The Labour Bureau has put out the monthly reading for the All India Consumer Price Index (Industrial Worker) (AICPI-IW) for May, 2026, at 150.8. This index is crucial for calculating the dearness allowance (DA) for central government employees and is the highest it has been in the last 12 months, accordig to Labour Bureau data. However, the DA hike for June 2026 will be known only after the Labour Bureau releases the June AICPI reading at the end of July.
Following a 2% increase in January 2026, the DA for central government employees stands at 60%. The May reading shows that the DA hike is likely to be 3%. But can it reach 4% after the June inflation data is released? Let’s find out.
AICPI -IW index data of last 12 months (From June 2025-May 2026)
| Particulars | AICPI-IW reading |
| Jun-25 | 145 |
| Jul-25 | 146.5 |
| Aug-25 | 147.1 |
| Sep-25 | 147.3 |
| Oct-25 | 147.7 |
| Nov-25 | 148.2 |
| Dec-25 | 148.2 |
| Jan-26 | 148.6 |
| Feb-26 | 148.5 |
| Mar-26 | 149.1 |
| Apr-26 | 149.9 |
| May-26 | 150.8 |
| Average | 148.075 |
Source: Labour Bureau
How is DA for central government employees calculated?
DA is calculated based on a formula-
DA% = [{12-month average of AICPI-IW (base year 2001)– 261.42}/261.42x100]
However, we will first have to link the 2016 base values to the 2001 base values by multiplying it by 2.88.
The factor of 2.88 is arrived at to equate the latest base year (2016) to 2001. Labour Bureau data shows that for August 2020, the value of CPI-IW under the old base (2001=100) was 33.8 and CPI-IW under the new base (2016=100) was 117.4, so the factor is calculated as 338 ÷ 117.4= 2.88.
What is the DA rate as per current AICPI-IW reading?
DA%= (148.075X2.88)– 261.42}/261.42x100]
= (426.456-261.42)/(261.42)X100
= .6313X100
= 63.13%
Since the government takes the nearest round figure value to determine the DA hike, it will be 63%, which means a 3% hike from January 2026.
Can DA reach 64% after the Labour Bureau releases the June 2026 AICPI-IW index reading?
DA can reach 64% only if the average 12-month inflation reach 148.86 after the June data. For that, the June AICPI-IW index reading should be 154.5, which is not easy given the last 12-months pattern.
However, the real magnitude of the DA hike will be known only after the government announces it.
How DA hike impacts the salary of a central government employee
Let’s take the example of a Level 6 employee whose minimum basic salary is Rs 35,400. At a 50% DA, their salary will be= Rs 35,400+(50% of Rs 35,400)= Rs 35,400+Rs 17,700= Rs 53,100.
If the same employee gets a DA 3% hike, their new salary will be= Rs 35,400+(53% of Rs 35,400)= Rs 35,400+Rs 18,762= Rs 54,162.
It means because of a 3% DA hike, their salary will increase by Rs 1,062.
