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DA Hike January 2026: Central Govt Likely To Receive 2% Increase In Dearness Allowance
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DA Hike January 2026: The Union Cabinet is expected to clear the DA revision in early March 2026, possibly in the first or second week, ahead of Holi.
DA Hike January 2026: If 2% hike approved, DA and dearness relief (DR) will rise from the current 58% to about 60% of Basic Pay.
DA Hike January 2026: Central government employees and pensioners are likely to see only a marginal increase in dearness allowance (DA) from January 1, 2026, with the hike expected to be capped at 2%. If approved, DA and dearness relief (DR) will rise from the current 58% to about 60% of Basic Pay, marking a restrained start to the 8th Pay Commission phase.
The Union Cabinet, headed by Prime Minister Narendra Modi, is expected to clear the DA revision in early March 2026, possibly in the first or second week, ahead of Holi. This will also be the first DA hike after the formal conclusion of the 7th Pay Commission on December 31, 2025.
Inflation numbers leave little room for a higher DA
The final DA calculation hinges on the All-India Consumer Price Index for Industrial Workers (CPI-IW) for December 2025, released by the Labour Bureau. The index remained unchanged at 148.2 points, mirroring the November reading.
With December data in place, the 12-month average CPI-IW for the July–December 2025 period stands at 419.17 points. Applying the existing 7th Pay Commission formula, the DA works out to 60.34%. Following established convention, the government is expected to drop the decimal and notify DA/DR at 60% with effect from January 1, 2026.
Smallest increase seen in several years
A 2% DA hike is relatively uncommon and has been witnessed only a few times in the past decade. The last such low increases were recorded in July 2018 and January 2025.
As a result, the upcoming January 2026 revision will be among the lowest DA hikes in more than seven years, even though inflation has remained elevated rather than easing sharply.
A transition-period DA hike with long-term consequences
The January 2026 DA revision carries greater weight than usual because it comes during a transition between two pay commissions. The 7th Pay Commission has completed its tenure, while the 8th Pay Commission, though constituted, is still in the early stages of its work.
There is no clarity yet on when the 8th Pay Commission’s recommendations will be implemented. With the commission having up to 18 months to submit its report — and the government typically taking additional time to examine it — actual pay and pension revisions may only come by late 2027 or early 2028.
Why slower DA growth is worrying employees
Employee unions are increasingly concerned that subdued DA increases now could limit salary revisions later. When a new pay commission is implemented, the prevailing DA is usually merged into Basic Pay, and DA is reset to zero.
With DA expected to touch only 60% in January 2026 and rise gradually thereafter, the quantum available for merger under the 8th Pay Commission could remain modest. This is why expectations around the fitment factor are now more conservative, with estimates clustering around 1.60.
Lower DA at the time of merger can permanently cap revised Basic Pay and pensions, making even small differences in DA levels significant over the long term.
DA revisions before 8th CPC will set the base
The DA hikes due in January 2026, July 2026, January 2027 and July 2027 will collectively determine the DA level that eventually gets merged into pay when the 8th Pay Commission structure is rolled out.
This makes the January 2026 hike, despite being limited to 2%, an important building block for future salary and pension calculations.
Unclear rollout timeline adds to anxiety
In earlier pay commission transitions, implementation timelines were more predictable. The 7th Pay Commission, for instance, came into effect from January 1, 2016, immediately after the end of the 6th Pay Commission.
This time, the government has not committed to any effective date for the 8th Pay Commission. A question raised in Parliament during the Winter Session on whether revised pay scales would be applicable from January 1, 2026 did not elicit a clear response, adding to fears of a prolonged gap period.
How DA is worked out
Dearness Allowance is designed to offset inflationary pressures on salaries and pensions. Under the 7th Pay Commission framework, DA is calculated using the formula:
DA (%) = (12-month average CPI-IW – 261.42) ÷ 261.42 × 100
DA is revised twice every year, in January and July, based on CPI-IW trends.
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February 08, 2026, 13:53 IST
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Al Drago | Getty Images
United Airlines flight attendants approved a new five-year labor contract with 31% average raises to base pay by August and other improvements, marking the last of the major carriers with unionized flight crews to reach a deal post-Covid.
The labor deal would give United’s roughly 30,000 flight attendants their first raises in close to six years. The company and the flight attendants’ union reached a preliminary deal in March. Crews had rejected a contract last year.
The union said the contract won 82% approval from the flight attendants, with close to 90% of them voting.
“The contract will immediately change the lives of United Flight Attendants, especially our thousands of new hires who have been hired since the pandemic,” said Ken Diaz, president of the United chapter of the Association of Flight Attendants.
The contract also includes boarding pay, or pay for when the aircraft’s door is open and travelers are getting on. Airlines had for years started flight attendants’ pay clock once the boarding door was closed.
The contract comes with a roughly 7% to 8% increase in compensation and $741 million in back pay, as well as quality-of-life improvements like restrictions on red-eye flights and “sit pay” during disruptions of more than 2½ hours.
Stocks struggled on Tuesday, although blue chips proved resilient, amid a triple whammy of domestic political strife, surging US inflation and a lack of progress in the Middle East.
The FTSE 100 closed down just 4.11 points at 10,265.32. The FTSE 250 ended down 341.66 points, 1.5%, at 22,466.20, and the AIM All-Share fell 11.75 points, 1.4%, at 810.66.
The pound fell to 1.3505 dollars on Tuesday afternoon from 1.3651 dollars on Monday. Against the euro, sterling was lower at 1.1517 euros from 1.1584 euros on Monday.
The yield on UK 10-year gilts traded at 5.10%, up from 5.01% the day before.
Prime Minister Sir Keir Starmer defied calls for him to quit, despite a growing number of Labour MPs demanding that he steps aside.
“The Labour Party has a process for challenging a leader and that has not been triggered,” Sir Keir told ministers during crunch talks over his future, as no one person has stepped forward to challenge him yet.
“The country expects us to get on with governing. That is what I am doing and what we must do as a Cabinet,” he added.
More than 80 of Labour’s 403 MPs have now called for Sir Keir to quit immediately, or to set out a timetable for his resignation, including some ministers.
Banks sold off, amid reports of a possible windfall tax on the sector should there be a change at the top of the Government.
“Banks narrowly avoided a higher tax rate at the last budget, but our base case now assumes the UK banking surcharge to increase from 3% to 5%,” said the banking team at JPMorgan.
NatWest fell 3.2%, Lloyds Banking Group dipped 4.4% and Barclays declined 3.6%.
Meanwhile, the surging bond yields weighed on interest rate-sensitive housebuilders, with Barratt Redrow down 4.1% and Taylor Wimpey 2.4% lower.
Adding to the uncertain mood was another spike in the oil price as the impasse in the Middle East carried on.
Iran’s chief negotiator said on Tuesday that Washington must accept Tehran’s latest peace plan or face failure, after US President Donald Trump warned a truce was on the brink of collapse.
“Relations between Washington and Tehran appear to be more strained than at any time since the original ceasefire was announced just over a month ago,” observed David Morrison at Trade Nation, suggesting that hostilities could “resume at any time”.
Brent crude for July delivery was trading at 108.07 dollars a barrel on Tuesday, up compared with 103.70 dollars at the time of the equities close in London on Monday.
In Europe on Tuesday, the CAC 40 in Paris ended down 1.0%, and the DAX 40 in Frankfurt declined 1.6%.
In New York, the Dow Jones Industrial Average was down 0.5%, the S&P 500 fell 1.0% while the Nasdaq Composite was 1.7% lower.
The yield on the US 10-year Treasury widened to 4.46% on Tuesday from 4.39% on Friday. The yield on the US 30-year Treasury stretched to 5.02% from 4.97%.
The impact of the Iran war was reflected in soaring US inflation figures for April.
Annual CPI inflation sped up to 3.8% in April from 3.3% in March, above FXStreet-cited expectations of a 3.7% rise.
Monthly, energy costs were up 5.6% in April after a 21.3% jump in March.
Excluding food and energy costs, core CPI was up 2.8% year-on-year in April, up from 2.6% in March and higher than an expected 2.7%.
Analysts explained that much of the upside in core inflation came from a spike in shelter costs.
TD Economics said the numbers reinforce why the Fed needs to remain “patient”.
“Even assuming a ‘more normal’ reading on shelter prices last month, core inflation would’ve still firmed relative to March. With secondary price effects from higher energy prices likely to intensify in the months ahead, we’re likely to see core measures of inflation drift a bit higher and hover around 3% through year-end,” the broker said.
While Bank of America said the latest increase means inflation is getting “very uncomfortable” for the Fed.
Following the data, Fed futures now place a 60% probability of a rate hike by March next year.
The euro traded slightly lower against the greenback, at 1.1729 dollars on Tuesday from 1.1782 dollars on Monday. Against the yen, the dollar was trading at 157.73 yen, higher than 157.01 yen.
Back in London, Vodafone fell back 7.0% after mixed full-year results with adjusted earnings short of hopes but adjusted cash flow ahead.
“In the stock market it’s often said that it’s better to travel than arrive, hence why shares in Vodafone dipped on robust-looking full-year results after a strong rally in the past 12 months,” said Dan Coatsworth, head of markets at AJ Bell.
Vodafone shares have risen 60% in the last 12 months.
Intertek led the risers, up 6.4%, as it said it was “reviewing” the latest takeover proposal from suitor EQT Fund Management Sarl.
Intertek has turned down three previous approaches from EQT.
On the FTSE 250, Greggs rose 8.0% after reporting higher sales in the opening weeks of 2026 and maintaining full-year expectations.
But Wickes plunged 12% after reporting mixed trading as wet weather weighed on retail demand at the start of 2026.
Gold traded lower at 4,663.87 dollars an ounce on Tuesday, from 4,733.27 dollars on Monday.
The biggest risers on the FTSE 100 were Intertek, up 320.00p at 5,300.00p, British American Tobacco, up 255.00p at 4,634.00p, Compass Group, up 1.74p at 31.93p, Imperial Brands, up 104.00p at 2,832.00p and London Stock Exchange Group, up 328.00p at 9,348.00p.
The biggest fallers on the FTSE 100 were Vodafone Group, down 8.45p at 111.95p, 3i Group, down 116.00p at 2,400.00p, St James’s Place, down 52.50p at 1,154.50p, Lloyds Banking Group, down 4.28p at 94.06p and Marks & Spencer, down 13.60p at 308.90p.
Wednesday’s global economic calendar has eurozone industrial production and GDP data, the King’s Speech in the UK and US PPI figures.
Wednesday’s local corporate calendar has a trading statement from Spirax Group.
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