DA hike: August CPI-IW rises to 154.4; is 65% DA likely for central govt employees? Here’s what the calculation shows

The All-India Consumer Price Index for Industrial Workers (CPI-IW) rose 1.2 points to 154.4 in August 2026, from 153.2 in July, providing the latest indication of where the Dearness Allowance (DA) for central government employees could head from January 2027.

The Labour Bureau released the August CPI-IW data on 30 September. Year-on-year inflation based on the index stood at 4.96% in August, compared with 4.57% in July.

Under the 7th Pay Commission framework, DA is revised twice a year and the calculation is linked to the CPI-IW. The August reading has now taken the running January 2027 DA calculation to about 65%.

January 2027 DA calculation currently points to 65%

The January 2027 DA calculation uses the 12-month average of CPI-IW. With August 2026 data included, the relevant period is September 2025 to August 2026, and the average CPI-IW works out to 149.82.

The DA formula uses the CPI-IW on the 2001=100 base. Since the Labour Bureau currently publishes the index on a 2016=100 base, the 2.88 linking factor is applied.

DA = [(12-month average CPI-IW × 2.88 − 261.42) ÷ 261.42] × 100

Using the latest average:

[(149.82 × 2.88 − 261.42) ÷ 261.42] × 100 = 65.05%

This means the running calculation has crossed the 65% mark.

Mint’s earlier September report, based on July’s CPI-IW reading, had calculated the January 2027 DA at 64.37%. The August reading has therefore pushed the calculation higher.

Importantly, 65.05% is only the current calculation and not an announced DA rate. The final rate will depend on the remaining CPI-IW readings and the government’s subsequent decision.

Four more CPI-IW readings will determine the final DA

July and August are only the first two months of the six-month period used to calculate the January 2027 DA revision. CPI-IW data for September, October, November and December 2026 will still be included.

If inflation remains elevated and CPI-IW rises further, the average used in the formula could increase. Conversely, weaker index readings could moderate the final calculation.

Therefore, employees should not treat the current 65% calculation as the January 2027 DA rate. The government will formally notify the revised rate after the calculation period is complete.

What could 65% DA mean for salaries?

If the DA is ultimately fixed at 65%, an employee with a basic pay of ₹18,000 would get DA of ₹11,700, compared with ₹10,800 at 60%. That would mean an increase of ₹900 a month in the DA component.

For an employee with basic pay of ₹44,900, DA at 65% would be ₹29,185, compared with ₹26,940 at 60%, translating into an increase of ₹2,245 a month.

These calculations relate only to the DA component. The actual change in take-home salary can vary depending on other salary components and deductions.

The immediate takeaway for central government employees is that August’s CPI-IW reading has taken the running January 2027 DA calculation to 65.05%, but four more inflation readings will determine where the final rate lands.