India's Solar Surge: Overcapacity Challenge Looms Despite Bright Prospects

India's solar module manufacturing capacity is set to surpass 125 gigawatts (GW) by 2025, more than three times the domestic demand of approximately 40 GW, potentially creating an inventory surplus of 29 GW, according to research from Wood Mackenzie. This rapid expansion has been spurred by the government's Production Linked Incentive (PLI) scheme aimed at bolstering factory growth.

However, the solar industry now faces significant overcapacity risks, exacerbated by a steep decline in exports to the United States. New reciprocal tariffs have caused a 52 percent drop in module shipments in the first half of 2025, prompting several manufacturers to stall their US expansion plans and refocus on the domestic market.

Wood Mackenzie cautioned that achieving cost competitiveness remains a substantial challenge. Indian-assembled modules, which rely on imported cells, are at least USD 0.03 per watt more expensive than wholly imported Chinese modules. Without government support, fully 'Made in India' modules could cost more than double their Chinese counterparts. Protective measures like the Approved List of Models and Manufacturers (ALMM) and a proposed 30 percent anti-dumping duty on Chinese modules are being introduced to bolster domestic producers. Experts suggest India has the potential to emerge as a large-scale alternative to China's solar supply chain, contingent on advancements in research and development, technology investment, and diversification into markets including Africa, Latin America, and Europe.