India’s solar module manufacturing capacity is set to surpass 125 GW by 2025, far exceeding domestic demand of around 40 GW, according to a recent report by Wood Mackenzie. This rapid expansion driven by the government’s Production Linked Incentive (PLI) scheme is a major milestone for India’s renewable energy ambitions. However the industry now faces the risk of overcapacity, with an estimated inventory buildup of 29 GW expected by the third quarter of 2025.
Rapid Growth and Overcapacity Concerns
The PLI scheme has successfully attracted significant investments and spurred the announcement of new manufacturing facilities across India. This surge in capacity positions India as a global solar manufacturing hub but it also brings new challenges. With domestic demand unable to absorb the full output manufacturers are left with a growing surplus. The situation is further complicated by a sharp downturn in exports especially to the United States, where new reciprocal tariffs have reduced export momentum by 52% in the first half of 2025.
Cost Competitiveness and Export Challenges
Indian-assembled modules using imported cells are currently at least USD 0.03 per watt more expensive than fully imported Chinese modules. Modules made entirely in India, under new domestic content requirements cost more than double their Chinese counterparts. This cost disadvantage makes it difficult for Indian manufacturers to compete globally especially in price-sensitive markets.
The Road Ahead: R&D and New Markets
To address these challenges, industry experts suggest a pivot toward aggressive research and development, investment in next-generation technology and a push to open new export markets in Africa, Latin America, and Europe. Yana Hryshko, Head of Solar Supply Chain Research at Wood Mackenzie, emphasized that India is at a crossroads but holds the potential to become the only credible, large-scale alternative to the Chinese solar supply chain.
Policy and Industry Outlook
While the PLI scheme has been instrumental in scaling up manufacturing, structural flaws and limited disbursals have raised concerns about its long-term effectiveness. The scheme favors large, vertically integrated firms, often sidelining smaller manufacturers. To ensure sustainable growth, policymakers must address these issues and support innovation, cost reduction, and market diversification.
India’s solar manufacturing sector is poised for a transformative phase, but achieving cost-competitiveness and diversifying export markets will be critical for long-term success. With the right strategies, India can not only meet its domestic energy needs but also emerge as a key player in the global solar supply chain
