India's Solar Manufacturing Faces Overcapacity Risk Amidst Export Challenges

India's solar module manufacturing capacity is poised to reach over 125 gigawatts (GW) by 2025, a substantial increase from the domestic demand estimated at around 40 GW. This expansion, largely driven by the government's Production Linked Incentive (PLI) scheme, is creating a projected inventory surplus of 29 GW. However, this rapid growth brings risks of overcapacity. Compounding these concerns, exports to the United States have plummeted by 52% in the first half of 2025, attributed to new 50% reciprocal tariffs. Consequently, many Indian manufacturers have paused their US expansion plans and are shifting their focus back to the domestic market.

Cost competitiveness remains a significant challenge for the Indian solar industry. Wood Mackenzie reports that Indian-assembled modules using imported cells are at least $0.03 per watt more expensive than fully imported Chinese modules. Fully 'Made in India' modules, without government subsidies, could cost more than double their Chinese competitors. To support domestic producers, protective measures such as the Approved List of Models and Manufacturers (ALMM) and a proposed 30% anti-dumping duty on Chinese modules are being implemented.

Despite these near-term hurdles, India possesses the potential to emerge as a large-scale alternative to China's dominance in the solar supply chain. However, long-term success will depend on strategic investments in research and development (R&D), adopting next-generation technologies, and aggressively pursuing export markets in regions like Africa, Latin America, and Europe.

Separately, CareEdge Advisory forecasts India's solar capacity to reach 216 GW by FY28, supported by ongoing PLI schemes that cover the entire manufacturing value chain from polysilicon to modules. This strong growth, combined with efficiency gains in project execution, reinforces India's scaling advantages.

Impact: This news has a significant impact on the Indian solar manufacturing sector, affecting listed companies, related industries, and investor sentiment due to potential oversupply, export market disruptions, and the need for strategic adaptation. The push for domestic manufacturing is strong, but global trade dynamics and cost pressures present substantial challenges. Rating: 8/10

Difficult Terms:

* **Gigawatts (GW)**: A unit of power equal to one billion watts. It's a measure of electricity generation or capacity. * **Production Linked Incentive (PLI) Scheme**: A government initiative that provides financial incentives based on increased sales of manufactured goods, aimed at boosting domestic production and exports. * **Inventory Surplus**: Having more goods in stock than can be sold or used within a reasonable period. * **Reciprocal Tariffs**: Taxes imposed by one country on another country's imports, in response to similar taxes imposed by that other country. * **Cost Competitiveness**: The ability of a company or country to produce goods or services at a lower cost than its competitors. * **Approved List of Models and Manufacturers (ALMM)**: A list maintained by the Indian government of solar modules and manufacturers that are approved for use in government-backed projects, intended to ensure quality and promote domestic production. * **Anti-dumping Duty**: An import tax imposed on certain goods considered to be sold at unfairly low prices (dumped) in the importing country, intended to protect domestic industries. * **Research and Development (R&D)**: Activities undertaken by companies or governments to discover new knowledge and use it to create new products or services, or improve existing ones. * **Polysilicon**: A highly purified form of silicon used as the raw material for solar cells and semiconductors. * **Ingot**: A large, solid block of semiconductor material (like silicon) from which wafers are cut. * **Wafer**: A thin slice of semiconductor material, typically silicon, used to make solar cells and microchips. * **Cell**: The basic unit of a solar panel that converts sunlight into electricity. * **Module**: A complete solar panel, consisting of multiple solar cells connected together and protected. * **BU (Billion Units)**: Likely refers to Billion Kilowatt-hours (kWh), a unit measuring electricity generation over time.