ICRA Expects Power Demand Growth to Rebound to 5–5.5% in FY2027

Rating agency ICRA has projected a rebound in India’s electricity demand growth to 5–5.5 per cent in FY2026-27 (FY2027), following a subdued growth of 1.5–2 per cent expected in FY2025-26 (FY2026). The agency noted that the power sector will continue to play a critical role in sustaining India’s economic growth, with emphasis on renewable expansion and grid stability.

Recent data indicates a recovery in power demand momentum. All-India electricity demand rose 5.1 per cent year-on-year during December 1–25, 2025, averaging 4.4 billion units per day, aided by seasonal factors. This marks a turnaround after a contraction of 0.8 per cent in November and a sharper 6.0 per cent decline in October 2025.

Commenting on the outlook, Ankit Jain, Vice President and Co-Group Head – Corporate Ratings, ICRA Ltd, said electricity demand is expected to strengthen in FY2027, supported by capacity additions and renewable energy growth. He highlighted that India added 31.2 GW of renewable capacity in the first eight months of FY2026, registering a 109 per cent year-on-year increase, driven by a strong project pipeline and favourable solar module prices.

However, Jain pointed out that renewable bidding activity slowed, with only 8.6 GW auctioned in 8M FY2026, largely due to delays in the signing of power purchase agreements (PPAs) and power sale agreements (PSAs). He stressed that transmission infrastructure development, grid strengthening, and energy storage solutions will remain key monitorables in FY2027, especially in light of grid curtailments during peak renewable generation hours.

On the supply side, net power generation capacity additions stood at 29.8 GW between April and October 2025, more than double the 12.5 GW added in the same period last year. This surge was driven by renewable projects commissioned ahead of the June 30, 2025 deadline for the waiver on interstate transmission system (ISTS) charges. ICRA expects net capacity additions of around 46 GW in FY2026, significantly higher than the 33 GW added in FY2025.

Demand trends in FY2026 have shown sharp regional divergence. During the first eight months of the fiscal, Gujarat led demand growth at 8.5 per cent, followed by Karnataka and Bihar at 6.5 per cent each. Growth remained muted in Maharashtra (1.2 per cent), Andhra Pradesh (1.3 per cent), Tamil Nadu (0.6 per cent), and West Bengal (1.2 per cent).

Several large states recorded a contraction in electricity demand, including Punjab (-6.2 per cent), Haryana (-4.0 per cent), Uttar Pradesh (-3.4 per cent), Telangana (-2.5 per cent), Rajasthan (-2.1 per cent), Madhya Pradesh (-2.0 per cent) and West Bengal (-1.2 per cent). ICRA attributed this trend to a high base effect and adverse weather conditions, particularly heavy rainfall across regions.