Indian solar module exporters are reeling under pressure after the United States imposed tariffs on solar imports, forcing manufacturers to redirect supplies back to the domestic market, according to a report by credit rating agency ICRA.
The move has deepened the existing oversupply situation in India’s solar module sector and is expected to compress margins while accelerating consolidation among smaller manufacturers.
ICRA estimates India’s solar photovoltaic (PV) module manufacturing capacity to surge to over 165 gigawatts (GW) by March 2027, up from around 109 GW currently. This expansion is being driven by policy measures such as the Approved List of Models and Manufacturers (ALMM), basic customs duty (BCD) on imported modules and cells, and the production-linked incentive (PLI) scheme. However, with annual domestic solar installations projected at only 45–50 GW direct current (GWdc), India’s production capacity is set to outstrip demand significantly.
“The recent imposition of tariffs by the USA and growing regulatory uncertainty are likely to dampen export volumes, putting pricing pressure on domestic OEMs,” said Ankit Jain, Vice President and Co-Group Head, Corporate Ratings, ICRA. “Operating profitability for Indian solar OEMs, which remained elevated at around 25 per cent in FY2025, is expected to moderate due to competitive pressures and capacity overhang.”
The redirection of export-bound modules into the local market has worsened the supply glut, driving down prices and threatening the viability of smaller or standalone module manufacturers. ICRA anticipates a wave of industry consolidation, with vertically integrated companies emerging stronger.
Despite India’s rapid build-up of domestic solar manufacturing, China continues to dominate the global supply chain, accounting for over 90 per cent of global polysilicon and wafer production and around 80–85 per cent of cell and module capacity. This heavy dependence exposes Indian manufacturers to long-term strategic and geopolitical vulnerabilities as they seek to strengthen backward integration.
On the policy side, the introduction of ALMM List-II for solar PV cells from June 2026 is expected to catalyse a surge in domestic cell manufacturing, with capacity projected to rise from 17.9 GW currently to around 100 GW by December 2027.
ICRA, however, warned that stabilising such rapid capacity expansion will be critical, as modules made with Indian cells could cost 3–4 cents per watt more than those using imported components.
Despite short-term challenges, ICRA believes that vertically integrated players stand to gain long-term benefits from enhanced supply chain control and reduced import dependency. In the near term, however, global trade barriers, aggressive domestic capacity growth, and softening export demand are expected to keep pressure on profit margins and drive a structural reshaping of India’s solar manufacturing industry.
