India’s Solar Equipment Sector: Growth, Policy & Exports

India’s solar manufacturing sector is witnessing rapid expansion, with module capacity expected to touch 200 GWp and cell capacity 100 GWp by FY28, far outpacing domestic demand of ~50 GWp annually. While this expansion supports self-reliance, oversupply risks loom large. Integrated players are better positioned to withstand margin pressure, which may lead to consolidation of smaller manufacturers.

Policy support has been pivotal—ranging from Basic Customs Duty (BCD) on imports, Domestic Content Requirement (DCR) mandates, and the Production Linked Incentive (PLI) scheme, to the Approved List of Models and Manufacturers (ALMM) framework. Recently, the GST Council reduced rates on solar cells and modules from 12% to 5%, cutting project costs by 4–5% and potentially lowering solar tariffs by 6–10 paise per unit.

On the export front, the outlook is mixed. The US remains India’s largest market, but policy tightening under the One Big Beautiful Bill Act (OBBBA), Foreign Entities of Concern (FEOC) rules, and reciprocal tariffs pose risks. Duties of up to 214% could be imposed on Indian exports, although competitive pricing and decoupling from Chinese inputs may help sustain momentum.

Meanwhile, volatility in Chinese supply chains underscores the need for backward integration, particularly in wafers. Indian companies have announced wafer capacity pipelines exceeding 30 GWp, supported by ALMM-III (effective June 2028). However, dependence on China for equipment and technology, coupled with workforce constraints, remains a challenge.

Commenting on the sector, Jatin Arya, Director, CareEdge Ratings, stated:

“The solar equipment manufacturing sector has several tailwinds, including robust domestic demand outlook, maturing module capacities, favourable government policies, and improved financing avenues for the RE sector. However, nascent integration of solar equipment capacity, supply chain dependence on China, uncertainty shrouding export prospects, and lagging RE capacity additions due to systemic issues are some headwinds that remain monitorable over the medium term.”

He further added:

“While domestic procurement mandates are crucial for incentivising backward integration in local manufacturing, policymaking needs to strike a balance between supply chain independence and energy security at competitive costs.”