The Union Cabinet, chaired by Prime Minister Narendra Modi , on Wednesday raised the dearness allowance (DA) for about 4.85 million central government employees by three percentage points to 63%, along with a similar increase in the dearness relief (DR) for 6.87 million pensioners ahead of Diwali .
DA is always expressed as a percentage of the basic salary. The combined impact on the exchequer on account of the increase in both DA and DR would be ₹ 10,016.10 crore per annum, he said. The previous raise was announced on April 18 this year, and took retrospective effect from January 1, 2026. At that time, both DA and DR were raised by 2 percentage points to take the total from 58% to 60%, with a financial implication of ₹ 6,791.24 crore per annum.
Information and broadcasting minister Ashwini Vaishnaw said the raised allowance will be effective from July 1, 2026 and described it as a “Diwali gift” to millions of employees and pensioners. This increase is broadly in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission , according to officials.
Central Pay Commissions are periodically constituted to go into various issues of emolument structure, retirement benefits and other service conditions of Central government employees and to make recommendations on the required changes. The allowance is currently based on the Consumer Price Index for Industrial Workers (CPI-IW). The aim is to build up container manufacturing in India, so the country relies less on imports. The scheme offers four kinds of help to manufacturers — cheaper loans , support for testing and certification, land on concessional terms, and cash assistance for running costs.
The Cabinet on Wednesday ₹ 10,000-crore container manufacturing promotion scheme.
DA is paid to Central government employees to protect their basic pay from erosion in real value on account of inflation, according to the Commission’s report.
