India’s solar industry is at a critical juncture where future success will be shaped by demand trends, trade dynamics, and technological shifts, according to a new report by Yes Securities. The report cautions that while the sector has witnessed rapid capacity expansion, risks such as demand-supply mismatches and heavy dependence on imports could challenge its sustainability.
Over the past few years, India’s solar module and cell manufacturing capacity has expanded aggressively, driven by policy support such as the Production Linked Incentive (PLI) scheme, Basic Customs Duty (BCD), Approved List of Models and Manufacturers (ALMM), and a wave of large-scale capital investment announcements.
As of now, module capacity has reached nearly 100 GW, and cell capacity has surpassed 25 GW, the report noted. According to industry projections, India’s nameplate module capacity could further climb to 160–170 GW by 2028.
However, Yes Securities warns that scale alone is not enough to mitigate sectoral risks. One of the key concerns highlighted is a potential mismatch between production capacity and actual demand.
“The sector now sits at an inflection point where policy, input markets, demand signals, trade flows, and technology shifts will determine which players survive and who gets squeezed,” the report stated.
Oversupply Concerns and Global Market Pressures
The report flagged that oversupply is no longer a hypothetical risk. Inventory buildup and falling prices are already being observed in China and other global markets, raising concerns about a similar trajectory in India. Should domestic tenders slow, rooftop solar uptake weaken, or export demand falter—particularly to the US and EU—utilization rates may decline sharply, leading to margin compression for manufacturers.
Continued Dependence on China for Key Inputs
Despite the growth in domestic manufacturing, India remains heavily dependent on China for upstream solar components such as polysilicon, wafers, and cells. According to the International Energy Agency (IEA), China controls more than 80% of the supply chain for these critical inputs.
This dependency leaves Indian manufacturers vulnerable to raw material bottlenecks, price fluctuations, and geopolitical or trade-related disruptions. For example, while polysilicon prices dropped sharply in 2024, they remain volatile—giving Chinese players a structural cost advantage.
Export Growth and Policy Risks
India’s solar module exports have surged in recent years, especially to the United States. However, the report underscores that this growth is highly dependent on external trade policies, including the U.S. Inflation Reduction Act (IRA), anti-circumvention investigations, and potential anti-dumping or countervailing duties targeting Southeast Asian exporters.
A sudden shift in trade policies or the imposition of new tariffs could significantly impact Indian exports, resulting in excess domestic capacity and suppressed pricing, the report warned.
