Renewable energy FDI in India surges despite quarterly fluctuations

The report by Mercom India says,  there has been a 9 percent YoY increase in FDI during the second quarter of the FY 2024, driven by solar, wind and hydro investments.

Foreign Direct Investment (FDI) in India’s renewable energy sector demonstrated a noteworthy 9 percent year-over-year increase during the second quarter (Q2) of the financial year (FY) 2023-24, reaching $504.08 million (~₹42.01 billion), in contrast to the $461.51 million (~₹38.26 billion) recorded in the corresponding quarter of the previous year, according to Ministry of Commerce and Industry data. However, there was a notable 31 percent decline quarter-over-quarter from $737.17 million (₹60.73 billion)

Primary beneficiaries of investment during this quarter were solar, pumped hydro storage, and wind projects, predominantly through the automatic route. Despite this positive trend, the FDI in renewables sector for the first half of FY24 amounted to $1.24 billion (~₹102.73 billion), reflecting a 12 percent year-over-year reduction from $1.41 billion (~₹113.81 billion).

Solar project installations in India are anticipated to experience a significant surge in 2024, as indicated by Mercom’s Q3 2023 India Solar Market Update. It’s noteworthy that there has been a conspicuous absence of FDI in coal production since FY 2014.

In Q2 FY24, the petroleum and natural gas segment witnessed a substantial 71.72 percent year-over-year surge in FDI, amounting to $27.75 million (~₹2.31 billion). Furthermore, the power segment recorded an extraordinary 919 percent year-over-year increase in total FDI, soaring from $31.24 million (~₹2.59 billion) to $318.42 million (~₹26.53 billion). This surge in investment can be chiefly attributed to the infusion of funds into transmission projects, aligning with India’s efforts to enhance grid infrastructure in response to the escalating renewable energy capacity.

For the entirety of FY 2023, FDI in India’s renewable energy sector reached an unprecedented $2.5 billion (~₹206.5 billion), marking a substantial 56 percent year-over-year escalation from $1.6 billion (~₹121 billion). Notably, investments up to 100 percent in the renewables sector are permissible under the automatic route, eliminating the need for prior approvals.

Cumulatively, the FDI inflow into the renewable sector from April 2010 to September 2024 stands at a substantial $14.54 billion (~₹1.12 trillion).

In alignment with global economic forecasts, a report from the World Economic Forum posits that India’s transition toward a net-zero economy could yield economic impacts exceeding $1 trillion (~₹82.8 trillion) by 2030 and a staggering $15 trillion (~₹1,242 trillion) by 2070.

It is crucial to note that, in March of the previous year, the Parliamentary Standing Committee on Energy emphasised the necessity for annual investments ranging from ₹1.5 trillion ($14.6 billion) to ₹2 trillion ($24.4 billion) in the renewable energy sector until 2030. This figure represents a twofold increase compared to the estimated ₹750 billion in preceding years.