Foreign capital bolsters India’s renewables play

Foreign investment has become one of the strongest forces reshaping India’s energy story, turning a once coal-heavy system into one of the world’s fastest‑growing clean power markets. Global capital is now flowing not just into giant solar and wind parks, but also into green hydrogen, storage and transmission, making India a test bed for the next phase of the energy transition.

Over the past few years, foreign direct investment (FDI) in India’s renewable energy sector has accelerated sharply, rising from roughly 1 per cent of India’s total FDI in FY21 to about 8 per cent by FY 2024‑25. By March 2025, cumulative FDI into renewables was estimated at around US$12-13 billion, with FY25 alone seeing inflows in the range of US$3-4 billion.

This money is arriving on top of broader clean‑energy financing: India drew about $11.8 billion in renewable energy investment in just the first half of 2025, one of the highest half‑year tallies on record. Solar dominates the mix, accounting for roughly three‑quarters of new investment, but wind, hybrid projects and battery‑backed “firm” renewables are steadily gaining ground.

Several structural factors make India unusually attractive to foreign clean‑energy investors. The country has set a target of 500GW of non‑fossil fuel capacity by 2030 and has already installed more than 230GW of renewables, giving investors confidence that the project pipeline will stay deep for years. Rapid demand growth, record‑low solar and wind tariffs, and falling technology costs have translated into historically solid equity returns, often in the mid‑teens for well‑structured projects.

Policy design has also evolved in investors’ favour. Long‑term power purchase agreements backed by central agencies, payment‑security mechanisms for state utilities and aggressive capacity auctions have all reduced perceived risk and sharpened the investment case. Besides, India allows up to 100 per cent foreign ownership in renewables through an automatic route, removing bureaucratic friction that can slow capital in other sectors.

The cast of foreign players is remarkably diverse: global pension funds, sovereign wealth funds, private equity giants, oil and gas majors pivoting to low‑carbon assets, and multilateral lenders are all in the mix. Institutions such as Canada Pension Plan Investment Board and KKR have taken large stakes in Indian platforms, while energy multinationals from Europe and elsewhere have bought into or partnered with local champions.

At the asset level, the solar sector leads, from mega‑parks in states like Gujarat and Rajasthan to rooftop and distributed solar backed by innovative financing. Wind and hybrid projects are seeing renewed interest, including “firm and dispatchable” renewable projects that blend wind, solar and storage, often supported by long‑term debt from Indian and international financiers.

Foreign investors are no longer fixated only on generation assets. Transmission and grid infrastructure, once an afterthought, is now recognised as a bottleneck where capital and expertise can earn stable returns. Local infrastructure investment trusts (InvITs) are emerging as vehicles to recycle operational assets, allowing long‑term foreign capital to come in at scale while freeing up developer balance sheets for new builds.

Newer themes are also pulling in global money. Under the National Green Hydrogen Mission, India aims to produce about 5 million tonnes of green hydrogen annually by 2030 and hopes to attract close to $100 billion in related investment, opening opportunities in electrolysers, export terminals and industrial offtake. Battery storage, grid‑scale and behind‑the‑meter, is drawing early‑stage investments as developers prepare for a system with much higher shares of variable solar and wind.

For all the enthusiasm, foreign investors still face familiar Indian headaches. Offtaker risk from financially stressed state distribution companies, land acquisition delays and regulatory uncertainty at state level can erode returns or slow projects. Grid constraints and under‑tendering in segments like wind have also led to periods where the project pipeline does not fully match investor appetite.

Yet, the momentum is unmistakable. Renewables already account for a majority of new power capacity added in India, and the share of clean energy in total installed capacity has crossed the halfway mark, beating earlier expectations. As global capital hunts for scalable, emerging‑market decarbonisation stories, India’s mix of strong policy signals, huge demand and improving financial structures ensures that foreign investment in its renewable boom is likely to deepen—and to shape the country’s economic and climatic future in the process.