AICPI-IW declines again, may affect DA hike in July 2025

The All India Consumer Price Index for Industrial Workers (AICPI-IW), which is a key metric for determining the dearness allowance (DA) hike of Central Government employees, declined further in February 2025.

As per data shared by Shimla-based Labour Bureau, Ministry of Labour & Employment, the AICPI-IW data for February 2025 decreased by 0.4 points to 142.8 from 143.2 points in January 2025.

"The All-India CPI-IW for February, 2025 decreased by 0.4 point and stood at 142.8 (one hundred forty-two point eight)," the Labour Bureau said in a statement.

Moreover, the year-on-year inflation in February 2025 was also over 2% lower than in February 2024.

"Year-on-year inflation for the month of February, 2025 stood at 2.59% as compared to 4.90% in February, 2024," the Labour Bureau said.

The year-on-year inflation based on CPI-IW has declined consistently since October 2024. It was 4.41% in October 2024, 3.88% in November 2024, 3.53% in December 2024, 3.10% in January 2025, and 2.59% in February 2025.

Why does this matter?

The Central government offers dearness allowance and dearness relief (DR) to its employees and pensioners, respectively, as a percentage of their basic salary. The DA/DR helps in countering the erosion in the real value of their wages due to inflation.

The AICPI-IW data is important for Central Government employees and pensioners. It helps in calculating the hike in DA and dearness relief (DR) rate for them as per the recommendations of the 7th Pay Commission.

The Government revises the DA/DR rate for Central Government employees and pensioners two times a year. While the first revised DA/DR rate in a year is effective from January 1, the second revised rate is effective from July 1.

Recently, the Union Cabinet increased the DA/DR of Central Government employees and pensioners by 3% to 56%. This hike is effective from January 1, 2025.

The next DA hike, if approved, will be effective from July 1, 2025. However, the extent of the hike may be low if the AICPI-IW continues to decline.