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India has recorded the third-largest increase in power generation capacity worldwide over the last five years, according to the latest findings from the International Energy Agency (IEA). Only China and the United States outpaced India in this regard, underscoring the country's rapid strides in strengthening its electricity infrastructure.

The report notes, "India has seen the third-largest growth in power generation capacity in the world after China and the United States."

India’s rapid urbanisation, industrial expansion, and increased appliance usage, particularly air conditioners in both residential and commercial sectors, have contributed to a significant uptick in electricity consumption. In response, the country has broadened its power generation capabilities across a wide mix of energy sources.

Renewables At The Forefront

One of the most notable aspects of this growth story is India’s aggressive investment in renewable energy, especially solar. Solar photovoltaic (PV) projects have emerged as a key contributor, accounting for more than half of the non-fossil fuel energy investments in the country over the past five years.

In 2024 alone, clean energy initiatives attracted a remarkable 83 per cent of the total investments in India’s power sector, illustrating a clear shift away from fossil fuels.

India leads In Clean Energy Development Finance

The IEA also highlighted India’s status as the top recipient of project-specific funding from development finance institutions (DFIs) for clean energy last year. The country secured approximately USD 2.4 billion in such funding in 2024.

FDI Flows Surge

Foreign direct investment (FDI) in India’s power sector reached USD 5 billion in 2023, nearly double the pre-pandemic levels. This growth has been supported by favourable policies, including the allowance of 100 per cent FDI in electricity generation, excluding nuclear and transmission infrastructure.

However, the report did point out a contrasting trend in foreign portfolio investment, which has declined over the past two years. This pullback is attributed to a blend of macroeconomic uncertainties and challenges unique to the energy sector.

Future Outlook Remains Strong

Despite short-term headwinds, the IEA report underscores India’s robust trajectory in power generation and its continued emphasis on scaling clean energy. The progress signals not only a transformation of the domestic energy landscape but also the country's increasing role in global energy transitions.