased to 4% which will bring the DA to 59 percent of basic pay up and down to 55 percent. This amendment is going to effective on July 1, 2025, and should be confirmed around Diwali.
DA Hike Based on CPI-IW Trends
AICPIIW has been on the upward trend owing to the past few months. This implies that based on a 1-year average, the DA would be around 58.85 percent by May 2025, where the figure would be 144. As rounded off, 59 percent DA increase should be allowed by the government.
Impact on Monthly Salary
This increase will have a direct impact on take-home salary of more than 48 lakh employees of the central government and 66 lakh pensioners. The DA element will be boosted by 720 rupees per month with regards to an entry level employee with a basic salary of 18000 rupees per month. Equal increase of proportionality of Dearness Relief (DR) to the pensioners would also see.
Salary Impact Table – July 2025 DA Hike
| Basic Pay (₹) | DA @ 55% (₹) | DA @ 59% (₹) | Monthly Increase (₹) |
|---|---|---|---|
| 18,000 | 9,900 | 10,620 | 720 |
| 25,000 | 13,750 | 14,750 | 1,000 |
| 30,000 | 16,500 | 17,700 | 1,200 |
| 40,000 | 22,000 | 23,600 | 1,600 |
Transition to 8th Pay Commission
Though the 8 th Pay Commission is declared, it will be implemented in FY27. Until then, inflationary effect of DA hikes under the 7 th Pay Commission is set to benefit. After the new commission is introduced, DA will be brought down to zero with the restructuring of salaries with a new fitment factor.
Economic Implications of the Hike
The increase in salaries is likely to improve consumer spending, more so, on housing, retail and financial services. The analysts also predict a higher growth in GDP by the increment of about 30-50 basis points as a result of the increased margin income. This last DA increase according to the 7th Pay Commission paves the way to larger fiscal reforms.
Also Read: LIC Smart Pension Scheme 2025: Secure Your Retirement with ₹44,000 Monthly Income