India's electricity demand likely to grow 4-4.5% in FY26, says ICRA

ICRA expects electricity demand to rebound in the second half of FY26, with renewables and stable economic activity driving growth despite early monsoon effects

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India’s electricity demand is likely to grow at a rate between 4 per cent and 4.5 per cent in the current financial year (2025–26), as a strong recovery in the second half of the year is expected to offset the monsoon-related weakness seen in the first half.

 

Electricity demand expected to rebound in second half 

“Following a muted 1 per cent growth in H1 FY2026 due to an unfavourable base and an early monsoon, we foresee a robust recovery in H2. As weather patterns normalise and underlying economic activity remains stable, we project full-year electricity demand growth to settle at a healthy 4.0–4.5 per cent,” said Ankit Jain, Vice-President and Co-Group Head – Corporate Ratings at ICRA.

 

The full-year projection trails the gross domestic product (GDP) growth forecast of 6.5 per cent. The projection comes amid recent volatility, with a notable 5 per cent year-on-year decline observed in the first 20 days of October 2025, according to provisional data from the Power System Operation Corporation.

 

Coal supply remains comfortable despite moderation 

On the supply side, coal inventory levels at domestic power plants have moderated but remain comfortable. As of October 10, 2025, coal stocks were sufficient for 14.7 days of requirement, which is notably better than the stock levels witnessed in the corresponding periods of previous years. This reflects sustained improvements in coal supply and logistics management.

 

Renewable energy output continues robust growth 

A significant highlight of the sector’s performance is the strong growth in the renewable energy segment. Driven by a steady project pipeline and consistent policy support from the Government of India, renewable energy generation surged by 24.8 per cent year-on-year during the first five months of 2025–26 (April–August 2025).