The Labour Bureau has released the monthly reading of All India Consumer Price Index (Industrial Worker) (AICPI-IW) for May 2026 at 150.8. The index data, which is the key matrix to calculate dearness allowance (DA) for central government employees, is the highest in the previous 12 months, as per Labour Bureau data. However, the DA hike for June 2026 will be known only after the Labour Bureau releases the June month AICPI reading at the end of July. After a 2% January 2026 hike, 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 figure 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.