Telangana slips back into deflation, retail prices fall 0.15% in September

Telangana returned to deflation in September, with retail prices falling 0.15%, the third such instance in four months. Economists warn the trend reflects weak consumption, sluggish rural demand, and could impact business investment, jobs, and state revenue.

Hyderabad: In a worrying sign of demand stagnation, Telangana has slipped back into deflation, reporting a 0.15 per cent fall in retail prices in September, according to the latest data from the Union Ministry of Statistics and Programme Implementation (MoSPI).

The State’s retail price trajectory since June paints a peculiar picture of economic cooling. For first time since its formation, Telangana entered the deflation zone in June this year with -0.93 per cent, followed by -0.44 per cent in July. A brief recovery was witnessed with 0.94 per cent inflation in August, only to slip back into deflation of -0.15% in September. This makes Telangana the only State in India to have entered deflation territory thrice in four months.

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In September, rural Telangana recorded -0.29 per cent deflation and urban areas -0.05 per cent, both far below the national average inflation of 1.54 per cent (1.07 per cent in rural and 2.04 per cent in urban India).

While consumers might view falling prices as relief, the economists cautioned that persistent deflation was a signal of weak consumption and sluggish economic activity, particularly in non-urban belts. They pointed to the State’s overdependence on urban consumption from Hyderabad, contrasting with slow rural recovery and weakened discretionary spending.

Officials attributed the downward trend to decreased food prices, particularly vegetables, cereals, pulses, and edible oils, as well as GST rate cuts and a favourable base effect. But a senior official admitted that continued deflation could indicate weak demand in retail trade and rural sectors, hinting that the economic pulse beyond Hyderabad may be losing rhythm. As flood inflation remained firm at the national level, he did not rule out the possibility of the Telangana’s price decline was due to local dynamics.

Economists warned that prolonged deflation can hurt producers and shrink State revenues which was evident from the last a few months. If prices continue to fall, they warned that businesses will defer investment, jobs will stagnate, and consumption will weaken further.