Telangana records -0.93 per cent deflation, experts warn of economic downturn

Telangana has entered a deflationary phase for the first time since its formation, with inflation at -0.93% in June 2025. Economists warn that falling prices, weak demand, and stalled investments could lead to long-term economic stagnation and fiscal distress.

Hyderabad: In a rare and worrying economic development, Telangana has officially entered a deflationary phase, becoming the only major State in India to record negative inflation as of June 2025, compared to last year. The State has reported deflation for the first time since its formation in 2014.

According to the latest report by Ministry of Statistics and Programme Implementation (MoSPI), the State’s overall inflation stood at -0.93 per cent, with rural areas witnessing -1.54 per cent and urban centres -0.45 per cent inflation, indicating a broad-based price decline.

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This is in stark contrast to the national average inflation rate of 2.1 per cent, pointing to the uniqueness and severity of Telangana’s situation.

Despite the Congress government attempting to portray this trend as a sign of policy success or economic prudence, economic experts and industry insiders are sounding the alarm. Unlike controlled inflation, deflation is typically a sign of economic contraction, driven by a collapse in consumer demand, frozen investments, worsening revenue streams and overall economic stagnation.

According to the experts, declining consumer demand remained the core problem across sectors. From retail to agriculture, low purchasing power is choking economic activity. Lower prices translate to lower GST collections, which will eventually hit the State’s capacity to fund public services and welfare schemes. With the Rythu Bharosa payments delayed, pending bills to contractors piling up, and power dues crossing Rs 12,000 crore, the fiscal strain is showing.

Deflation is particularly harsh on farmers, who are now forced to sell produce at rates lower than their input costs. With poor procurement, delayed MSP (Minimum Support Price) payments, and increasing distress migration, the rural economy is under severe stress.

Meanwhile, industrialists are holding back expansion plans, and business investment is stalling, as falling prices and weak demand are signalling poor returns on capital.

“What Telangana needs is moderate, healthy inflation, but not a freefall in prices,” economists said. If the deflationary spiral continues, it could hurt the State’s Gross State Domestic Product (GSDP) and also the per capita income. Unless demand is revived and public investment accelerated, Telangana will be at risk of slipping into a prolonged economic slowdown.