India's Solar Manufacturing Boom Faces Overcapacity Challenge
India's rapid expansion in solar photovoltaic (PV) module manufacturing has propelled it to become the world's second-largest producer. As of June 2026, the nation boasts an impressive 233 gigawatts (GW) of module capacity, a stark contrast to its previous reliance on over 90% imports. However, this remarkable growth comes with a significant drawback: module factories are currently operating at a mere 35-40% utilization rate, far below the 50-65% needed for sustainable operations.
A recent report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research, titled Assessing overcapacity risk in India’s solar PV manufacturing market, highlights that this capacity surge is overwhelmingly concentrated at the module stage. This imbalance means that module capacity now stands at nearly seven times cell capacity and 116 times ingot-wafer capacity. Consequently, upstream segments such as cells, wafers, and polysilicon remain underdeveloped, leaving India's supply chain heavily dependent on imported inputs, primarily from China.
Intensifying Pressure on Manufacturers
Prabhakar Sharma, Senior Consultant at JMK Research and lead author of the report, states, "India has added module capacity faster than the market can absorb it. With around 135GW more already planned or under construction and factories running at 35–40%, the pressure on utilisation, margins, and returns will only intensify." He warns that standalone module manufacturers face a real risk of stranded assets if this trend continues. The report projects that this demand-supply imbalance is unlikely to ease by 2030, even with strong anticipated growth in India's solar deployment.
While new demand from sectors like data centers, green hydrogen, and ammonia, along with increased exports, could add an incremental 17–22 GW by 2030, this is unlikely to fully offset the planned scale of expansion. Green hydrogen, in particular, offers the largest avenue for new demand due to its dedicated renewable energy requirements.
Navigating Export Markets and Supply Chain Deepening
Exports are becoming increasingly pivotal for India's solar module industry. Historically, the US absorbed approximately 97% of India's module export volume in FY2026. However, new US duties, exceeding 200% on most Indian manufacturers, have already slashed exports to the US by 44–47% from their FY2024 peak. This shift positions the European Union, with its evolving supply-chain and sourcing rules, as a structured medium-term alternative for Indian manufacturers.
Charith Konda, Lead Energy Specialist at IEEFA, emphasizes, "India may have the opportunity to unlock new export markets, provided Indian solar PV manufacturers can effectively compete with Chinese manufacturers by investing in R&D and the manufacturing of polysilicon, ingots, wafers, and cells."
On the domestic front, the capacity-demand gap is expected to reshape the industry. Smaller, non-integrated manufacturers are likely to face increased pressure, while larger, vertically integrated players are better positioned to thrive. There is also an anticipated move towards domestic manufacturing of upstream components, such as cells, wafers, and polysilicon, to reduce reliance on imports.
Chirag H. Tewani, Senior Research Associate at JMK Research, concludes, "The challenge is no longer building capacity; it is using it well and deepening the value chain." He suggests spreading incentives evenly across cells, wafers, and polysilicon, rather than solely rewarding modules. The report also calls for stronger industry-research collaboration, targeted support for exporters, faster power transmission clearances, and a framework for repowering aging solar assets to ensure sustained domestic deployment.
Ultimately, today's module overcapacity is viewed as a transitional phase in a rapidly expanding industry, resolvable through demand absorption, industry consolidation, and disciplined upstream investment over the coming decade.