India’s solar success faces toughest test

Few industries in India have transformed as dramatically in the past decade as solar photovoltaic (PV) manufacturing. What began as a modest effort to build domestic capability has, by 2025, become one of the largest growth stories in the global renewable energy sector. Yet, as with any rapid expansion, success has brought new complications. Beneath the headline numbers of capacity and investment lies a more nuanced story, one that blends triumph with risk and ambition with uncertainty.

From modest beginnings to global ambitions

In 2014, India’s solar module manufacturing capacity stood at just 2.3 gigawatts (GW). Solar cell manufacturing was even more negligible, at less than 1.2 GW. By mid-2025, those figures had soared with module capacity reaching 100 GW and cells capacity reaching 30 GW. The trajectory has been staggering, reflecting both policy momentum and private capital.

The pipeline is even more ambitious. According to a recent SBICAPS report, module capacity is expected to surpass 190 GW by 2027. If realised, this would firmly position India as a global manufacturing powerhouse, rivalling established players in East Asia. This surge aligns with India’s broader target of installing 280 GW of solar power capacity by 2030, itself a key plank of the nation’s net-zero commitments reaffirmed at COP29.

The policy push behind the boom

India’s success in scaling up cannot be understood without recognising the role of policy. Demand-creating schemes such as CPSU Phase II, PM Surya Ghar and PM-Kusum have laid the foundation for steady domestic uptake. On the supply side, the Production Linked Incentive (PLI) scheme and the Approved List of Models and Manufacturers (ALMM) have provided both financial and regulatory incentives for local production.

ALMM, in particular, has been significant. By mandating the use of domestically sourced solar equipment in government-backed projects, it created a guaranteed market for Indian manufacturers. Imports, once dominant, have fallen sharply—from USD 3.7 billion in FY22 to USD 2.1 billion by FY25. Meanwhile, the PLI scheme alone is expected to generate 65 GW of integrated capacity, draw INR 94,000 crore in investment, and create roughly 10 lakh jobs. By mid-2025, close to INR 48,000 crore had already been invested, with nearly 38,500 jobs created.

A bright story with growing shadows

Yet beneath the optimism, several shadows are lengthening. The first is the risk of overcapacity. India’s own annual demand is projected to remain at about 40 GW for the next four to five years. Existing facilities are already sufficient to meet this level, meaning that new capacity, unless matched by export opportunities or fresh domestic demand, risks lying idle. Idle factories not only weaken investor confidence but also risk turning a success story into a tale of stranded assets.

The second challenge comes from external markets. The United States absorbed almost 97.5% of India’s solar exports in 2024. That near-total dependence on one buyer has created vulnerability. Washington has since tightened tariffs, encouraged its own domestic manufacturing, and begun winding down tax credits for renewables. Together, these measures signal a reduced appetite for imports and a broader shift away from the open, subsidy-driven renewable expansion of earlier years. For Indian exporters, this translates to a sudden narrowing of demand. Over-reliance on the US was always risky; now it looks like a major strategic flaw.

Mismatch in the value chain

A third issue is structural: the imbalance between module and cell production. While module capacity nears 100 GW, cell capacity lags at only 30 GW. This mismatch has implications for costs, supply chain dependence, and project viability. The ALMM-II order, set to take effect after August 2025, will require that only approved domestic cells be used in projects. Until domestic capacity catches up—projected at 115 GW by FY27—developers could face higher cell prices, escalating project costs and slowing down bidding pipeline.

This is not a trivial concern. For years, India’s solar revolution has been powered by falling prices. If cost pressures resurface, momentum on the ground—especially for utility-scale projects—could slow considerably.

Lessons from the global market

India is not the first country to experience the whiplash of overcapacity in renewables. China, the world’s largest solar manufacturer, has repeatedly grappled with similar cycles. Oversupply led to price crashes, bankruptcies, and consolidation, though Chinese firms ultimately used scale and vertical integration to dominate globally.

For India, the challenge will be to avoid the destructive side of that cycle while building resilience. The lesson is clear: manufacturing success cannot rest solely on capacity expansion. It requires deep investment in upstream integration—polysilicon, ingots, wafers—and in technological innovation. Those who move up the value chain will be better insulated from short-term market fluctuations.

What needs to change

Several steps could help stabilise India’s solar manufacturing sector:

•Diversify export markets: Beyond the US, India must cultivate demand in Europe, Africa, and middle east. Each of these markets is set for rapid solar deployment and could reduce dependence on one buyer.

•Balance capacity with demand: Policy should incentivise consolidation and quality improvements rather than sheer expansion. Overcapacity benefits no one if it drives unsustainable competition.

•Bridge the cell-module gap: Faster execution of cell projects is critical, alongside support for upstream integration. Without this, the bottleneck will continue to distort costs.

•Diversify supply chains: Currently, the solar manufacturing value chain in India is heavily dominated by China. Indian manufacturers source crucial raw materials, manufacturing equipment, and technical expertise primarily from China. This over-reliance exposes the sector to significant risks, as witnessed recently with supply disruptions in critical imports such as rare earth magnets and fertilizers. 

•Accelerate efforts on upstream integration: While the target of achieving 40 GW wafer capacity by March 2027 is ambitious, current on-ground developments appear moderate, indicating a need for accelerated implementation and policy support. Further, China’s recent move to shut down nearly a third of its polysilicon capacity strengthens the case for developing domestic production facilities. 

India’s solar manufacturing has made extraordinary progress, growing from almost zero to nearly 100 GW in just over a decade. This reflects strong national ambition and private enterprise. However, moving from a volume producer to a global leader requires not just scale but resilience.

The sector faces risks such as overcapacity, international protectionism, and value chain gaps that could hinder growth. Policymakers and industry must now focus on consolidating gains, addressing imbalances, and advancing up the technology ladder.