India’s Solar Sector Recalibrates as U.S. Policy Turns Hostile

In July, a group of American solar manufacturers requested that the U.S. Commerce Department impose tariffs on solar panels imported from India, Indonesia, and Laos. The petition accuses companies based in these countries of selling modules at unfairly low prices, which allegedly undercut recent U.S. manufacturing investments. The Commerce Department has begun reviewing the petition.

This move came amid broader efforts by the small but growing domestic solar industry in the U.S. to curb foreign competition, particularly from Chinese-owned producers operating through third countries.

Indian solar firms, including Waaree Energies, said they remain confident about their U.S. exports and are prepared to respond to any anti-dumping investigation.

Tensions escalated when U.S. President Donald Trump imposed a 25% tariff on Indian exports on July 31. He cited India’s energy and defence transactions with Russia. On August 6, he signed an executive order introducing a second 25% tariff, targeting Indian imports linked to continued purchases of Russian oil.

India’s trade surplus with the U.S., its largest export market, was about 1.2% of GDP in 2024. Analysts estimate that cutting this surplus in half could reduce India’s GDP by 25 to 40 basis points, weakening macroeconomic stability during a global slowdown.

Export disruption expected, but domestic focus may offset losses

According to The Economic Times, the 25% tariff on Indian solar modules is likely to impose short-term pricing pressures and margin contraction for Indian exporters. Vikram Reddy, a corporate ratings executive, noted that over 95% of India’s solar module exports in FY2025 were directed to the U.S., underscoring the exposure of Indian firms to policy changes in that market.

He also pointed out that competitor nations like Vietnam and Thailand could benefit if they remain exempt from similar penalties. In addition, falling incentives for renewable energy in the U.S. may dampen long-term demand for imported solar modules.

Some industry leaders see potential upside in the redirection of focus to the domestic market. India’s Production-Linked Incentive (PLI) scheme, introduced in 2020, is designed to support solar module manufacturing through output-based subsidies. The initiative is part of a broader Rs 28,000 crore industrial policy across 13 sectors, with Rs 3,000 crore earmarked for solar PV manufacturing.

Implemented in two phases, Rs 4,500 crore in 2021 and Rs 19,500 crore in 2022, the PLI scheme offers subsidies estimated at Rs 5.15 per watt, disbursed over five years. At 2020 module prices (Rs 14/watt), this equates to an approximate 7.3% annual subsidy-to-price ratio.

Sanjeev Agrawal, chairman of Hexa Climate, noted that the shift toward domestic supply would be welcomed by project developers, as it would ease concerns over module availability.

Economic models support joint use of tariffs and subsidies

An analysis published in Industrial Policy in Oligopolistic Markets: Case of Utility-Scale Solar in India supports the dual application of subsidies and tariffs. The study concludes that for large-scale domestic expansion, a combination of the two policies yields better welfare outcomes than using either tool alone. While subsidies reduce domestic production costs, tariffs lower government expenditure and shift some of the financial burden to foreign suppliers.

Empirical simulations within the paper show that this hybrid approach results in higher economic efficiency and avoids the high distortions associated with using only one form of support.

Diverging strategies: Waaree doubles down on U.S. market, Premier stays India-focused

While some firms remain cautious, Waaree Energies has significantly expanded its U.S. presence. In January 2025, the company commissioned a 1.6 GW solar module facility in the U.S., just days before President Trump took office. This plant now benefits from U.S. tax credits of up to 45% under the Inflation Reduction Act.

In its latest financial disclosures, Waaree reported an order book of 25 GW valued at Rs 49,000 crore. Of this, 41.3% comes from international clients, including the U.S., while overseas revenue accounts for 32% of its total income.

CEO Amit Paithankar informed investors that the firm secured 2.23 GW in new U.S. orders during the last quarter alone. He highlighted three growth drivers in the U.S. solar market: increasing electricity demand from data centres, the electrification of transport, and widespread adoption of AI technologies. Company projections suggest U.S. solar capacity could rise from 236 GW in 2024 to 500 GW by 2030.

In contrast, Premier Energies has opted to stay out of the U.S. manufacturing space for now. The company’s leadership cited ongoing uncertainty around American solar policies and tariffs as the reason for pausing its proposed U.S. cell production plant.

Premier’s management confirmed that less than 1% of its current order book involves the U.S. market. Instead, the company is prioritising domestic projects, especially those aligned with Indian government programs. They also noted that existing production volumes are insufficient to support both Indian and U.S. demand.

While Waaree has established a firm foothold in the U.S., other Indian solar manufacturers such as Rayzon Solar and Vikram Solar have expressed interest in setting up production facilities in the U.S. However, these companies remain on hold, awaiting further clarity on trade policies and taxation before proceeding.

Domestic solar sector sees robust demand outlook

India’s domestic solar market continues to grow steadily. According to the latest data from the Ministry of New and Renewable Energy, the country has installed a total of 116.25 GW of solar capacity. Of this, 89.29 GW comes from ground-mounted systems, 18.84 GW from grid-connected rooftop installations, 3.06 GW from hybrid projects, and 5.05 GW from off-grid solar applications.

A recent report by CRISIL projects that domestic demand will average 50–55 GW annually from FY2024 to FY2030. With local production expected to exceed demand starting FY2025, the potential for exports remains, though their share in total output is likely to moderate to 25–32% by FY2030 due to stronger internal consumption. In FY2024, India exported approximately 7 GW of modules, around half of the total domestic output. 

Conclusion: Strategic choices shape resilience amid policy shifts

As global trade tensions continue to influence the solar industry, Indian manufacturers are recalibrating their strategies. Firms like Waaree are investing abroad to secure long-term access to the U.S. market, while others, such as Premier Energies, are deepening their domestic footprint amid policy uncertainty.

With a strong policy framework in place at home and rising global demand for renewable energy, the Indian solar industry’s future trajectory will depend on its ability to balance export risks with domestic opportunities.