India's solar module capacity reached about 233 gigawatts by June 2026, raising overcapacity risks, the Institute for Energy Economics and Financial Analysis said in a Tuesday note.
India has shifted from heavy reliance on imported solar photovoltaics to becoming a major global manufacturer, with most new capacity concentrated in modules.
The module segment faces the sharpest imbalance, with another 135 GW of capacity backed by firm investments and likely commissioning schedules, the institute said.
Manufacturers currently operate at an estimated 35% to 40% utilization, below the 50% to 65% level industry participants generally consider necessary for sustainable operations, increasing pressure on margins and returns.
The supply-demand mismatch could persist through 2030 despite growth across utility-scale, commercial and industrial, rooftop and hybrid solar projects, according to IEEFA, citing an analysis by JMK Research.
JMK Research assessed two 2030 scenarios based on confirmed investments and all announced capacity, with both showing module supply exceeding demand and polysilicon facing the largest upstream gap.
Low entry barriers have driven module expansion because assembly requires less capital, shorter construction periods and simpler processes than cell and wafer manufacturing, the institute said.
The Approved List of Models and Manufacturers, or ALMM, also reinforced module investment because its List I requirement remained in effect for nearly five years before the cell and wafer rules were implemented.
Data centers, green hydrogen and ammonia production, and exports could create additional demand by 2030, although IEEFA said these markets may not fully absorb planned capacity.
Exports could play a key role, but manufacturers' heavy reliance on the US exposes the industry to trade-policy risks, while Europe offers a potential avenue for greater market diversification.
Indian producers will need to narrow their cost and technology gap with China through scale, greater integration, efficiency and research and development to sustain export growth.
Smaller standalone manufacturers could face rising pressure as capacity grows, while vertically integrated companies may gain an advantage as India expands into cells, wafers and eventually polysilicon.
The institute said the sector must shift its focus from simply adding capacity to improving utilization, competitiveness, and value-chain depth through upstream incentives, research cooperation, and targeted export support.
In the near term, limited availability of ALMM List II-compliant domestic cells remains a constraint for module makers without in-house cell production.
An exemption for net-metering and open-access projects will remain in place through the end of 2026, providing time for domestic cell capacity to scale and easing utilization pressure on standalone module makers.