India Solar Manufacturing Policy: Industrial Linkages

PAPER

How Can India's Existing Industries Join Clean Energy Supply Chains?

Outlining Implications for Industrial Strategy in the Energy Transition

05 November, 2026 | Technology Futures

Shruti Gauba, Abhinandan Khajuria, and Dhruv Warrior

Suggested citation: Gauba, Shruti, Abhinandan Khajuria, and Dhruv Warrior. 2026. How Can India's Existing Industries Join Clean Energy Supply Chains? Outlining Implications for Industrial Strategy in the Energy Transition. New Delhi: Council on Energy, Environment and Water.

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Overview

India has built substantial production capacity for solar modules, wind turbines, and battery assembly. However, it still depends on imports for many of the upstream and intermediate components that carry the most technological and commercial value, as earlier CEEW research on clean energy supply chains has shown. Moving into these value chain segments requires capabilities in skills, materials, and machinery that production incentives and tariffs have so far not created at scale.

This white paper examines how India's existing industrial base can support that move. Using the Product Space framework developed by the Harvard Growth Lab, it maps the linkages between solar PV, wind turbine, and lithium-ion battery value chains and the sectors in which India already holds a comparative advantage. It also assesses why a greater focus on clean energy value chains matters beyond the energy sector, using measures of product centrality, complexity, and opportunity gain. The paper closes with five implications for India's industrial policy.

Key findings

India's clean energy manufacturing base is broad downstream and thin upstream. As of September 2026, solar module capacity enlisted under the Approved List of Models and Manufacturers (ALMM) stood at nearly 229 GW, and cell capacity at nearly 37 GW. In comparison, domestic ingot and wafer capacity stands at around 2 GW, and polysilicon production remains nascent. Wind turbine (nacelle and hub) manufacturing capacity rose to about 24 GW as of March 2026. In batteries, less than 3 per cent of the 50 GWh target under the production-linked incentive (PLI) scheme for Advanced Chemistry Cell batteries had been commissioned as of October 2025.
Making clean energy components would build some of the most advanced manufacturing know-how India can benefit from. India does not yet produce most clean energy components at a competitive scale. Compared with other products India does not yet make competitively, these components require more specialised knowledge, skills, and processes to produce. Building capacity in them would therefore do more to raise the overall sophistication of India's manufacturing economy.
Many of these components also matter for advanced technology and national security. About half (54 per cent) of the clean energy components India does not yet make competitively also appear on international lists of advanced technology products or of goods with both civilian and military uses. Examples include electromagnets, semiconductor devices, and instruments for measuring electricity. Building these industries would strengthen India's position in sectors well beyond energy.
India can build on strengths in industries it is already good at. India is already competitive in many electronics, machinery, metals, chemicals, and precision manufacturing products that rely on similar skills, machines, and suppliers to solar, wind, and battery components. Firms in these industries are well placed to move into clean energy manufacturing. These links show where entry is likely to be easier, although they do not guarantee that it will be commercially viable.

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Shruti Gauba

Research Analyst

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“India has shown it can build clean energy manufacturing capacity at speed. The harder task is building the capabilities underneath it. The opportunity also extends beyond clean energy, as these value chains connect to advanced technology and strategic sectors where India aims to compete. Many of the capabilities needed, such as skills, machinery, and process know-how, already exist in India’s established industries, but they are spread across different sectors, ministries, and states. Realising this opportunity will need stronger coordination across them and better data on where these capabilities lie.”

Executive Summary

India has sought to position itself as a manufacturing hub for clean energy technologies through a combination of production-linked incentives (PLIs), tariff and non-tariff measures, research and development support, and broader industrial policy interventions. While fiscal support and protectionist interventions have helped scale downstream industries in assembly of final products, India has continually remained importdependent across critical and technologically advanced segments of clean energy manufacturing (CEEW 2024). This is detrimental to India’s broader industrial strategy, as manufacturing’s share of GDP has seen little change over the past decade, and employment generation has remained incremental. India’s Economic Survey 2025–26 underscores this gap, particularly in a context where India accounts for only 2.9 per cent of global manufacturing GVA and 1.8 per cent of exports (PIB 2026a).

Figure ES1. India has the potential to become a leading clean energy manufacturing hub outside China

India has the potential to become a leading clean energy manufacturing hub outside China

Parallelly, the global demand for clean energy technologies has grown rapidly. Countries are increasingly seeking to secure footholds across clean energy value chains (CEVCs), not only to accelerate decarbonisation, but also to strengthen economic and strategic resilience (CSIS 2022). Since 2018, China, the United States, and the European Union have together accounted for nearly 86 per cent of global clean technology manufacturing investment (BjerkanWade et al. 2026). In this competitive landscape, India’s next phase of growth will depend on whether it can expand its foothold towards complex intermediate products, where required manufacturing knowhow, scale economies, and incumbent advantages remain significantly higher. Success in scaling the value chain as per 2030 targets could position India as one of the most significant manufacturers in the non-China market (Figure ES1).

Understanding the industrial linkages behind clean energy manufacturing

While the opportunity is real, success is not automatic. Becoming a significant manufacturing hub in upstream and midstream segments requires a more expansive set of capabilities in manpower, materials, and machinery. A substantial body of research highlights that countries tend to move into products requiring similar productive knowledge, supplier ecosystems, machinery, and skill bases, often referred to as the ‘principle of relatedness’ (Pinheiro 2025; Chen, Poncet and Xiong 2017; Li and Neffke 2024). Understanding these industrial linkages can therefore help shape CEVC industrial policy around foundations that already exist.

Clean energy value chains are deeply interconnected with wider manufacturing ecosystems. Components, materials, and technologies used across CEVCs frequently serve multiple downstream sectors, occupying structurally important nodes within production networks. For instance, ball bearings used in wind turbines are also critical to automotive and industrial machinery industries, while rare earth magnets essential for electric vehicles are equally important for defence and other strategic sectors. As a result, the returns to India’s entry in these value chains, and conversely the costs of exclusion, extend far beyond the energy sector itself. Assessing these linkages for solar PV, wind turbines, and lithium-ion batteries, this paper finds outlines two essential findings:

Figure ES2. Overlapping HS classifications indicate that clean energy manufacturing is deeply embedded within broader strategic and industrial ecosystems

Overlapping HS classifications indicate that clean energy manufacturing is deeply embedded within broader strategic and industrial ecosystems

Strengthening capabilities in clean energy value chains could generate simultaneous cobenefits for India across industrial upgrading, export competitiveness, and strategic resilience. Among the large set of products where India currently lacks competitive manufacturing capability, CEVC components consistently rank among the most knowledge-intensive and sophisticated. Further, India’s unrealised clean energy manufacturing potential lies in products that also carry strategic significance. CEVCs intersect with value chains for advanced technology products and strategic and dual-use goods1 , which are themselves increasingly central to contemporary industrial policy competition (Figure ES2).
India can expand its footprint in CEVCs by building upon capabilities that already exist within the domestic economy. Clean energy value chains are strongly connected to industries where India already has a comparative advantage, enabling a pathway for capability driven industrial diversification. These industries are concentrated in sectors such as metals, electronics, machinery etc. For India, this implies that strengthening and connecting existing industrial ecosystems could play a critical role in expanding its footprint across CEVCs.

Mapping India’s capability foundations for clean energy manufacturing

Based on the product space framework developed by the Harvard Growth Lab, this paper maps the linkages between clean energy value chains and India’s existing industrial base (Growth Lab at Harvard 2026). Specifically, it identifies the sectors whose productive capabilities most closely overlap with the requirements of solar PV, wind turbine, and battery manufacturing. Findings suggest that India’s existing strengths in electronics, industrial machinery, metals, chemicals, and precision manufacturing are closely related (Figure ES3). This suggests that several entry points can be built upon capabilities that already exist within the domestic economy. Successful cases show how pre-existing capabilities in related industries are an important enabler—China, Japan, and South Korea consistently dominate multiple clean energy technologies, reflective of underlying strengths in advanced manufacturing and sophisticated chemical production (Net Zero Industrial Policy Lab 2025).

Figure ES3. India’s existing industries feature many competitive product families that can support entry into clean energy manufacturing

India’s existing industries feature many competitive product families that can support entry into clean energy manufacturing

At the same time, relatedness metrics should be interpreted as mere signals; they identify where similar capabilities exist, but cannot explain why certain industries have not yet scaled despite apparent alignment with the domestic production structure. Future research should identify different forms of industrial linkages, including shared inputs, capital equipment, labour skills, technical knowledge, and supplier ecosystems, and recognise the bottlenecks constraining their transferability. Mapping these gaps to appropriate policy responses will help accelerate capability diffusion and industrial entry.

Five implications for industrial policy in clean energy value chains

The global scale and rationale for industrial policy has evolved; national security, supply chain resilience, and geopolitical positioning now drive intervention in leading economies more than climate-related objectives do (Martín and Evenett 2025). Given India’s ambitions, its approach to the clean energy technology sector has not kept pace with these shifts. The Economic Survey 2025–26 encourages a welcome change in perspective by framing manufacturing capacity as a ‘strategic national asset’. It calls for the state to move beyond its regulatory role and act as a catalyst for structural transformation and technological sovereignty.

Clean energy value chains offer a valuable avenue for translating this vision into practice. Drawing on the analytical findings of this paper, the following implications intend to guide policymakers towards the strategic, institutional, and diagnostic priorities that will shape India’s ability to build globally competitive manufacturing capabilities over the coming decade.

Clean energy manufacturing should be treated as an industrial and strategic opportunity, not merely a self-reliance agenda for decarbonisation. The case for domestic component manufacturing is strongest where it reinforces broader industrial and technological capabilities—generating long-term resilience across multiple sectors, signalling more durable policy support, and crowding in private investment.
Protection and incentives are necessary but insufficient—the capabilities underpinning manufacturing capacity are what determine long-run competitiveness, and many can be drawn from existing industrial strengths. What determines whether capacity becomes competitive is the plumbing underneath it: workforce readiness, supplier networks, manufacturing knowhow, capital, and equipment.
New manufacturing avenues will require resisting protectionist temptations that are particularly acute in a moment of heightened geopolitical competition, and placing the hard work of strengthening underlying capabilities at the core.
Leveraging strengths in adjacent industries presents a significant coordination challenge, while being a self-reliant pathway of scaling new products. Even where sectors appear statistically closely related, the relevant ministries may lack visibility into these complementarities, and firms may remain unaware of adjacent diversification opportunities. Gaps in information, incentives, or institutional mandates—which are needed to convert these overlaps into concrete industrial outcomes—must be bridged.
Existing capabilities can shorten the path to competitiveness, but they cannot compensate for capital, technology, and process engineering where those gaps are large. Complementary capabilities alone cannot overcome constraints that arise from high capital intensity, minimum efficient scale requirements, or limited access to technology and knowhow. More complex products, such as polysilicon, wafers, lithium-ion cells, and rare earth 2. The ALMM list specifies the approved solar technologies that can legally be used for government-backed, net-metered, and openaccess solar energy installations in the country. magnets, are likely to additionally require long-term financing, technology partnerships, and anchor demand commitments.
Emerging manufacturing sectors must not remain statistically invisible. Strengthening industrial classifications is an enabling condition for data-driven industrial policy. Existing industrial data taxonomies fail to represent emerging sectors. India cannot unilaterally revise harmonised standards, but it has previously designated temporary domestic codes for priority sub-sectors. This approach will help unlock firm- and subnational-level diagnostics that can inform more actionable and data driven policy.

The framework developed in this paper is intended to open a broader diagnostic conversation on industrial strategy. Its relevance extends well beyond clean energy manufacturing: the analytical approach, and the institutional shifts it calls for, are equally applicable to a wider landscape of deep-tech sectors where India’s strategic ambitions increasingly lie.

FAQs

What are complementary industries?

Complementary industries are established product families that are closely related to a clean energy component, and India already holds a comparative advantage (an RCA of 1 or more) in producing that set of products. Since related products tend to draw on similar skills, machinery, supplier networks, and know-how, firms in these established and related industries are likely to face lower barriers to entering clean energy manufacturing.
Why is clean energy manufacturing more than an energy policy issue?

Clean energy components are inputs to many other sectors. Bearings, transformers, magnets, semiconductor devices, and graphite products serve automotive, industrial machinery, electronics, and defence value chains as well as energy. Building capability in these products can therefore support industrial upgrading, export competitiveness, and strategic resilience together. The study finds that about 54 per cent of the clean energy value chain products that India does not yet manufacture competitively are linked to advanced technology or strategic and dual-use sectors.
How did the study map these linkages?

The authors defined clean energy value chain products by their 4-digit HS codes across solar PV, wind turbine, and lithium-ion battery supply chains. For each product, they used the product proximity measure from the Atlas of Economic Complexity to identify the most closely related products. Proximity is based on the probability that countries export two products together.
Should India only pursue products that are close to its existing strengths?

Proximity indicates where entry is more plausible; it does not rule out strategic bets on less related products. Some clean energy components may be important enough to pursue despite a larger capability gap. Technological change also periodically opens windows in which competitive positions are not yet fixed. The study therefore treats a horizontal, capability-led push as a complement to existing measures and to investment in emerging technologies
What will it take to turn these linkages into real manufacturing capability?

Turning these linkages into production means tackling the barriers that keep related firms from making the move: limited information, weak coordination, missing inputs, and institutional gaps. The right response depends on what the linkage is built on. Firms that share inputs or suppliers benefit from industrial clusters and buyer–supplier matching. Shared equipment calls for technology upgradation funds and common facility centres. Shared skills need apprenticeships and reskilling, and shared technical knowledge needs joint ventures, technology licensing, and research support. Coordination across ministries and states, and industrial data that can track emerging sectors, will help direct these measures to the right firms.