Foreign direct investment (FDI) in India’s renewable energy sector stood at $1.6 billion (~₹121.05 billion) in the financial year (FY) 2021-22.

The investment is the highest ever in the Indian renewable sector in a year. On a year-over-year basis, foreign investments in India rose by 101% compared to the $797.21 million (~₹58.87 billion) invested in COVID-19 affected FY 2020-21.

The renewable energy sector has been witnessing a steady inflow of FDI in the past few years, increasing from $1.2 billion (~₹92.05 billion) in FY 2017-18 to $1.45 billion (~₹110.53 billion) in FY 2018-19. The sector saw an FDI inflow of $1.4 billion (~₹97.73 billion) in FY 2019-20.

The cumulative FDI in the renewable sector stood at $10.81 billion (~₹813.74 billion) between April 2010 and March 2022.

There has been no FDI into coal production after 2013-14, indicating a clear shift in the energy choices of investors. Investments in petroleum and natural gas have also been stable for the last couple of years.

FDI Equity Inflows

India’s renewable sector has become attractive from an investor’s perspective due to the government’s increased support and improved economics. As India looks to become a net-zero economy, the country’s renewable sector can contribute over $1 trillion by 2030 and $15 trillion by 2070 in economic impact. FDI will play a crucial role in bringing resources such as capital and advanced technology into the sector.

Currently, FDI of up to 100% is allowed in the renewable energy industry under the automatic route, with no prior government approval needed.

In March, the Parliamentary Standing Committee on Energy, in a report on ‘Financial Constraints in the Renewable Energy Sector, pointed to a considerable gap between the required and actual investment and suggested the government create an enabling framework to bridge it. The Committee noted that India would need an annual investment of ₹1.5-₹2 trillion (~$19.72-~$26.29 billion) in the renewable energy sector until 2030, compared to the earlier estimate of ₹750 billion (~$9.86 billion).