India's solar sector is experiencing a period of rapid expansion, driven by ambitious renewable energy targets and supportive government policies. Module manufacturing capacity has reached 100 GW as of August 2025, a significant increase from 2.3 GW in 2014. This growth has been fueled by initiatives like the Production Linked Incentive (PLI) scheme, the Approved List of Models and Manufacturers (ALMM), and import duties. India's goal is to achieve 500 GW of non-fossil fuel power generation capacity by 2030.
However, this boom also faces significant challenges that cast a shadow on the industry's future. A major concern is a potential "solar-module glut" in the domestic market. Manufacturing capacity already exceeds domestic demand by an estimated 200-250%, and projections indicate it could surpass 200 GW in the coming years. This raises concerns about how to reconcile this imbalance.
Exports, once a viable outlet, are becoming less reliable. The United States, which previously accounted for 90% of India's module exports, imposed 50% tariffs in August 2025, significantly impacting Indian firms' export earnings.
The government has also adjusted import duties on solar cells and modules. In the Union Budget 2025, the basic customs duty (BCD) was reduced on solar cells from 25% to 20%, and on solar modules from 40% to 20%. However, an Agriculture Infrastructure and Development Cess (AIDC) was introduced, effectively maintaining overall import duties at previous levels. The aim was to support domestic manufacturers and fund agriculture infrastructure. However, solar developers argue that the ALMM, which restricts foreign manufacturers, makes domestic panels uncompetitive and affects supply.
Several factors contribute to the uncertainties in India's solar panel industry. The high capital intensity of upstream integration, inadequate incentives, inconsistencies in trade policy, import dependency, and global raw material price volatility pose implementation challenges for the PLI scheme. Furthermore, the majority of Indian manufacturers struggle to secure affordable long-term financing. A recent spike in the prices of solar modules, driven by rising costs of materials like silver and aluminum, a weaker rupee, and supply constraints from China, is expected to increase costs and tariffs for projects under construction. Some Indian solar module makers have already acknowledged increasing module prices, with RenewSys announcing a 25% increase due to higher raw material costs.
Despite these challenges, India's commitment to solar energy remains strong. Solar prices have fallen to approximately ₹2.40 per unit, making it a competitive energy source. The share of renewable tenders paired with battery storage has increased from 12% in 2021 to 50% in 2024, indicating a move towards more reliable and sustainable energy solutions. India is also outperforming China in solar deployment at equivalent levels of economic development. In 2025, solar accounted for 9% of India's electricity generation. A number of recent projects and initiatives also highlight the continued momentum in the sector. ArcelorMittal is investing $900 million in three green energy projects in India, which will double the company's renewable energy capacity in the country.
To ensure the long-term success of India's solar-panel boom, policymakers and industry stakeholders must address the challenges of overcapacity, import dependence, rising costs, and policy inconsistencies. Strategic investments in R&D, streamlined financing, and consistent policies will be crucial to solidifying India's position as a leader in the global solar energy landscape.
