A recent report by credit rating agency ICRA indicates that US tariffs on solar imports have significantly impacted Indian solar module exporters, forcing manufacturers to redirect export-oriented production to the domestic market. This has further exacerbated the supply glut in India’s local module industry, making squeezed profit margins and a wave of consolidation among smaller players highly likely.
The report reveals that India’s solar PV module manufacturing capacity is expanding rapidly, currently standing at approximately 109 GW, with projections suggesting it will surge to over 165 GW by March 2027. This growth is primarily driven by Indian government initiatives 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.
In stark contrast to the capacity surge, domestic demand remains relatively subdued. ICRA estimates India’s annual solar installations at around 45–50 GWdc, far insufficient to absorb the rapidly growing supply. “Recent US tariffs and increasing regulatory uncertainties may dampen export volumes, exerting pricing pressure on domestic OEMs,” said Ankit Jain, Vice President and Co-Group Head of Corporate Ratings at ICRA.
Overcapacity has already begun affecting industry profitability. ICRA data shows that the operating profitability for its tracked sample of Indian solar OEMs was approximately 25% in FY2025, but this metric is expected to gradually decline due to intensified competition and oversupply. The diversion of modules originally intended for export to the domestic market has further driven down prices, severely challenging the survival of smaller or pure-play module manufacturers and making industry consolidation imminent.
The report also highlights deeper risks in India’s solar manufacturing sector. Despite the rapid expansion of the domestic manufacturing ecosystem, the global supply chain remains dominated by China, which accounts for over 90% of global polysilicon and wafer production and 80%–85% of cell and module capacity. This dependency poses long-term strategic and geopolitical risks for backward integration by Indian manufacturers.
On the policy front, the implementation of ALMM List-II for solar PV cells starting June 2026 is expected to boost domestic cell manufacturing capacity from the current 17.9 GW to around 100 GW by December 2027. However, ICRA warns that capacity expansion must be balanced with stability, as modules using domestically produced cells are projected to cost 3–4 cents per watt more than those using imported cells.
ICRA believes that vertically integrated companies may benefit in the long term from enhanced supply chain control and reduced import reliance. In the short term, however, the combination of global trade barriers, domestic capacity surges, and weak exports will continue to suppress industry profitability, signaling that an adjustment phase for India’s solar manufacturing sector has already begun.
