FDI in India’s Renewable Sector Up 9% YoY to $505 Million in Q2 FY24

The Foreign Direct Investments have witnessed a steady decline in the last three quarters

November 28, 2023


Foreign Direct investment (FDI) in India’s renewable energy sector saw a rise of 9% year-over-year (YoY) in the second quarter (Q2) of the financial year (FY) 2023-24.

FDI in renewables stood at $504.08 million (~₹42.01 billion) in Q2 compared to $461.51 million (~₹38.26 billion) in the same quarter last year, according to Ministry of Commerce and Industry data.

The amount was, however, down 31% quarter-over-quarter from $737.17 million (₹60.73 billion).

The market segments that witnessed the most investment flow during the quarter were solar, pumped hydro storage, and wind projects, mostly through the automatic route.

According to Mercom’s Q3 2023 India Solar Market Update, solar project installations in the country are expected to rise significantly in 2024.

FDI in India’s Renewable Sector in Q2 FY24.jpg

There has been no FDI in coal production after FY 2014. In Q2 FY24, there was a 71.72% YoY increase in FDI in the petroleum and natural gas segment with $27.75 million (~₹2.31 billion).

For the power segment, the total FDI was $318.42 million (~₹26.53 billion), a 919% YoY increase from $31.24 million (~₹2.59 billion).

The significant jump in investment was mainly attributed to the investments made in transmission projects as India ramps up grid infrastructure to integrate the increasing renewable energy capacity.

Investments in 2023

Foreign investment in India’s renewable energy sector for 1H FY24 stood at $1.24 billion (~₹102.73 billion), a 12% decrease YoY from $1.41 billion (~₹113.81 billion).

Foreign investments of up to 100% in the renewables sector are permitted under the automatic route, with no prior approvals required.

FDI in India’s renewable energy sector for FY 2023 stood at $2.5 billion (~₹206.5 billion), a 56% increase YoY compared to $1.6 billion (~₹121 billion). The investment was the highest ever in the Indian renewable sector in a year.

The cumulative FDI inflow in the renewable sector stood at $14.54 billion (~₹1.12 trillion) from April 2010 to September 2024.

According to a World Economic Forum report, India’s transition towards a net-zero economy could contribute over $1 trillion (~₹82.8 trillion) by 2030 and $15 trillion (~₹1,242 trillion) by 2070 in economic impact.

In March last year, the Parliamentary Standing Committee on Energy observed that India would need an investment of ₹1.5 trillion (~$14.6 billion) – ₹2 trillion (~$24.4 billion) annually in the renewable energy sector until 2030, which was twice the ₹750 billion estimated in the past few years.