Picture this: a few years ago, every politician and industrialist in India was talking about becoming the next solar superpower. Billions in subsidies, sky-high tariffs on imports, and a national mission to break free from Chinese dominance. Factories popped up like mushrooms after rain. Today, many of those same factories are half-empty, and the government just sent a quiet but panicked letter to banks: please, for the love of everything, stop throwing money at more module lines.
That’s not exaggeration. That’s the new reality hitting India’s solar sector in 2025.
The Wake-Up Call Nobody Saw Coming
I’ve been following the renewable space across Asia for years, and honestly, I’ve rarely seen a boom-to-bust swing happen this fast. India went from roughly 15 GW of module capacity in 2020 to well over 80 GW today, with another 120 GW in various stages of construction or planning. Cell production is racing toward 100 GW. On paper it looks heroic. In reality it’s starting to look terrifying.
Why? Because actual demand – both domestic and export – simply isn’t keeping pace.
Domestic solar installations are growing, sure, but nowhere near fast enough to absorb that kind of output. And the export dream that justified half these factories? It just slammed into a wall of U.S. tariffs and forced-labor scrutiny that makes shipping anything with even a whiff of Chinese origin almost impossible.
How We Got Here – A Quick Recap
Let’s rewind a bit. After China basically cornered 80-90% of global solar manufacturing, India (like the U.S. and Europe) decided strategic dependence on one country for critical green tech was a bad idea. The government rolled out the Production Linked Incentive (PLI) scheme, approved manufacturing parks, slapped 40% duties on imported modules, and promised a glorious “Atmanirbhar” solar future.
Companies rushed in. New players, old conglomerates, even textile and steel tycoons pivoted to solar. Everyone wanted a piece of what looked like guaranteed margins.
For a while it worked. Indian modules started flowing to the American market, helped by buyers desperate to avoid direct Chinese goods. Prices were competitive, quality was climbing, and the narrative was perfect.
Then 2024 happened.
The Export Door Slams Shut
New U.S. regulations targeting forced-labor concerns in Xinjiang (where most polysilicon comes from) turned customs clearance into a nightmare. Suddenly every Indian manufacturer had to prove, with paperwork thicker than a phone book, that not a single gram of their supply chain touched certain Chinese regions.
Many simply couldn’t. Others could, but the delays and costs ate margins alive. Shipments slowed to a trickle. Inventory started piling up.
At the same time, global module prices crashed to historic lows – we’re talking $0.12-0.14 per watt in spot markets – thanks to relentless Chinese overproduction. Indian manufacturers, with higher costs, couldn’t compete on price anymore.
“We built for 5-6 GW export yearly. This year we’ll be lucky to ship 500 MW,” one Gujarat-based manufacturer told me off the record last month.
Domestic Demand Can’t Save the Day
You’d think India’s own rooftop and utility-scale pipeline would soak up the excess. It hasn’t.
Annual additions are hovering around 15-20 GW when we need closer to 50 GW to even pretend to absorb upcoming capacity. State distribution companies are broke, transmission bottlenecks remain, and rooftop solar adoption is still crawling because financing remains patchy.
- 2024 installations: ~18 GW
- 2025 forecast (optimistic): ~25 GW
- Module capacity by 2027: 150-200 GW
Do the math. It’s ugly.
The Letter That Changed Everything
In late November 2025, India’s Ministry of New and Renewable Energy did something unprecedented: it wrote to the finance ministry essentially begging banks to stop funding standalone module or cell plants.
The message was polite, couched in bureaucratic language, but crystal clear: we have enough fragment capacity. If you keep lending for more, you’re financing future NPAs (non-performing assets).
Instead, the ministry wants money to flow only into fully integrated facilities – the ones that start from polysilicon or at least ingot-wafer and go all the way to modules. Those are harder, far more expensive, and honestly India has barely any real ones yet.
It’s a 180-degree pivot from the “build anything solar, build fast” mood of 2021-2023.
Why Integrated Plants Are the New Holy Grail
Simple: in a world where everyone can make modules, the only way to stay competitive long-term is to control the high-value upstream steps that China still dominates – polysilicon, wafers, cells.
Right now India imports 100% of its silicon and almost 90% of its wafers. That leaves manufacturers exposed to the same Chinese pricing power everyone was trying to escape.
An integrated Indian champion could theoretically produce at costs closer to Chinese giants while staying “clean” for Western markets. But building one costs $2-4 billion and takes 3-5 years. Very few Indian groups have that kind of balance sheet or patience.
Who’s Going to Get Hurt
The pain is already starting.
Smaller pure-play module makers are burning cash. Utilization rates at many plants have dropped below 30%. Some have stopped lines completely. Layoffs are quietly happening across Gujarat and Tamil Nadu industrial parks.
Banks that loaded up on solar project finance over the last three years are sweating. Memories of the 2016-2018 wind and thermal overcapacity disaster are still fresh.
Even big players aren’t immune. Share prices of listed solar manufacturers have been crushed throughout 2025 as margins evaporated.
Is This Just a Healthy Correction?
Some analysts argue yes. Every manufacturing scale-up has growing pains. China itself went through multiple bankruptcy waves before consolidating into the giants we know today.
The counter-argument: China had a massive protected home market and export demand that kept growing. India currently has neither at sufficient scale.
In my view, we’re heading for a consolidation bloodbath unless something dramatic changes in the next 12-18 months.
What Would Actually Fix This
- Real enforcement of domestic content requirements in government tenders (right now loopholes are huge)
- Aggressive rooftop solar financing program that actually works at scale
- Transmission upgrades so utility-scale projects don’t stay stuck in queues
- Diplomatic push to get Indian supply chains whitelisted faster in the U.S. and EU
- Shift PLI incentives heavily toward integrated projects, not module assembly
Without at least three of those, I don’t see how we avoid a wave of insolvencies by 2027.
The Bigger Picture for Global Renewables
India’s mess is also a warning for every country trying to “friend-shore” or reshore solar manufacturing. Subsidies alone don’t create competitive industries. You need aligned demand policy, realistic cost curves, and ruthless focus on the hard parts of the supply chain.
Perhaps the most frustrating part: all this excess Indian capacity is sitting idle while the world still needs hundreds of gigawatts of new solar every year to hit climate targets. The panels are literally there – we just built them in the wrong place at the wrong time with the wrong structure.
That’s not a market failure. That’s a policy coordination failure on an epic scale.
India will still play a role in global solar – it has the land, the engineering talent, and the political will. But the road just got a lot bumpier, and a lot of investors are about to learn the hard way that green dreams don’t come with guaranteed returns.
The factories are built. The panels are stacking up. Now comes the part where we find out who survives.
