At present, DA and DR revisions are based on the 12-month average of the All India Consumer Price Index for Industrial Workers (AICPI-IW), an index designed to protect purchasing power against inflation.
AIDEF argues that the formula has significant shortcomings and no longer reflects the actual cost of living faced by central government employees and pensioners.
The federation has pointed to the revised Consumer Price Index basket introduced in 2022-23, which assigns food and beverages a weight of only 36.75%, while housing, healthcare, transport, communication and digital services carry a higher combined weightage. AIDEF contends that lower-paid employees and pensioners spend a disproportionately larger share of their income on essentials such as food, medicines, healthcare, education and house rent, meaning their personal inflation experience is significantly higher than what the official index reflects.
On the specific challenges faced by pensioners, AIDEF highlighted that many retirees spend a substantial portion of their monthly income on health insurance premiums, medicines, medical treatment and caregiving services. If prices of these necessities rise faster than overall consumer inflation, periodic DR revisions may fail to fully protect their purchasing power, placing additional financial pressure on retirees.
To address these gaps, AIDEF has proposed the creation of an employee-specific cost-of-living index that better captures the expenditure patterns of government employees and pensioners. The federation has further recommended that elderly care-related expenses receive greater recognition in future pay and pension revisions, and that shifts in expenditure patterns be factored into the fitment factor used to determine salary and pension hikes.
Also read | 8th Pay Commission: Central govt employees seek higher HRA, pension reforms
The 8th Pay Commission is currently examining representations from employee organisations and pensioners’ bodies, and its recommendations are expected to shape the pay structure and retirement benefits of central government employees and pensioners.
