NEW DELHI: India’s photovoltaic (PV) module manufacturing capacity is likely to face a potential overcapacity situation following a reduction in exports due to the recent imposition of US tariffs, according to a report by ICRA.
The rating agency noted that annual solar capacity installations in India are expected to remain at around 45–50 gigawatt direct current (GWdc), while annual solar module production capacity stands at 60–65 GW. The imposition of US tariffs has adversely affected export volumes, as modules originally intended for export are now being redirected to the domestic market.
As a result, the report said, this overcapacity in module production could lead to consolidation among smaller or pure-play module manufacturers. However, ICRA expects vertically integrated manufacturers to benefit in the long term due to their greater control over the supply chain.
“The recent imposition of tariffs by the USA and the growing regulatory uncertainty in the USA are likely to dampen export volumes, potentially exerting pricing pressures on domestic OEMs. Given that the ALMM requirement for solar cells is effective from June 2026, a significant scale-up in the cell manufacturing capacity along with its stabilisation in a timely manner remains critical in the near term. Further, the cost of modules using domestic cells is expected to be higher by 3-4 cents/watt compared to the cost of the domestic modules using imported cells,” Ankit Jain, Vice President & Co-Group Head - Corporate Ratings, ICRA.
According to ICRA, India’s solar PV module manufacturing capacity is expected to increase to over 165 GW by March 2027, up from about 109 GW at present, driven by strong policy support such as the Approved List of Models and Manufacturers (ALMM). The implementation of ALMM List-II for solar PV cells from June 2026 has spurred an expansion of cell manufacturing capacity among domestic OEMs, which is projected to rise to about 100 GW by December 2027, compared to 17.9 GW currently under ALMM.
Globally, China continues to dominate the solar PV manufacturing supply chain, accounting for over 90 percent of the global capacity in polysilicon and wafer production, 85 percent in cells, and around 80 percent in modules. Given India’s dependence on China for sourcing wafers and ingots, any potential geopolitical restrictions on technology or machinery for setting up backward integration facilities among domestic OEMs remain a key risk factor.