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India's solar exports to the US have reduced by 35% due to tariffs.
This highlights the risks of over-reliance on a single market.
A new report suggests diversifying export markets and boosting domestic solar demand.
India’s solar module exports to the United States (US) have dropped roughly 35 per cent after steep tariffs imposed by US President Donald Trump administration disrupted trade flows, according to a new report by a Bengaluru-based climate and energy policy think tank Climate Risk Horizons. The situation exposed Indian solar industry’s heavy dependence on a single export market, the analysts noted.
Although the share of manufacturing in India’s gross domestic product has declined, solar module production has grown strongly, making India a net exporter and the US its major buyer. From FY22 to FY24, exports of Indian photovoltaic (PV) modules to the US rose nearly 10 times.
Since early February 2026, tariff rates have fluctuated frequently, with Indian-made solar modules currently facing duties of 126 per cent. This has sharply increased the price of Indian solar panels in the US market and triggered volatility in the sector. The US has historically been India’s dominant export destination, accounting for nearly 95 per cent of India’s solar module exports, despite India supplying only about 7 per cent of total US imports, the report showed.
The impact was immediate. From August to September 2025, India’s solar module exports fell from about $134 million to roughly $80 million after a blanket 50 per cent tariff was imposed on Indian exports. Module costs in the US rose by 31 per cent, squeezing profit margins that typically range between 40-60 per cent in developed markets.
In a time of volatile geopolitics, this tariff war reflects the risk of over-reliance on and concentration of, export markets, the report said. To strengthen export resilience, India must diversify markets, including exploring opportunities in the European Union, which currently relies heavily on imports from China, the authors said.
They also argued that India should leverage favourable domestic factors, such as reduced GST on solar equipment, latent industrial demand for renewable electricity and the need to cut energy imports to scale up domestic deployment of solar power.
Increasing solar installations and enforcing renewable purchase obligations (RPO) for states and industries could help stabilise demand for domestically produced panels. Heavy industries are required to source about 30 per cent of their electricity from renewable energy, but compliance remains weak.
“If India’s top companies across cement, aluminium, steel and fertiliser industries were to meet their RPOs, that alone would translate to about 19 billion units of annual renewable electricity demand,” said Vishnu Teja, energy and finance researcher at Climate Risk Horizons and co-author of the report.
“We estimate that 10 GW of solar PV would be needed to meet the 30 per cent RPO and 50 GW if all electricity used by these companies were sourced from renewables. This would boost demand for domestically produced panels, while lowering industrial energy costs,” he added.
India’s solar manufacturing capacity has expanded rapidly in recent years. By the end of 2025, the country had built around 144 gigawatts (GW) of solar module manufacturing capacity, positioning it among the world’s fastest-growing producers. However, the export slump risks leaving part of that capacity underutilised.
“Enforcing RPOs and accelerating utility-scale and decentralised solar projects would boost domestic demand while lowering electricity costs for industry,” said Teja.
A faster solar buildout through utility-scale projects, decentralised systems and green power purchase agreements could also reduce India’s reliance on imported fossil fuels.
“Recent volatility in energy markets, whether reflected in tariffs on India’s solar exports or restrictions on oil imports, reinforces the need for greater energy security,” said Ashish Fernandes, director at Climate Risk Horizons. “Solar is cheap and getting cheaper. Increasing domestic renewable deployment will reduce India’s dependency on imported coal and, eventually, oil and gas as well. By strengthening domestic renewable capacity, India could not only improve energy security but also conserve foreign exchange.”