Key Takeaways

• India’s solar manufacturing capacity may exceed demand 3-fold by 2025, triggering overcapacity concerns, according to Wood Mackenzie 
• US tariffs and high domestic costs make Indian modules less competitive than their Chinese counterparts 
• Wood Mackenzie recommends R&D and market diversification for India to build a cost-competitive solar supply chain 

India’s solar PV module manufacturing capacity is projected to exceed 125 GW by 2025, far outpacing the country’s annual domestic demand of around 40 GW. The sharp expansion – more than 3× the required capacity – raises concerns of potential overcapacity in the sector, according to a new analysis by Wood Mackenzie. 

In its latest report titled Perfect Storm in the Indian Solar Supply Chain, Wood Mackenzie expects the rapid expansion, driven by the Production Linked Incentive (PLI) scheme, to result in an inventory buildup of around 29 GW by Q3 2025, a 125% increase from Q4 2023.  

“India’s government's PLI scheme has been highly effective in spurring factory announcements, but the industry is now seeing warning signs of rapid overcapacity similar to those that preceded China's recent price collapse,” said Wood Mackenzie’s Head of Solar Supply Chain Research, Yana Hryshko. 

Analysts attribute this possible situation to the sharp downturn in the country’s primary export market, the US. Indian module exports to the US fell 52% annually in H1 2025, as the US imposed 50% reciprocal tariffs on Indian imports. This prompted Indian manufacturers planning to set up US manufacturing to pause in their tracks (see North America Solar PV News Snippets).  

Moreover, India-assembled modules using imported cells cost at least $0.03/W more than fully imported Chinese modules, making it expensive for Indian developers. A completely Made in India module, under the new domestic content requirements, will cost more than double compared to Chinese-made modules. This will make Indian modules ‘uncompetitive’ without substantial government support, point out the analysts.  

Wood Mackenzie, nevertheless, sees India as having the potential to become a large-scale alternative to China’s well-established solar supply chain. All it needs to do is aggressive R&D, invest in next-generation technology, and explore newer export markets in Africa, Latin America, and Europe.   

“The current challenges are not roadblocks, but rather a clear roadmap for the future. Success now depends on shifting focus from just building capacity to achieving cost-competitiveness,” states Hryshko.