According to an official cabinet release, this hike is retroactive and will be applicable from January 1 of this year, a move that ensures central government employees and pensioners are positioned to receive substantial arrear pay. To facilitate this adjustment, the government has earmarked an additional Rs. 6,791 crore in annual hits to the national exchequer. This increase is specifically engineered as a fundamental cost-of-living adjustment designed to support 49.19 lakh central government employees and 68.72 lakh pensioners by offsetting the corrosive impact of inflation on fixed incomes. By maintaining the purchasing power of the workforce through periodic revisions based on established inflation indices, the allowance remains linked to the Consumer Price Index for Industrial Workers (CPI-IW), which is released monthly by the Labour Bureau under the Labour Ministry.
This latest fiscal measure follows the previous intervention in October 2025, when the Union Cabinet approved a 3 per cent increase that raised the rate from 55 per cent to 58 per cent, backdated to July 1, 2025. That prior decision carried a total financial implication of Rs. 10,083.96 crore annually. The current transition to 60 per cent reinforces a systematic biannual revision cycle, typically occurring in January and July, to provide a continuous buffer against rising costs. By injecting these funds into the livelihoods of over 1.17 crore individuals, the government reaffirms its commitment to administrative welfare and economic resilience, ensuring that the compensation of those who serve and have served the nation remains robust in the face of shifting market dynamics.
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