The telugu characters in gucharmap are displayed properly. Does this
mean that all the necessary fonts are installed? I dont know what other
packages to install as I have already installed ttf-telugu-fonts package.
It seems you need to configure yudit manually:
Configuration
1. Please copy the Pothana2000.ttf to the ~/.yudit/fonts.
2. Edit the file ~/.yudit/yudit.properties . Make an entry
"Pothana2000.ttf" at the end the
of the "yudit.font.TrueType" entry prefixed with a "," separator.
From: http://hserus.net/~cck/telugu-yudit.html