Jefferies has forecast a recovery in India’s electricity consumption that could improve the power sector’s fortunes by 2026, after a subdued 2025 marked by flat demand and delayed project activity. The investment bank trimmed its fiscal 2026 demand growth estimate to 2 per cent from an earlier 4 per cent, but expects a medium-term rebound to annual growth of 5–6 per cent as weather patterns normalise and industrial activity strengthens.
India power demand recovery key drivers
The firm attributes the near-term weakness to prolonged monsoon rains and weak industrial output. Between April and November 2025, power demand was broadly flat year on year. Heavy rainfall reduced residential cooling loads and curtailed irrigation and pumping requirements in agriculture, while subdued factory activity further weighed on consumption.
Jefferies noted historical precedents in fiscal years 2008 and 2014 when above-average rainfall coincided with very low demand growth of 1–2 per cent. Against that backdrop, the bank expects demand to pick up once weather returns to seasonal norms and industrial throughput recovers. Rising ownership of consumer durables, particularly cooling products, as well as rapid growth in data centres and electric vehicles, are cited as durable demand drivers.
The slowdown has rippled through the renewable segment. Although renewable awards reached 41 GW in fiscal 2025, PPA signings slowed considerably to 8.7 GW between April and November 2025. State Electricity Boards have postponed contract signings, leaving roughly 44 GW of renewable PPAs unsigned. Jefferies also flagged transmission connectivity delays as a constraint on new generation coming online.
Thermal generation remains central to meeting base load requirements. The Ministry of Power has raised the thermal capacity addition target to 97 GW for fiscal years 2024–35, up from an earlier 80 GW goal. At present, 36 GW of thermal capacity is under construction, with 23 GW already awarded and another 24 GW in the pipeline. Jefferies emphasised that new state tenders with assured coal supplies lower merchant risk for generators.
From an investment perspective, Jefferies highlighted a projected 10 per cent capital expenditure compound annual growth rate for the sector. That sustained capex, together with demand growth from data centres, electrification and electric vehicles, supports a constructive long-term demand profile even if near-term earnings remain under pressure.
However, the report cautioned that valuation re-rating across power stocks is unlikely until consumption fully recovers. Market participants and developers are watching for renewed PPA activity and improvements in grid connectivity that would allow capacity additions, particularly in renewables, to proceed at the planned pace.
For policymakers and market participants, the immediate priorities are encouraging offtake through timely PPA signings, accelerating transmission projects and ensuring fuel availability for thermal units that will continue to provide base load. If those elements align and demand trends revert to the bank’s forecasts, investors may see clearer upside in the sector by 2026.
Key Takeaways:
- Jefferies expects India power demand recovery to reach 5–6% medium-term following a weak 2025.
- Monsoon rains and sluggish industry suppressed demand and slowed renewable PPA signings.
- Thermal capacity additions and a 10% capex CAGR underpin supply readiness.
- Sector valuations may remain muted until consumption normalises.
