FDI Inflows into India’s Renewable Sector Fell by 51% QoQ in Q2 FY 2023

Weaker investors’ confidence due to global uncertainty primary reason


Foreign Direct investment (FDI) in India’s renewable energy sector stood at $461.51 million (~₹38.22 billion) in the second quarter (Q2) of the financial year (FY) 2023, a 51% fall compared to $949.45 million (~₹78.62 billion) in Q1 FY 2023.

The sectoral decline aligns with a nearly 37% QoQ fall in the overall equity inflows into the country in the July-September period, which is primarily attributable to weakened investors’ appetite following the war in Europe along with high inflation leading to tighter monetary policies in the FDI-source countries.

Quarterly FDI inflows in the renewable energy sector has been hovering around the $500 million (~$41.41 billion) mark for the past few quarters, barring the exception of Q1 FY 2023, where it shot up to $949.45 million (~₹78.62 billion).

Cumulatively, the total FDI in India’s renewable sector stood at $12.22 billion (~₹1.01 trillion) at the end of September 2022. As the center of the global renewable energy transition among developing countries, India has seen a consistent inflow of capital in the rapidly growing sector.

In the past few years, the renewable sector has seen a steady increase in FDI. In FY 2018, FDI in the sector was $1.2 billion (~₹92.05 billion), and it increased to $1.6 billion (~₹121.05 billion) in FY 2022.

There has not been any foreign direct investment (FDI) in coal production since 2013-2014, but FDI in petroleum and natural gas has remained stable.

At the end of Q2 FY 2023, FDI in the petroleum and natural gas segment was $19.35 million (~₹1.6 billion), and was $540 million (~₹44.72 billion) in the power segment.

According to a World Economic Forum report, India’s transition towards a net-zero economy could contribute over $1 trillion (~₹82.81 trillion) by 2030 and $15 trillion (~₹1,242 trillion) by 2070 in economic impact.

In March last year, the Parliamentary Standing Committee on Energy recommended that the Ministry of New and Renewable Energy (MNRE) should take proactive steps to find and utilize innovative financing mechanisms and alternative funding options for the renewable energy sector. The Committee determined that India would require an annual investment of ₹1.5 trillion (~$18.11 billion)-₹2 trillion (~$24.15 billion) in the renewable energy sector until 2030, in contrast to the previously estimated amount of ₹750 billion (~$9.06 billion) in recent years.