India's power demand growth to slow to 1% in FY26, lowest in 5 years: ICRA

ICRA expects India's power demand growth to slow to 1 per cent in FY26, the lowest in five years, citing a prolonged monsoon, weak demand and a high base effect

India is likely to end the current financial year with a power demand growth of around 1 per cent, ratings agency ICRA said on Friday, adding that the country’s year-on-year electricity demand growth remained muted in the first 22 days of March too at 0.8 per cent.

 

The power demand growth for FY26 at 1 per cent will be the lowest in five years. During FY22–FY25, the average growth rate was over 7 per cent. Power demand had last dropped below 1 per cent at the time of the Covid pandemic in FY21.

 

In the current financial year, power demand for the April–February period remained subdued, thanks to a longer-than-expected monsoon. “In 11 months of FY2026, the YoY electricity demand growth remained flat at 0.9 per cent, due to prolonged monsoon conditions and a high base despite some recovery in the winter months,” said Ankit Jain, vice-president and co-group head — corporate ratings, ICRA.

   

ICRA expects power demand to rebound to around 5 per cent in FY27. According to Jain, the rebound is attributed to expectations of normalised weather conditions, a lower base, and continued momentum in industrial and commercial activity.

 

The agency said the current financial year is among the best over the past decade from a capacity addition perspective. India added a record 52.5 GW of generation capacity between April 2025 and January 2026, with renewable energy additions exceeding 39 GW. Jain said capacity addition is double last year’s level, driven by RE projects “commissioned ahead of the transmission charge waiver expiry and followed by thermal capacity addition”.

 

Moreover, coal inventories at power plants, as of March 18, stood at around 53.41 MT, enough for nearly 23 days at the current consumption rate. “As of March 10, coal inventories at power plants stood at 18.9 days, below normative levels due to monsoon-impacted mining operations, though stocks remain significantly higher than September 2024 and 2023 levels,” Jain said.

 

The overall stock position, therefore, remains stable. Further, spot power tariffs on the India Energy Exchange averaged Rs 3.9 per unit as of March 12, 2026, higher than February levels but below March 2025. However, prices remained subdued through most of FY26 amid improved supply conditions and weak underlying demand, Jain said.