India has climbed to the third position globally in terms of power generation capacity expansion over the past five years, according to the International Energy Agency (IEA). The only countries ahead are China and the United States, underscoring India’s rapid strides in meeting its growing electricity needs.
This remarkable growth has been primarily driven by rising energy demand, which stems from rapid urban development, increased household appliance usage—particularly air conditioners—and escalating industrial activity. To match this demand, India has diversified its energy portfolio, scaling up capacity across both conventional and renewable sources.
One of the standout features of India’s energy evolution has been its aggressive adoption of clean energy, with solar photovoltaic (PV) technology taking center stage. Solar PV alone has represented over half of the total non-fossil energy investments made in the country since 2019. In 2024 alone, 83% of India’s total power sector investments were channeled into green energy projects, according to the report.
Backing this clean energy push, India became the largest recipient of development finance institution (DFI) funds in 2024, drawing in approximately $2.4 billion in targeted project financing for renewables. This, paired with a progressive policy framework, has made India a compelling destination for foreign capital.
Foreign direct investment (FDI) in the power sector reached $5 billion in 2023, nearly double the pre-pandemic figures. This boost is largely attributed to government policies permitting 100% FDI in all electricity generation areas, excluding nuclear energy, as well as in transmission systems.
However, while FDI remains strong, the IEA noted a decline in foreign portfolio investment (FPI) in the last two years. Analysts attribute this to global economic volatility and specific sector-related issues. Still, long-term trends suggest that India’s energy sector remains robust and investor-friendly.
Overall, the IEA’s latest findings paint India as a rising energy powerhouse, balancing growing demand with sustainable solutions, and emerging as a global leader in clean power initiatives.
