Opinion: Can Telangana become USD 1 trillion economy?

With a decade of groundwork, the runway is ready — now it’s time to chart the right policies for takeoff and activate growth engines

By Prof Prabhakar Reddy Tada

Telangana is one of the fastest-growing economies in the country, with an average annual growth rate of 13.9 per cent over the last five years. The goal of transforming Telangana into a ‘one trillion dollar economy’ in the next ten years is an ambitious project announced by the government and reflects its intentions to make it one of the richest States in India.

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Although a challenging task, it is not insurmountable. Strong economic fundamentals — such as favourable GSDP growth rates, rising per capita income, a conducive atmosphere for industries to set up their operations, and the potential to attract IT projects — have helped Telangana emerge as a robust economy. In fact, the runway has been laid in the last ten years. Now the task is to design the right policies to activate growth engines while assessing priority and sub-sectors.

Key Economic Indicators

Telangana’s per capita income is increasing at a faster rate (11.4 per cent) than the national average (8.1 per cent). The Average Annual Growth Rates of Telangana and All-India from 2014-15 to 2023-24 stood at 14 per cent and 10.2 per cent respectively. Similarly, the Compound Annual Growth Rates of Telangana and All-India for the same period were 12.1 per cent and 8.7 per cent respectively. These figures clearly establish that Telangana’s economy is outperforming national averages, indicating the potential for sustained growth.

Agriculture registered over 4 per cent growth during FY24 and has become a vital growth engine of the State (MOSPI). Besides, several ‘green pastures’ exist that can contribute significantly to the economy if supported with effective and appropriate policies.

Fiscal Position

Telangana has experienced growth with stability. For the financial year 2024-25, the GSDP at current prices is estimated at Rs 16.12 lakh crore reflecting a growth rate of 10.5 per cent over the previous fiscal. The per capita income is estimated at Rs 3.79 lakh, growing at a rate of 9.6 per cent, reinforcing the economy’s strong growth potential.

Sector-wise contributions to the GSDP at current prices in FY2023-24 are as follows MOSPI):

• Agriculture (including fishing, forestry, mining and quarrying: 17.9 per cent (4.8 per cent)
• Industry: 16.4 per cent (10.1 per cent)
• Tertiary sector: 65.7 per cent (14.6 per cent)

Notably, the State’s tax revenue grew by 9.1 per cent in the Q1 of fiscal year 2024-25, showcasing fiscal strength. In the first quarter of FY2023, the State’s tax revenue — with a share of 63 per cent in the total revenue — stood at Rs 29,212 crore and increased to Rs 34,609 crore in 2025, underlining economic resilience. However, non-tax revenue (13.7 per cent) declined from Rs 6,874 crore to Rs 1,000 crore during the same period. The overall tax and non-tax revenue of the state during 2023-24 is Rs 1,40,000 crore, with an additional Rs 14,000 crore expected annually as grants-in-aid from the Centre.

Exports

Telangana also saw a 34.3 per cent growth in exports while its share was 4 per cent in India’s total exports during April-May 2024-25. However, exports are concentrated in just two districts of the State — Ranga Reddy and Medchal Malkajgiri which form part of Hyderabad. Encouraging similar growth in other districts can exponentially boost the overall export figures. The main exports from Telangana include IT, engineering goods, drugs and pharmaceuticals, and chemicals.

With strong fundamentals and the right policy mix, Telangana has the potential to generate substantial employment, increase revenues, attract investments

There is substantial potential to encourage these sectors in other districts which can then become growth engines of the State. In fact, the government has also set up IT hubs in several district headquarters in the last five years to promote decentralised development and encourage entrepreneurs.

Despite all achievements, enhancing fiscal space through increased tax revenue, foreign and domestic grants, and adopting a broad macroeconomic framework will go a long way in strengthening the financial position of the economy. Public expenditure review, strengthening budget analysis and ensuring better focus on poverty reduction, health and education and service delivery are essential.

The Strategies

• Agriculture and Exports
Agriculture, a major GSDP contributor, should be given a stimulus through strategy support focusing on promoting value-added crops, crop diversification, post-harvest technologies, and improved cold storage and ware housing facilities. Agriculture’s resilience was evident during Covid-19 when it ensured food security and recorded a cumulative 16.4 per cent growth in food crop production from 2018-19 to 2023-24.

In terms of employment, agriculture leads with 42.7 per cent, followed by services (34.8 per cent) and industry (22.7 per cent) in 2024-25. Urban unemployment dropped from 8.8 per cent to 7.1 per cent, indicating job creation. Improved irrigation has boosted paddy cultivation, which saw a 256 per cent increase during the Kharif season.

• Industry and MSMEs
Telangana is home to 2.6 million MSME units of which 56 per cent are in rural areas while 44 per cent are in urban areas. The manufacturing sector has huge potential to create jobs. Therefore, industry, especially MSMEs, should be given a fillip. They contribute significantly to employment, industrial output (45 per cent), and exports (40 per cent), with their share of GSDP exceeding 20 per cent.
In fact, Telangana has become a destination for MSME units given the robust policy framework, use of digital technology and importantly for developing industrial ecosystem which is supported and facilitated by the State government.

• Service Sector and IT exports
The service sector is the backbone of Telangana’s economy, contributing nearly 67 per cent to the GSDP. Within this, IT exports play a significant role. Therefore, a big push to the sector would spur growth and create employment opportunities for thousands of graduates. Further, there is a need to embrace sunrise sectors such as semiconductors and aerospace. Aerospace parts are already being manufactured at Adibatla near Hyderabad. These must be prioritised to ensure sectoral diversification and sustainable growth.

• Pharma Sector
Hyderabad is India’s bulk drug manufacturing hub. Companies like Dr Reddy’s, Hetero, and Aurobindo have placed Telangana on the global pharmaceutical map, contributing 33 per cent to India’s pharma exports. With rising global demand, this sector offers immense potential. Pulling all economic levers—investment, consumption, and exports — across agriculture, manufacturing, and services is critical at this juncture.

The Way Forward

While utilising the strong potential and growth engines that can contribute to the economy, it is equally important to encourage private investment along with public investment to realise the objective. Tax compliance rate needs to be enhanced. The government should also appoint a High-Level Committee of Experts to explore strategies for reducing the State’s debt burden and creating fiscal space.

In conclusion, with strong fundamentals and the right policy mix, Telangana has the potential to generate substantial employment, increase revenues, attract investments, and eventually realise its dream of becoming a trillion-dollar economy.

(The author is an Economist based in Hyderabad)