Union Cabinet Approves 2% Hike in DA for Central Government Employees

New Delhi: In a move providing significant financial relief to millions of households, the Union Cabinet, chaired by Prime Minister Narendra Modi, today approved a 2% increase in Dearness Allowance (DA) for central government employees and Dearness Relief (DR) for pensioners.

The hike, which is effective retrospectively from January 1, 2026, raises the existing allowance from its previous level to meet the rising cost of living and inflationary pressures. This decision is expected to benefit approximately 4.8 million central government employees and over 6.7 million pensioners.

The 2% increase is based on the percentage increase in the 12-month average of the All-India Consumer Price Index (AICPI) for the period ending December 2025. According to official estimates, this move will place an additional annual burden of approximately ₹7,500 crore on the exchequer.

For the current financial year (2026-27), the combined impact for the period of January to March will be accounted for in the supplementary budget allocations.

The timing of the announcement is seen as a strategic measure to bolster the purchasing power of the middle class amid fluctuating global commodity prices. Government sources indicated that the Cabinet felt the 2% adjustment was a balanced approach to support employees without overextending the fiscal deficit targets.

Employees and pensioners will receive arrears for the months of January, February, and March along with their April salaries and pensions. Historically, several state governments follow the Union Cabinet’s lead, and it is expected that multiple states will announce similar 2% hikes for their respective staff in the coming weeks.

While the move has been welcomed by many, some central employee confederations expressed a cautious stance, noting that while the 2% hike is a positive step, it remains on the lower side of their expectations given the retail inflation trends in urban centers.

“This is a routine but necessary adjustment,” said a senior representative of a leading railway employees’ union. “We appreciate the timely announcement, which ensures that the gap between real wages and inflation does not widen further.”

With this approval, the total DA/DR component for central staff reaches a new milestone, reflecting the government’s commitment to the formula-based salary adjustments mandated by the 7th Central Pay Commission guidelines.