Recently, India’s credit rating agency ICRA issued a warning that the country’s solar manufacturing industry is facing significant overcapacity risks. Data shows that India’s current annual solar module production capacity has reached 60-65 GW, far exceeding the annual新增装机 demand of 45-50 GW. Under this supply-demand imbalance, small and medium-sized manufacturers as well as those producing单一产品 may face a wave of mergers and acquisitions.
ICRA pointed out that India’s solar manufacturing sector is expanding rapidly, with total module capacity expected to exceed 165 GW by March 2027, a 51% increase from the current 109 GW. This expansion is primarily driven by three policy incentives: the Approved List of Models and Manufacturers (ALMM) regime, the Basic Customs Duty (BCD) on imported cells and modules, and the Production Linked Incentive (PLI) scheme. Notably, the upcoming ALMM List-II (for solar cells), effective June 2026, has triggered a preemptive expansion wave. It is projected that domestic cell manufacturing capacity will surge to approximately 100 GW by December 2027, while the current ALMM-compliant capacity stands at only 17.9 GW.
ICRA highlighted that recent U.S. tariffs on Indian solar products have hindered exports to the American market, forcing manufacturers to redirect more products to the domestic market, thereby intensifying price competition locally. Ankit Jain, Vice President and Co-Group Head of Corporate Ratings at ICRA, stated, “Although the operating profit margin for tracked companies remained high at 25% in FY2025, accumulating capacity and increasing competition will gradually compress margins. U.S. tariffs and regulatory uncertainties will continue to amplify domestic price pressures.”
Jain further noted that after the ALMM cell requirements take effect in June 2026, capacity expansion and stability will become critical for the industry. According to his estimates, the cost of modules using domestically produced cells will be 3-4 cents per watt higher than those using imported cells, posing greater challenges for cost control. However, the policy provides a buffer: reserved projects totaling 45-50 GW that are bid out by September 1, 2025, will be exempt from the domestic cell requirement even if they are grid-connected after June 2026, offering short-term order support for module manufacturers that have not yet established cell production capabilities.
ICRA emphasized that China controls over 90% of global polysilicon and wafer capacity, over 85% of cell capacity, and about 80% of module capacity. India heavily relies on Chinese supplies for wafers and ingots, facing dual risks from geopolitical tensions and technological supply chain vulnerabilities. Moreover, moving upstream in the solar manufacturing value chain requires higher technical expertise and capital investment, which will further increase construction and production line stability risks for domestic companies.
Industry analysis suggests that ICRA’s warning reveals the structural contradictions behind India’s “rapid and massive” solar manufacturing expansion. Balancing policy-driven capacity growth with market demand and supply chain resilience will be a core issue for the industry’s future development.
