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India has emerged as one of the world’s major solar manufacturing hubs after moving from near-total import dependence in solar photovoltaics (PV). However, the rapid expansion of domestic manufacturing capacity is creating a new challenge, with production growing significantly faster than demand.
India’s solar PV module manufacturing capacity reached approximately 233 GW by June 2026. However, manufacturers are operating at just 35–40% capacity utilisation, well below the 50–65% level generally considered necessary for sustainable operations, according to the latest analysis by the Institute for Energy Economics and Financial Analysis (IEEFA).
The pressure is particularly acute at the module level, where capacity additions have significantly outpaced demand. The report estimates that around 135 GW of additional module capacity is backed by firm investment commitments and near-certain commissioning schedules, raising the risk of further overcapacity in the near term.
As demand catches up gradually, manufacturers could face increasing pressure on utilisation, margins and investment returns, with standalone module manufacturers particularly exposed to the risk of stranded assets.

India currently has approximately 135 GW of future capacity additions backed by firm investment commitments and near-certain commissioning schedules. According to the research, this pipeline raises a clear risk of overcapacity in the near term. As demand catches up gradually, manufacturers could face growing pressure on utilisation, margins, and investment returns, increasing the risk of stranded assets, particularly for standalone players.
Against this backdrop, exports could become critical to absorbing the country’s expanding production capacity. The timing could also favour Indian manufacturers, with leading Chinese producers absorbing losses amid persistent oversupply, while their Indian counterparts have remained profitable. This provides an opportunity to channel capital towards upstream integration, manufacturing efficiency, and research and development (R&D).
While this has established India as a major solar manufacturing destination, upstream segments such as cells, wafers, and polysilicon remain comparatively underdeveloped. The resulting mismatch has become one of the sector’s central challenges.
The gap is evident across the manufacturing value chain. Module assembly is the easiest segment to enter, requiring relatively modest capital, shorter commissioning timelines, and limited process complexity. Cell and wafer manufacturing, by comparison, require significantly larger investments, longer build-out periods, and specialised expertise.
India’s heavy reliance on the US, which currently absorbs the bulk of its solar shipments, has also increased exposure to trade-policy risks and underscored the need to diversify export markets.
Europe offers the most structured medium-term opportunity, as its policy frameworks increasingly favour supply-chain resilience and diversified sourcing. However, securing market access alone will not be enough; Indian manufacturers will also need to remain competitive on cost and technology.
The current Production Linked Incentive (PLI) framework primarily incentivises manufacturers based on their level of integration, rewarding those producing multiple stages of the solar PV value chain, including Polysilicon, Wafer-Ingot, Cell & Module (PWCM), Wafer-Ingot, Cell & Module (WCM), or Cell and Module (CM). However, capacity additions across these components have remained uneven, with module manufacturing growing much faster than upstream segments.
IEEFA suggested that a more targeted approach could restructure incentives at the component level, providing meaningful rewards for PWCM manufacturing independently through future PLI iterations. This would allow upstream investments without requiring manufacturers to achieve full vertical integration, lowering the entry barrier for companies seeking to specialise in a particular stage of the value chain.
Such a model could distribute supply-side incentives more evenly across the manufacturing chain, encouraging a broader and more resilient domestic industry.
The narrowing gap between Indian and Chinese solar module production is creating an opportunity for Indian manufacturers, but converting that opportunity into higher export volumes will depend on how effectively they can compete with China, the world’s dominant solar supplier.
Cost and technology remain the two major competitive gaps. However, financial conditions are currently creating more avenenues for Indian manufacturers. This opportunity is arising for India as some leading Chinese module producers witnessed operating under sustained financial stress, with the top five reporting combined net losses exceeding USD 4–4.7 billion (approximately ₹37,800–44,415 crore) in 2025, driven by persistent oversupply.
Indian manufacturers, in contrast, remained profitable through 2025 and the first quarter of (Q1) 2026, supported by domestic policy protection and higher export margins. But, solar module remain more expensive modules than Chinese products, the domestic policy support and market protection is attempting to reduce this. This is despite the narrowing price gap of roughly 28.6% from its earlier 2024 level.

Further additions in cell and wafer manufacturing are expected to reduce import dependence and improve cost competitiveness over time. Together with greater upstream integration, these investments could help Indian manufacturers strengthen their position in overseas markets and make exports a more important outlet for the country’s rapidly expanding solar manufacturing capacity.
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