Hello, this is Priyanka Salve, writing to you from Mumbai.
Welcome to the latest edition of “Inside India“ — your one-stop destination for stories and developments from the world’s fastest-growing large economy.
India shares a complex relationship with its neighbor China. While New Delhi heavily relies on imports from Beijing, it also seeks to position itself as an alternative to China for manufacturing and investments from Western businesses.
But to drive its manufacturing agenda, promote local chip and AI companies, and attract data center investments, India needs ample and reliable power supply. And it seems here, New Delhi is too dependent on Beijing.
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The big story
New Delhi’s plan to create a self-reliant energy ecosystem by expanding its renewable energy footprint is facing a China problem.
The renewable energy capacity of the world’s third-largest electricity producer and consumer has increased rapidly over the last 10 years. Solar and wind power plants are now more than 40% of total electricity generation capacity, nearly as much as coal-fired ones, according to data from Indian government think tank Niti Aayog.
Experts told CNBC that green energy is available in India, but its supply is not reliable, and battery-based energy storage solutions hold the key to resolving this issue. The challenge, however, is that nearly 80% of these batteries originate from China, hampering India’s plans of “self-reliance” to meet its growing energy needs.
Not surprisingly, the green energy push has not managed to wean India off coal-fired power plants. Nearly 70% of power generated in India was still coal-based while just over 15% came from solar and wind projects in the financial year ending March 2026.
Dependency on China
Last week, India’s Central Electricity Authority proposed draft regulations aimed at making it compulsory for all new government solar and wind projects commissioned after July next year to have battery storage that will store green power and dispatch it when needed.
While this will improve the reliability of solar and wind energy supply, in the absence of local battery manufacturers, it will deepen India’s reliance on China.
India’s domestic battery manufacturing currently accounts for less than 1% of its estimated 260 gigawatt-hour demand pipeline based on competitive tenders in 2026, according to Wood Mackenzie.
Nearly 80% of batteries used for storing renewable power come from China, and 20% come from other Asian countries like South Korea and Taiwan, it said.
This is a “critical advantage” that China holds over India, and in the past Beijing has used its access to key resources and technology as a “geopolitical tool” to get better trade deals, Ankita Chauhan, director at Wood Mackenzie, told CNBC.
The ties between the two neighbors have improved over the past year after Modi and Chinese President Xi Jinping’s meeting in Tianjin last year. Yet, the issues between the two sides are far from resolved. According to local media reports, Indian businessmen and executives are facing “significant difficulties” in getting Chinese visas.
While India is easing investment rules for Chinese firms, it is also imposing some trade restrictions on goods in sectors where India is closer to self-sufficiency. Meanwhile, China is wary of technology transfers to India as it could undermine Beijing’s role in key global supply chains.
India, for example, is already emerging as a key supplier for Apple smartphones after the company started diversifying its manufacturing base away from China. But to drive its manufacturing program, promote local chip and AI champions and attract data center demand, India needs an ample and reliable power supply.
“Energy security is the need of our times,” Indian Prime Minister Narendra Modi said during his Independence Day speech last month. “It is becoming increasingly difficult to run the new world without energy,” Modi said, underscoring the enormous need for electricity for make chips, AI or data centers.
Increasing India’s alternative energy production has been one of the key achievements of the Modi government, but its role in enhancing India’s energy security is limited. Storage of solar and wind energy is becoming “increasingly critical,” Ray Tay, executive director of project and infrastructure finance at Moody’s Ratings, told CNBC.
“Solar and wind availability varies by time of day, weather and season, and peak resource availability does not usually coincide with peak demand,” explained Tay. Storage can help shift surplus generation into peak hours.
It can also improve the credit profile of renewable energy producers by stabilizing revenue and “reducing curtailment risk,” Tay said. Curtailment risk in India refers to a situation when renewable power plants are forced to cut their generation to meet the electrical grid’s capacity to safely absorb or transmit power.
It is easier for renewable plants to scale down generation than it is for thermal power plants, which need to function at a critical level, experts said.
Local manufacturing
As per the report by Wood Mackenzie, it could take over a decade for India to ramp up its local battery manufacturing abilities. At present, experts said, most of the Indian companies are either investing in setting up downstream assembly and testing facilities or making batteries for mobility, which are more lucrative given the government subsidies.
China controls over 80% of global manufacturing capacity across several major battery supply-chain components, leaving India exposed to price volatility, trade restrictions, and technology-concentration risks, Ashish Singla, director of South Asia power and renewable research at S&P Global Energy, told CNBC.
But he is hopeful that India’s local cell manufacturing capacity “could reach around 140 GWh,” if execution remains on track and critical-mineral initiatives and recycling policies pan out.
Need to know
India’s June quarter GDP print is courting controversy
India’s faster-than-expected economic expansion of 7.8% in the June quarter is under scrutiny after a former government official alleged the reading was artificially boosted by compressing the prior year’s figures.
India’s largest bourse National Stock Exchange gets regulatory nod to launch IPO
India’s largest bourse, the National Stock Exchange, has secured the Securities and Exchange Board of India’s approval for its IPO on Friday. According to Reuters, the stock exchange is planning to launch its IPO, which could value the company up to $47 billion, in the week starting 21 September.
Coming up
Sep 12-13: India hosts BRICS Summit in New Delhi
Sept. 14: India CPI and WPI inflation data for August
Source: CNBC