MAINS Current Affairs includes Indian Reservoirs can Host 102 GW Floating Solar Capacity: Report & Understanding the Fall in India’s Net Foreign Direct Investment (FDI)

RENEWABLE ENERGY

1. Indian Reservoirs can Host 102 GW Floating Solar Capacity: Report

Context: India’s reservoirs can host about 102 gigawatt (GW) of floating solar capacity, according to the first comprehensive national assessment by the National Institute of Solar Energy (NISE).

Major Highlights

• Report: Solar PV Potential of India (Floating Solar).
• Total FSPV Potential: It estimates India’s total floating solar (FSPV) potential at around 102.18 GW, with a constraint of usingonly 20% of the reservoir area.
• Region wise Potential: High concentrations in Maharashtra, Madhya Pradesh, Karnataka, Odisha, Telangana and Gujarat, reflecting the availability of large, technically suitable reservoirs and inland water bodies.
• Complimentary to Ground-mounted PV: Floating solar is a significant and scalable complement to ground-mounted PV in India’s renewable energy portfolio.
• Water Conservation: FSPV also contributes to water conservation by shading water bodies, thereby reducing evaporation by 30–60%. Large scale projects demonstrate the impact of saving nearly 19.5 million cubic meters of water per year.
• Economically, FSPV systems are currently approximately 25% more expensive upfront than land-based solar due to floating structures, anchoring, and waterproofing.
  • However, higher efficiency, land savings, water conservation, reduced transmission costs, and hybrid integrationimprove long-term financial viability.
• Comparison to Ground-mounted solar systems: Ground-mounted solar systems dominate India’s roughly 100 GW of installed solar capacity, requiring three to four times more areaper megawatt than the panels themselves occupy.
  • Land acquisition, which is costly, prone to conflict with agriculture and habitation, has historically and continues to be a chokepoint as India pursues 500 GW of non-fossil capacity by 2030.

Floating Solar Photovoltaic (FSPV)

• Also known as “floatovoltaics,” is a technology wheresolar panels are installed on buoyant structures floating on water bodies like reservoirs, lakes, and dams.
• Globally,floating solar reached about 6 GW by 2024, nearly 90% of it in Asia.
  • China leads, with installations such as a 120 MW plant on a fish farm in Poyang Lake.
  • The Netherlands accounts forroughly three-fourths of Europe’s capacity, built largely on quarry lakes.
• India’s flagship is theOmkareshwar floating solar park on the Narmada river in Madhya Pradesh — at 278 MW, the country’s largest, with plans to scale to 600 MW.

Key factors Driving the rise of FSPV:

• Land-use Advantages:FSPV uses water surfaces that typically have low competing demands. This reduces land acquisition challenges and minimises social conflicts compared to large GMPV installations .
• Enhanced Energy Performance:Water bodies provide a cooling effect on PV modules, which can reduce operating temperatures and potentially increase energy yield.
• Synergy with Hydropower: FSPV can be co-located with hydropower reservoirs, allowing shared infrastructure and enabling hybrid generation strategies.
• Rapid Market Growth and Policy Momentum: Countries like China, the Netherlands, Singapore, and South Korea have established dedicated guidelines. This standardisation effort is improving investor confidence and supporting utility-scale deployments.

Challenges

• Despite the rapid growth, FSPV still faces challenges related to system reliability, wave-induced stress, environmental uncertainties, and a lack of long-term performance datasets.
• The report underscores the need for better modelling frameworks, and robust degradation assessments.

Way Ahead

• Development of a Dedicated Solar Potential Portal: To enable more informed, transparent, and actionable planning, NISE is committed to developing a dedicated Solar Potential Portal.
• Integration with National and State-Level Energy Planning:NISE’s periodic assessments and portal-based data will be directly linked to national and state energy planning frameworks.
  • This will enable:Prioritisation of high-potential zones for ultra-mega solar parks.
  • Strategic allocation of resourcesfor grid strengthening and infrastructure development.
• Through a combination of continuous potential updates, a dedicated geospatial portal, and application-specific assessments, NISE aims to provide a scientific, transparent, and policy-relevant foundation for India’s solar roadmap.

Economy

2. Understanding the Fall in India’s Net Foreign Direct Investment (FDI)

Context: India’s net Foreign Direct Investment (FDI) has witnessed a sharp decline in recent years despite strong gross inflows.

What is Foreign Direct Investment (FDI)?

• It refers toinvestments made by foreign entities (individuals or companies) in the business interests of another country, typically in the form of ownership or control of enterprises.
• At present,FDI is prohibited in lottery, gambling and betting, chit funds, Nidhi company, real estate business, and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco.
• Net FDI:It represents the difference between foreign investment entering the country and capital flowing out through disinvestment and repatriation.
  • A decline in net FDI does not necessarily imply a fall in investor interest, as gross inflows may remain strong.
  • India’s net FDI fell dramatically from $44 billion in 2020-21to less than $1 billion in 2024-25, before recovering modestly to $7.6 billion in 2025-26.
  • This decline occurred despite a substantial gross FDI inflow of $94.6 billion in 2025-26, indicating that large capital outflows are offsetting fresh inflows.

Evolution of India’s FDI Policy

• The economic reforms of 1991 promoted FDI primarily to acquire advanced technology, enhance exports, and conserve foreign exchange reserves.
• Over time, policy emphasis shifted towards attracting larger volumes of foreign capitaland improving India’s investment attractiveness.
• Consequently, concerns relating to the quality of investment, technology transfer, and future external payment obligations received relatively less attention.

Different Types of FDI Investors

• Real FDI (RFDI):Real FDI is undertaken by multinational corporations that establish production facilities and service operations in the host country.
  • Such investments generally bringtechnology, managerial expertise, employment generation, and long-term industrial development.
  • Real FDI is considered the most beneficial form of FDIfrom a developmental perspective.
  • It accounted for only 41.9%of effective inflows during 2022-23 to 2025-26.
• Financial Investors: Financial investors include private equity funds, venture capital firms, sovereign wealth funds, and asset management companies.
  • Their primary objective is earning capital gains rather than building long-term productive capacity.
  • They accounted for 5% of effective inflows,nearly matching the share of Real FDI.
• Diaspora investments and special purpose vehicles (SPVs): Diaspora investors and Special Purpose Vehicles (SPVs) contributed 6% of effective inflows.
  • These investments are often routed through offshore financial centresand may involve round-tripping of domestic capital.

Routes for FDI in India

• Automatic Route: No prior approval is required.
  • Investors need to inform the Reserve Bank of India (RBI)after making the investment.
  • Most sectors, such as manufacturing and software, fall under this route.
• Government Approval Route:Requires prior approval from the concerned Ministry or Department.
  • Sectors such as telecom, media, pharmaceuticals, and insurance fall under this route.

Why Has Net FDI Declined?

• Rising Disinvestment and Capital Repatriation: The principal reason for weak net FDI is the growing scale of investor exits and capital repatriation.
  • During calendar year 2025, total recorded divestment reached $52 billion.
  • Of this, 45 major private equity and venture capital exits accounted for nearly $29 billion.
• Declining Manufacturing-Oriented FDI: Manufacturing FDI has declined across three consecutive four-year periods.
  • Real FDI into manufacturing accounted for only 6% of total effective inflows during the latest four-year period.
• Rising Outward Foreign Direct Investment (OFDI):India’s outward FDI has increased significantly in recent years.
  • Between 2023-24 and 2025-26,Indian firms invested nearly $65 billion
  • The International Financial Services Centre (IFSC) at GIFT Cityis emerging as an important conduit for cross-border capital flows.
  • OFDI routed through GIFT City increased from $246 million in 2023-24to $1.18 billion in 2025-26.

What are the Concerns?

• Financialisation of FDI:The growing share of financial investors may reduce technology transfer and long-term industrial benefits.
• Weak Manufacturing FDI:The declining share of manufacturing-oriented FDI could hamper industrialisation, employment generation, and exports.
• Declining Net FDI:Rising disinvestment and capital repatriation have significantly reduced net foreign exchange gains.
• Gross vs Net FDI Gap:Strong gross inflows may mask the underlying weakness in net FDI and investment quality.
• Capital Recycling Risks:The use of SPVs and offshore financial centres can obscure the true nature of investment flows.

Way Ahead

• Prioritise Quality over Quantity: India should focus on attracting technology-intensive, export-oriented, and employment-generating FDI rather than merely maximizing inflow volumes.
• Promote Manufacturing FDI:Policy support should encourage greenfield investments in manufacturing to strengthen industrial capacity and integration with global value chains.
• Enhance Transparency in FDI Reporting:Official data should distinguish between Real FDI, financial investments, and SPV-based flows to enable better policy assessment.
• Strengthen Domestic Competitiveness: Improving infrastructure, logistics, ease of doing business, and innovation ecosystems can attract more productive and sustainable investments.

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