8th Pay Commission: How DA Hike Will Be Impacted Amid AICPI-IW Drop

The All India Consumer Price Index for Industrial Workers (AICPI-IW) for January 2025 has shown a decrease, raising questions about its implications for the anticipated hike in the dearness allowance (DA) for central government employees. The latest data revealed a drop of 0.5 points, bringing the index to 143.2. This marks another consecutive month of decline, as the AICPI-IW had also fallen by 0.8 points to 143.7 in December 2024.

What is the AICPI-IW?

Compiled monthly by the Labour Bureau, a division of the Ministry of Labour and Employment, the AICPI-IW tracks changes in the retail prices collected from 317 markets across 88 industrial hubs in India. The index serves as an essential tool for measuring inflation specifically for industrial workers, reflecting changes in their cost of living.

According to the Labour Bureau’s press release dated March 13, 2025, “The All-India CPI-IW for January 2025 decreased by 0.5 points and stood at 143.2.”

In addition to the monthly decline, the AICPI-IW data also shows a significant year-on-year decrease in inflation for January. The inflation rate for industrial workers stood at 3.10% in January 2025, compared to 4.59% in January 2024. This sharp drop underscores the evolving economic conditions affecting workers across India.

Significance of AICPI-IW

The AICPI-IW data plays a critical role in the calculation of dearness allowance (DA) for central government employees. DA is an additional payment over and above an employee’s basic salary and is designed to help offset the effects of inflation. The central government uses the AICPI-IW to determine the rate of DA, in line with recommendations from the 7th Pay Commission.

Currently, government employees are receiving a DA equivalent to 53% of their basic salary. As the AICPI-IW continues to show a downward trend, it has raised questions about the anticipated 2% increase in DA, which was expected to take effect from January 1, 2025.

Possible Delays in DA Announcement

The decrease in both the month-on-month and year-on-year AICPI-IW data could be a factor in the delay of the DA increase announcement. If inflation continues to dip, the government may reconsider or adjust the expected hike, especially given that the current rate of 53% DA is already high in relation to the cost-of-living index.

Conclusion

The latest AICPI-IW data is crucial for government employees, as it directly influences their DA calculations. With a continued downward trend in the index, it remains to be seen how the government will address the DA hike moving forward.

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