Rating agency ICRA expects India’s electricity demand to pick up again in the financial year 2026-27, projecting growth of 5 to 5.5 percent. This marks a recovery from the much slower expected growth of 1.5 to 2 percent in FY2026. The power sector continues to play a central role in supporting India’s economic expansion, especially as the country works toward a more sustainable and stable energy system.
Recent data shows early signs of improvement in electricity demand. Between December 1 and 25, 2025, all-India power demand increased by 5.1 percent year-on-year, with daily usage averaging 4.4 billion units. This rebound was supported by seasonal factors and follows a sharp decline of 0.8 percent in November and a 6 percent contraction in October 2025.
Sharing ICRA’s outlook, Ankit Jain, Vice President and Co-Group Head of Corporate Ratings at the agency, noted that the expected recovery in FY2027 aligns with strong activity in the renewable energy sector. He highlighted that India added 31.2 GW of renewable capacity in the first eight months of FY2026—an annual increase of 109 percent—driven by a healthy project pipeline and lower solar module prices.
However, he also pointed out that the pace of new project auctions slowed, with only 8.6 GW bid out in the same period due to delays in signing power purchase and power sale agreements. Jain emphasised that transmission infrastructure remains a critical area of focus, as grid curtailments during peak renewable generation hours reveal the urgent need for better storage capacity and stronger transmission networks. These developments will be key areas to watch in FY2027 to ensure the sector maintains its growth momentum.
On the supply side, the sector is witnessing strong activity, mainly led by renewable projects. From April to October 2025, India added 29.8 GW of new power generation capacity, more than double the 12.5 GW added during the same period in the previous year. This surge was largely the result of developers rushing to commission projects before the complete waiver of interstate transmission system charges expired on June 30, 2025. Overall, net capacity additions for FY2026 are expected to reach around 46 GW, significantly higher than the 33 GW added in FY2025, supported by a strong renewable pipeline.
Electricity demand growth has varied widely across states in FY2026. Gujarat recorded the highest growth at 8.5 percent, followed by Karnataka and Bihar at 6.5 percent each. In contrast, major states such as Maharashtra, Andhra Pradesh, Tamil Nadu, and West Bengal saw minimal growth, all close to or just above 1 percent. Several states experienced a drop in demand, including Haryana (-4.0%), Punjab (-6.2%), Rajasthan (-2.1%), Uttar Pradesh (-3.4%), Madhya Pradesh (-2.0%), and Telangana (-2.5%). This uneven trend has been influenced by a high base in the previous year and adverse weather conditions, such as heavy rainfall, which affected consumption patterns.
Overall, the outlook suggests that while short-term challenges persist, India’s electricity demand is expected to regain strength in FY2027, supported by rapid renewable capacity additions and ongoing efforts to upgrade transmission and grid infrastructure.
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