Over the past five years, India recorded the third-largest increase in power generation capacity globally — trailing only China and the United States. The push towards renewable comes as electricity demand in India continues to soar. In 2024 alone, a staggering 83 per cent of the country’s total power sector investment was directed towards clean energy. India also led the world in development finance institution (DFI) fund ing for clean energy projects last year, securing around USD 2.4 billion in project-based support.
INVESTMENTS RISE, YET GAP PERSISTS
To meet its broader climate ambitions, including a net-zero emissions target by 2070, India will require about USD 1.3 trillion in cumulative investment in clean power infrastructure by 2035. This figure represents a 16 per cent increase over projections based on current policy pathways, highlighting a significant financing gap. Renewables investment in India grew by 17 per cent to USD 33 billion in 2024 and is expected to climb a further 12 per cent in 2025. The government has taken several steps to bridge this shortfall. In 2024 and 2025, over USD 3.5 billion was allocated to the PM Surya GharMuft Bijli Yojana, which aims to install rooftop solar systems in 10 million homes by March 2027. Additionally, USD 245 million was earmarked for nuclear energy projects in the current fiscal year, supporting a long-term target of expanding capacity to 100 GW by 2047, up from the current level of less than 10 GW. 16
FDI HITS USD 5 BILLION
These new efforts complement existing initiatives such as the Production Linked Incentive (PLI) scheme to boost domestic manufacturing of solar modules and batteries, the solar park initiative for utility-scale projects, and the Green Energy Corridor, which have already seen USD 2.6 billion invested in upgrading the national grid to support renewable integration. While domestic sources continue to fund the majority of India’s power investments, foreign direct investment (FDI) is playing an increasingly critical role. FDI in electricity sector rose to USD 5 billion in 2023, nearly double of pre-pandemic levels. This growth has been supported by liberalised FDI rules, including allowing 100 per cent foreign ownership in all power segments except nuclear.
INFRASTRUCTURE GAPS HINDER ADOPTION
However, India’s renewable energy sector, FDI in India’s electricity sector has doubled since pre-pandemic levels to reach USD 5 billion, but there is scope to accelerate further while competitive on cost, still faces sever al structural challenges. Financing costs for grid-scale renewables remain about 80 per cent higher than advanced economies, driven by risks related to land acquisition, inadequate transmission infrastructure, and payment de lays from financially distressed distribution companies (DISCOMs), the report highlighted. As of March 2025, DISCOMs owed genera tion companies over USD 9 billion in unpaid dues, with accumulated losses hitting USD 75 billion in 2023. To address these issues, the government has implemented reforms such as the Ujjwal DISCOM Assurance Yojana (UDAY) to restructure debts, and late payment surcharge rules to enforce timely payments. The Solar Energy Corporation of India (SECI) has also established a payment security mech anism featuring escrow accounts, security funds and state-backed guarantees.