Hi Sandeep Chandra,
Welcome to the Microsoft Q&A Platform! Thank you for reaching out regarding your query on Dapr Resiliency Policy.
The issue here might lie in the large initial delay. Since the first retry is delayed by an hour, subsequent retries might happen in quick succession after the initial delay. This can result in a burst of retries, potentially overwhelming the target system and causing DLQing.
Could you try reducing the initial delay to a smaller value? This would ensure that retries begin sooner and are more evenly spaced out.