India has recorded the third-highest growth in power generation capacity worldwide over the past five years, according to a recent report released by the International Energy Agency (IEA). The country trails only behind China and the United States in terms of capacity expansion during this period.
The IEA report attributes this surge in electricity generation to rapidly increasing demand driven by multiple factors, including urban development, rising household appliance usage—particularly air conditioners—and growing industrial activity. To meet this escalating demand, India has ramped up power generation across a range of energy sources.
A key contributor to this growth has been the country’s accelerated shift towards renewable energy. The report highlights a substantial rise in investments in clean energy, with solar photovoltaic (PV) projects leading the way. Over the last five years, solar PV alone has accounted for more than half of India’s total investment in non-fossil fuel energy sources.
In 2024, clean energy initiatives attracted a remarkable 83% of the total investments in India’s power sector. The report also notes that India emerged as the top recipient of clean energy financing from development finance institutions (DFIs) in 2024, receiving approximately USD 2.4 billion in project-specific funding.
Foreign direct investment (FDI) in India’s power sector has shown a steady upward trend as well, reaching USD 5 billion in 2023—almost double the pre-pandemic level. This increase is largely credited to policy measures that allow 100% FDI in electricity generation (excluding nuclear power) and transmission infrastructure.
However, the report also flags a decline in foreign portfolio investment in the energy sector over the past two years, citing broader macroeconomic and sector-specific challenges. Despite this short-term dip, the IEA maintains a positive long-term outlook for investment in India’s energy market.
Overall, the IEA’s findings underscore India’s strong momentum in expanding its power generation capacity, with a notable pivot toward clean and sustainable energy sources.
