India emerges as key player in solar trade amidst Xinjiang forced labor sanction

India saw a surge in solar product exports, particularly to the US, as China faces restrictions and trade barriers to sell its products to the US market. A report found that China-based solar manufacturers may indirectly export their products to the US through India-based manufacturers.

Bloomberg examined the US Customs and Border Protection data, finding that the US detained US2 billion worth of products categorized as electronics, which industry analysts say are primarily solar panels, since June 2022, when the US government enacted the Uyghur Forced Labor Protection Act in June 2022, which requires companies to clarify whether their goods exported to the US were produced using forced labor in Xinjiang.

At the same time, India's solar panel exports to the US had increased to almost US$2 billion in the first 11 months of 2023. Furthermore, according to Bloomberg, India-based Waaree Energies shipped millions of panels to the US, with the panels incorporating components from a Chinese company whose products faced repeated denials of entry into the US market due to concerns about forced labor in Xinjiang.

Bloomberg quoted Reginald Smith, a solar industry analyst at Eventide Asset Management, saying that based on their ongoing industry research, smaller solar panel manufacturers outside of China, including India and Southeast Asia, are using materials inputs from China that are possibly, even likely, exposed to forced labor.

The US government implemented the Inflation Reduction Act to encourage clean energy technologies to combat climate change, and the rising demands for solar panels brought by the act must be met through other sources.

According to official trade data from India, the country exported most of its solar panels to the US in 2022 and the first 11 months of 2023. Data from China Customs shows that the economy still exported solar cells and panels to the US at a much lower value than products India exported to the US.

Meanwhile, India's capacity for solar products is increasing. ICRA forecasted substantial growth in India's solar cell production capacity. The current capacity of 6GW per year is projected to surge to 25GW by 2025, while the capacity for solar panels is anticipated to increase from 37GW to 60GW within the same timeframe. Besides, the Institute for Energy Economics and Financial Analysis estimates that India's manufacturing capacity for solar cells and panels will likely reach 6.6GW and 38GW, respectively, by the end of the current year, with the combined capacity for both expected to reach 110GW by 2026.

Source: Department of Commerce of India and China Customs, February 2024