ICRA Projects India’s Power Demand To Grow 4.0–4.5% In FY2026, Driven By Strong Recovery In Second Half Of The Fiscal Year

ICRA has projected that India’s electricity demand will grow by around 4.0–4.5 per cent in FY2026, supported by a strong recovery in the latter half of the fiscal year. This rebound is expected to compensate for the slower demand growth recorded in the first half due to the early onset of the monsoon and an unfavourable base effect.

According to Mr. Ankit Jain, Vice President and Co-Group Head – Corporate Ratings at ICRA, “Following a muted 1% growth in H1 FY2026 due to an unfavourable base and an early monsoon, we foresee a robust recovery in H2. As weather patterns normalize and underlying economic activity remains stable, we project full-year electricity demand growth to settle at a healthy 4.0–4.5%.” However, the projected electricity demand growth rate remains below India’s expected GDP growth of 6.5 per cent for the same period.

This outlook comes amid recent fluctuations in power consumption, including a 5% year-on-year decline observed in the first 20 days of October 2025, based on provisional data from the Power System Operation Corporation (POSOCO). Despite these short-term variations, ICRA anticipates a steady recovery as temperatures normalize and industrial and commercial activities pick up in the second half of the fiscal year.

On the supply front, coal inventory levels at domestic power plants have remained adequate despite a slight moderation. As of October 10, 2025, coal stocks were sufficient for 14.7 days of operation, which is a marked improvement compared to the same period in previous years. This improvement highlights better coordination in coal supply chains and logistics management, ensuring a more stable power supply even during periods of high demand.

A notable positive trend in the sector has been the strong growth of renewable energy generation. Supported by a robust pipeline of new projects and consistent policy backing from the Government of India, renewable generation surged by 24.8% year-on-year during the first five months of FY2026 (April–August 2025). This growth underscores India’s continued progress toward clean energy goals and its broader strategy to diversify the country’s energy mix. Overall, ICRA’s forecast indicates that India’s power demand will remain on a healthy growth trajectory, driven by stable economic activity, improved supply-side management, and an expanding share of renewable energy in the national grid.