In 2025, India installed 119 GW of solar module production capacity in a single year, bringing its cumulative industrial park to 210 GW. That is fourteen times more than in 2020. The industrial gamble was bold, and India has delivered on it.
The problem is that it may have succeeded too well. Its 2026 production is expected to reach 60 to 65 GW. Its domestic installations will absorb only 45 to 50 GW. And the only foreign market that really mattered has just closed.
The essentials
- In 2025, India added 119 GW of solar module capacity, bringing the cumulative total to 210 GW, a fourteen-fold increase since 2020 (Mercom India / ICRA)
- The gap between expected production (60-65 GW) and domestic absorption (45-50 GW) creates a structural surplus starting in 2026
- 96.8% of Indian module exports were headed to the United States, a market now closed by Trump tariffs
- 67% of solar cells remain imported from China, weakening the claimed industrial sovereignty
Fourteen years of lag caught up in five years
To understand what is happening in 2026, we must go back to 2020. India’s nominal module production capacity stood at around 15 GW according to JMK Research, or around 7 GW according to other sources like CareEdge — in all cases well below national demand, so India imported most of what it installed, primarily from China, which controlled more than 80% of the global photovoltaic value chain at the time.
The political decision to change course was clear. New Delhi combined several instruments: basic customs duties (BCD) of 40% on imported modules and 25% on cells, a production-linked incentives (PLI) scheme endowed with 4,500 crores of rupees to attract manufacturers toward vertical integration, and public tender criteria reserving markets for equipment certified “Made in India.” The statistical result is impressive. In five years, the sector multiplied its capacity by fourteen.
This type of strategy is not without precedent. China itself followed this path in the 2000s-2010s, combining massive subsidies, captive markets, and controlled dumping to conquer global markets. What India is discovering today is the less-told side of this Chinese success: chronic overcapacities, crushed prices, and dependence on one or two export markets that, when they close, destabilize the entire sector.
A surplus of 15 GW with no immediate outlets
The 2026 figures are clear. Installed production capacity allows for manufacturing between 60 and 65 GW of modules per year. Domestic installation targets, meanwhile, count on 45 to 50 GW. The gap is on the order of 15 GW minimum. This is not a cyclical adjustment. It is a structural overcapacity.
To absorb it, industry had found a relief valve: the United States. In 2024 and early 2025, 96.8% of Indian solar module exports were heading to American ports. This concentration was already a warning signal. A single customer for nearly all exports is less a commercial strategy than a disguised dependence.
The tariffs announced by the Trump administration closed this outlet with a speed that Indian industrialists had not anticipated. Indian solar modules face cumulative duties that render them uncompetitive on the American market against manufacturers positioned in Southeast Asia or outside taxed perimeters. In a matter of months, the relief valve became obstructed.
The sector thus finds itself with expanding production, a growing but insufficient domestic market, and a primary export market suddenly inaccessible. The question that imposes itself is not one of technical competence — India knows how to manufacture panels. It is one of where to sell what it manufactures.
67% dependence on Chinese cells: the Achilles heel
The reading of the situation would be incomplete without addressing what installed capacity statistics conceal. India produces modules. But 67% of the cells that compose them are still imported, primarily from China. The value chain thus remains split in two: a robust national assembly industry, and upstream dependence that undermines the entire sovereignty narrative.
This disconnect has a simple economic logic. Manufacturing efficient photovoltaic cells requires mastery of purified silicon, thermal diffusion equipment, and process expertise that China has accumulated over two decades. India does not yet have this depth. Companies like Adani Solar, Waaree Energies, or Vikram Solar have invested in modules because margins were accessible and technical barriers surmountable. Cell manufacturing remains a different challenge.
This is not inevitable. The PLI regime includes provisions dedicated to vertical integration, and several actors have announced investments in cell production for 2025-2027. Waaree notably committed to large-scale cell capacity. But lead times for ramping up production are long, and until verticalisation becomes effective, each “Made in India” module remains partially “Made in China” at the level of essential components.
This reality also complicates India’s diplomatic position. When New Delhi defends its solar industry as an instrument of energy and technological sovereignty, it does so on the basis of an incomplete chain. This is not fatal — all industrializations pass through this phase of progressive competence development — but it demands humility in announcements and urgency in decisions.
Europe and Southeast Asia as replacement horizons
Facing the closure of the American market, Indian industry is seeking other outlets. Two directions are taking shape, with very different potentials and obstacles.
Europe is the first obvious avenue. The continent is massively deploying solar as part of its REPowerEU plan, actively seeking to diversify supplies away from China, and has political and economic reasons to look toward India. Discussions are underway as part of the EU-India free trade agreement project, and several European actors have already established exploratory partnerships with Indian manufacturers. But Europe is also pursuing its own solar industrial policy, with the Net-Zero Industry Act and support mechanisms for European manufacturers. Market access will not be free.
South Asia, Africa, and the Middle East represent a second horizon. Bangladesh, Sri Lanka, Nepal, African countries engaged in rapid energy transitions: these are markets where India has real logistical and diplomatic advantages, and where Chinese modules are not necessarily better positioned. The challenge is that these markets are fragmented, unit volumes are modest, and financing is often tied to international aid or development banks. Building a solid commercial base in this direction requires time and investments in commercial presence that the industry has not yet made.
What we observe here resembles what Africa is experiencing on the demand side: emerging markets seek to no longer depend on a single dominant partner, and India could occupy a place in this rebalancing. But political intentions do not by themselves create commercial flows.
Consolidate or subsidize: the real political arbitrage
With overproduction posed, the central question becomes political. India has two options before it, each with its costs.
The first is to let the market sort it out. In this scenario, the least efficient producers close or merge. The 119 GW of installed capacity concentrates in a reduced number of actors capable of supporting compressed margins, investing in verticalisation, and competing internationally. This is the Schumpeterian logic: creative destruction, industrial consolidation, emergence of national champions capable of exporting beyond the United States. China went through this in solar between 2011 and 2015, with dozens of manufacturers disappearing while Longi, Jinko, and Trina Solar carved out global positions.
The problem with this option for India is employment. The sector mobilizes hundreds of thousands of workers, concentrated in states like Gujarat, Rajasthan, and Andhra Pradesh. Rapid consolidation creates job losses in regions where manufacturing industry is still fragile and where the government has strong political commitments. This is a social and electoral cost that New Delhi cannot ignore.
The second option is to support the sector through additional subsidies, accelerated public procurement, and price floor mechanisms, while verticalisation is put in place and new export markets develop. This is more expensive in the short term for public finances, but it preserves the industrial base and buys time. The risk is maintaining artificially alive actors that would not be competitive long-term, and creating an industry on permanent life support rather than a robust sector.
Most observers, including ICRA and several pv-magazine analysts, note that reality will probably be between the two: partial consolidation, accompanied by targeted public support for actors investing in cells and wafers, and forced diversification of outlets. This is pragmatic. It is not necessarily coherent.
The first responses from Modi’s government
Faced with this situation, New Delhi has not remained idle. Several signals are readable since early 2026.
Domestic installation targets have been revised upward in several regional master plans. Orders from public utilities, notably Solar Energy Corporation of India (SECI), are being accelerated to absorb part of the surplus. Discussions have been opened with several Gulf countries around industrial partnerships including production transfers or preferential supply agreements. India has also strengthened local content requirements for new tenders, which creates a larger captive market for domestic producers.
On verticalisation, the government has expanded PLI incentives to explicitly cover investments in cells and wafers, with payment conditions tied to effective production thresholds. This is the right direction. But between the announcement of an incentive and the commissioning of a large-scale cell production line, eighteen months to three years passes.
This dynamic recalls what Europe is going through in its own attempt at industrial reconstruction, where outsourced value chains prove difficult to repatriate even when political will is present. Wanting a sovereign industry and having the means to achieve it are two different things, and the industrial calendar does not adjust as fast as the political calendar.
The true measure of India’s success remains to be written
It would be unfair to conclude with a verdict of failure. India has accomplished in five years what few countries have succeeded in doing: building a high-tech manufacturing industry by leveraging coherent industrial policy instruments, and attracting significant private investment. Waaree Energies, Adani Solar, and Vikram Solar are today actors that matter on a global scale. This was not the case in 2020.
The 2026 surplus is real, but it is also the mark of an ambition that has worked faster than expected. Overcapacities are the problem of industries that have succeeded in ramping up, not those that have failed. China knows something about this.
The true measure of India’s success will be decided on two questions by 2028: will India succeed in verticalizing its chain sufficiently to no longer depend on Chinese cells? And will it find sufficiently diversified export markets to never again depend 97% on a single customer? If the answer is yes to both, the 2026 surplus will be remembered as a painful parenthesis in a trajectory of success. If the answer is no, the entire model will need to be reconsidered.
This is not a technical question. It is a question of sustained political will over time, quality of industrial execution, and ability to forge commercial partnerships in a geopolitical context where every major power is now playing its own card in the energy transition.
Sources
- Mercom India / ICRA — India Added 119 GW Solar Module and 9 GW Cell Capacity in 2025
- pv-magazine India — analyses of overcapacity and export outlets (pv-magazine.com/india)
- Solar Energy Corporation of India (SECI) — tenders and public orders (seci.co.in)
- Ministry of New and Renewable Energy, Government of India — solar PLI master plan (mnre.gov.in)
- IRENA — World Energy Transitions Outlook 2025 (irena.org)
- ICRA — Report on Indian Solar Manufacturing Overcapacity (November 2025)
- PV Tech — India’s cumulative solar module capacity reaches 210 GW, cell capacity hits 27 GW (Mercom / JMK Research, March 2026)
- IEA — Solar PV Global Supply Chains (2022 report)
- MNRE — Production Linked Incentive (PLI) Scheme (official)
- MNRE — Approved List of Models and Manufacturers (ALMM) (official)
- TaiyangNews — Reduction of BCD on modules and cells (February 2025)
- Wood Mackenzie — Perfect Storm in the Indian Solar Supply Chain (October 2025)