India’s Battery Mission Is 2.8% Complete — and That’s the Investment Case

India’s flagship battery programme is badly off schedule. That is exactly why it matters for capital.

According to a January 2026 assessment by the Institute for Energy Economics and Financial Analysis and JMK Research, India has commissioned only 1.4 GWh of advanced chemistry cell capacity under its Production Linked Incentive scheme, against a 50 GWh target, implying just 2.8 percent execution of the original ambition. The Ministry of Heavy Industries has since hardened its stance, issuing fresh notices in November 2025 to Ola Electric, Reliance New Energy and Rajesh Exports to pay accrued penalties for missing commissioning timelines, and explicitly refusing the deadline extensions and waivers they sought. On any conventional policy scorecard, this is a failure. On an asset-allocation scorecard, it is an unusually pure, under-owned call option.

The global backdrop is shifting in India’s favour even as domestic execution stumbles. In April 2026, G7 finance ministers meeting in Washington agreed to step up cooperation with resource-rich countries, including India, to reduce their dependence on China for critical minerals, explicitly framing this as a diversification and “win–win” opportunity for host nations. A month earlier, India had already moved to secure upstream options, signing a cooperation pact with Brazil in February 2026 to jointly explore and develop critical minerals such as lithium and rare earths, with the goal of building resilient, non-Chinese supply chains. The irony is stark: at the precise moment when G7 capital and policy are actively hunting for non-Chinese critical mineral exposure, India’s primary domestic battery scheme is paying daily penalties instead of producing cells.

The ACC-PLI Scorecard

The numbers on the ACC-PLI scheme are sobering. The IEEFA–JMK report notes that only 1.4 GWh of capacity has been commissioned out of the 50 GWh awarded under the programme, a gap that reflects delays and under-execution by key beneficiaries, including Ola Electric, Reliance New Energy and Rajesh Exports. The Financial Express reported in November 2025 that the government has rejected arguments that Covid-era disruptions and supply bottlenecks from China justified leniency, and has instead directed these firms to pay the penalties stipulated in their contracts for missing agreed commissioning milestones. The scheme’s original promises on investment and job creation are therefore materially lagging the targets that were used to justify the fiscal outlay. In other words, the state’s balance sheet is delivering less capacity, later than planned, at a higher implicit cost per GWh than envisaged.

The upstream picture is no more encouraging domestically. In March 2025, the Ministry of Coal and Mines confirmed that the first commercial auction of lithium reserves in Reasi, Jammu and Kashmir, had to be annulled after attracting no bids at all. The deposits there were only at a preliminary G3 exploration stage, and while their discovery was trumpeted as a strategic breakthrough, the complete absence of bidder interest is a revealing commercial verdict on the current economics and risk profile of Indian lithium mining. The message from the market is that early-stage, domestic lithium assets, under current regulatory and geological uncertainty, are not bankable on a purely private basis.

That is why India’s state-backed mining arm is looking abroad. Khanij Bidesh India Ltd (KABIL), the joint venture created to secure overseas minerals, has launched exploration across five lithium brine blocks in Argentina’s Catamarca province, with geological mapping and sampling underway to test commercial viability, according to a November 2025 operational update. The stated aim is explicitly to secure strategic lithium assets for India’s EV and battery sectors, anchoring future supply from outside China-centric chains. This mirrors India’s February 2026 pact with Brazil, which positions Brazil’s large rare earth reserves as a diversification pillar for India’s industrial and technological ambitions, again with the clear subtext of reducing reliance on Chinese supply.

China’s Leverage, Already Felt

Meanwhile, the vulnerability of India’s current dependence on China has already been demonstrated. CARE Ratings’ June 2025 analysis of China’s April 2025 export controls on rare earth elements warned that the curbs would hit India’s auto sector, particularly EVs, hybrids and high-end internal combustion vehicles, because of the country’s heavy reliance on Chinese high-performance magnets and other REE-intensive components. The report highlights that as existing stockpiles are drawn down, OEMs face the prospect of production curtailments in the absence of alternative supply. Even without quantifying the exact cut in any specific model line, the direction of travel is clear: China’s policy lever on REEs transmits directly into India’s industrial output and, by extension, into earnings and employment.

Conventional commentary tends to frame this as a story of policy disappointment and execution risk: a PLI scheme that under-delivers, an aborted lithium auction, and a scramble to secure overseas assets that are still at exploration stage. That reading is accurate but incomplete. For investors, the more interesting mispricing lies in what is not listed, not benchmarked and not in standard sector allocations. The IEEFA–JMK report makes clear that the ACC-PLI scheme has so far produced a fraction of the targeted capacity, meaning India’s future battery supply chain is still largely on the drawing board. The Financial Express coverage of the government’s refusal to relax penalties underscores that the state is not going to socialise execution risk for corporates indefinitely. Combine that with the G7’s explicit push to channel capital into non-Chinese critical mineral supply, and the result is a large, policy-backed, under-developed industrial ecosystem whose value creation will sit predominantly in private hands for the next decade.

Capital Supply Meets Strategic Gap

The McKinsey–IVCA survey of global limited partners reinforces this point from the capital supply side. The March 2026 report finds that global LPs rank India as the top private-market destination in Asia-Pacific and plan to increase allocations to India-focused funds, driven by macro momentum and entrepreneurial depth. What is striking is that this enthusiasm coexists with relatively muted interest in traditional manufacturing, metals and mining strategies within the Indian private-market universe, which McKinsey notes as an area where LP appetite lags the broader India optimism. For a contrarian allocator, that combination – strong overall India flows, but tepid attention to precisely the sectors that underpin critical minerals and batteries – is the definition of an overlooked opportunity set.

The other blind spot in conventional wisdom is the assumption that the public markets will eventually provide clean exposure to this theme. Right now, the opposite is true. The IEEFA–JMK scorecard shows that the most advanced battery assets under the ACC-PLI scheme are controlled by unlisted entities and that the scheme’s broader ecosystem of component suppliers, recyclers and technology providers is still nascent. The government’s own overseas mining vehicle, KABIL, is a joint venture between public-sector firms but is itself unlisted. The India–Brazil pact on critical minerals is framed as a state-to-state industrial partnership, not a pipeline of IPO-ready assets. In practice, this means that listed proxies in chemicals or metals capture only a thin slice of the future value chain; the rest will be created – or destroyed – in private markets long before it hits public benchmarks.

Asset Class Implications

For equity investors, the immediate implication is that Indian listed markets offer, at best, second-order exposure to the country’s strategic battery and critical minerals push. The ACC-PLI under-execution highlighted by IEEFA and JMK and the government’s tougher stance on defaulters reduce the near-term earnings uplift that public-market investors might have hoped for from local cell manufacturing. On the other hand, CARE Ratings’ warning about potential production curtailments in the auto sector due to Chinese REE curbs introduces a downside risk to Indian auto OEM earnings if supply disruptions intensify. Public-equity allocations therefore need to treat “India battery” as a risk factor for autos and certain industrials, rather than a clean growth theme they can buy directly.

In fixed income, the story is more about sovereign and quasi-sovereign balance sheets and their capacity to absorb the costs of delay. The ACC-PLI scheme’s slow progress and penalty impositions do not, on their own, move the sovereign credit needle, but they do illustrate the execution risk embedded in India’s broader industrial policy, which bondholders increasingly rely on to justify growth-friendly narratives. The government’s refusal, reported by The Financial Express, to waive penalties or extend deadlines for ACC-PLI laggards can be read as a modest credit-positive signal of fiscal discipline and contract enforcement. However, the need for continued overseas resource acquisitions, exemplified by KABIL’s exploration outlays in Argentina, also implies long-dated, foreign-currency capital commitments whose returns will be uncertain for years, something sovereign and PSU bond investors should factor into their risk assessments.

Currency markets will price this through two lenses: external vulnerability and long-term competitiveness. The G7’s April 2026 commitment to help countries like India diversify away from Chinese critical minerals suggests that, over time, India could attract more FDI and concessional capital into its critical minerals and battery ecosystem, which would support the rupee’s structural balance of payments position. Conversely, the immediate need to import higher-value battery cells and REE-intensive components, given the ACC-PLI under-delivery and the lack of domestic lithium mining, keeps India’s external energy-technology bill elevated. For FX-sensitive investors, the key is that any acceleration in domestic cell capacity or successful overseas resource development would gradually reduce this drag, but those are medium-term, not tactical, drivers.

For alternatives, this is the main event. McKinsey and IVCA report that roughly seventy percent of India-focused private-market capital is deployed into unlisted securities across strategies such as venture, growth and infrastructure. The critical minerals and battery value chain fits squarely into that universe: KABIL’s overseas assets, private lithium refiners and recyclers, and technology firms working on alternative chemistries are all predominantly unlisted. The India–Brazil pact on rare earths and lithium opens the door to cross-border joint ventures and SPVs that will most likely be financed through private equity, infrastructure AIFs and specialist resource funds rather than public equity. For LPs and GPs, this is where differentiated sourcing and structuring can actually move the needle.

Geographic Ripple Effects

The geographic ripple effects start with Latin America. KABIL’s exploration programme in Argentina’s Catamarca province places India directly into the “lithium triangle” contest that has so far been dominated by Chinese, US and, to a lesser extent, European capital. While KABIL is still in the geological mapping and sampling phase, its presence signals that future project finance and offtake agreements in the region will increasingly feature Indian counterparties, potentially creating opportunities for global resource PE funds to structure co-investment vehicles around Indian PSUs’ minority stakes. Brazil’s role is different but complementary. With the February 2026 India–Brazil pact, Brazil’s position as a holder of the world’s third-largest rare earth reserves is being explicitly tied into India’s industrial strategy. That sets up a corridor of mining, processing and technology projects that could be financed through Brazil- or global-domiciled vehicles but with Indian strategic backing.

Within Asia, the G7’s Washington statement makes clear that India is seen as a priority partner for diversifying critical mineral supply chains away from China. For regional investors, this increases the likelihood that Japanese and European corporates, backed by their governments, will seek Indian joint ventures or long-term offtake contracts as part of their own derisking. That, in turn, could create layered capital structures in which Indian sponsors bring policy access and domestic market, while G7 corporates and DFIs bring technology and concessional or patient capital. For Chinese producers, the risk is that over a decade this re-routing of investment chips away at their market share and pricing power in certain segments, even if they remain dominant in the near term.

Domestically, the regional impact of the Reasi lithium auction’s failure is instructive. Kashmir Life’s March 2025 reporting on the annulled auction underscores that preliminary G3-stage deposits, even when strategically hyped, are not sufficient to attract serious capital under India’s current framework. That suggests that other states with early-stage critical mineral finds cannot assume a straightforward path from discovery to development. The more likely trajectory is that capital and expertise will flow first to overseas assets with clearer geology and regulatory frameworks, such as Argentina’s brine blocks or Brazilian REE deposits, and only later circle back to more complex domestic projects once the ecosystem and risk appetite have matured.

Portfolio Construction

From a portfolio construction perspective, the key is to separate what is investible today from what is merely strategic rhetoric. Public-equity investors should treat India’s battery and critical minerals story primarily as a risk factor and a macro context for existing holdings, especially in autos and industrials, given the exposure to Chinese REE curbs documented by CARE Ratings. They can complement this with small, diversified positions in listed companies that may tangentially benefit from PLI-driven investment, but should not assume direct, high-beta exposure to cell manufacturing until more capacity is actually commissioned, as tracked by IEEFA and JMK.

For fixed-income portfolios, especially those holding Indian sovereign and PSU paper, the focus should be on monitoring contingent liabilities and capex commitments in overseas mining ventures. KABIL’s Argentine exploration programme is still in early stages, but if and when it transitions to development, the associated funding structures will matter for PSU balance sheets and, by extension, quasi-sovereign risk. Bondholders may find selective opportunities in project-linked debt backed by G7 or multilateral support, consistent with the diversification agenda outlined at the Washington G7 meeting, which can offer enhanced credit quality relative to standalone corporate risk.

Alternative investors and AIFs, particularly Category I and II vehicles with mandates in infrastructure, climate tech or deep tech, are structurally best placed to capture the upside. The McKinsey–IVCA work confirms that LPs are already increasing allocations to India-focused private-market funds. The contrarian opportunity is to tilt those flows toward manufacturing, metals and mining strategies that are currently under-subscribed relative to software and consumer themes, even though they sit at the heart of the critical minerals and battery build-out. That means building specialised teams capable of underwriting geological, processing and policy risk, and structuring investments around state-backed anchors such as KABIL or around cross-border JVs emerging from the India–Brazil pact.

Scenario Analysis

Scenario analysis helps frame how much capital to commit, and on what terms. In a base case, with roughly a 55 percent probability, India’s ACC-PLI scheme gradually catches up, but still misses its original 50 GWh timeline by several years. Penalties continue to be enforced, as indicated by the government’s November 2025 stance, forcing some reallocation of capacity to better-capitalised players. KABIL’s Argentine exploration progresses to more advanced feasibility stages but full-scale production remains beyond the current forecast horizon. China maintains calibrated REE export controls, similar to those imposed in April 2025, but avoids extreme measures that would trigger a full-blown supply crisis. In this world, public markets see modest earnings drag in autos and incremental upside in industrials, but the real value creation is in private platforms that consolidate fragmented refining and recycling assets.

In a bullish upside scenario, at around 25 percent probability, the combination of G7 support, Brazil and Argentina partnerships and domestic policy learning effects leads to a faster-than-expected build-out. ACC-PLI capacity additions accelerate, closing much of the current 2.8 percent gap over the next several years. KABIL’s Argentine blocks yield commercially viable resources earlier than anticipated, attracting significant co-investment from global resource funds. The India–Brazil pact catalyses at least a handful of bankable REE and lithium projects. China, under pressure from coordinated G7 diversification, moderates its use of REE export controls, reducing tail-risk for OEMs. In this scenario, early private-market investors in the ecosystem can plausibly earn outsized returns, and public-market proxies rerate on improved growth visibility.

The downside scenario, with a 20 percent probability, is that execution continues to disappoint. ACC-PLI beneficiaries struggle to raise capital or secure technology, keeping commissioned capacity well below target for a prolonged period, as the current IEEFA–JMK scorecard already hints. The government, constrained by fiscal and political considerations, remains strict on penalties but is slow to redesign the scheme. KABIL’s overseas exploration fails to yield commercially attractive projects in the current cycle, while domestic auctions like Reasi continue to languish without credible bidders. At the same time, China tightens REE export controls further, beyond the April 2025 measures analysed by CARE Ratings, forcing deeper production cuts in Indian autos and other REE-dependent sectors. In that world, the theme is more about loss avoidance than return maximisation: investors who avoided over-exposure to vulnerable OEMs and who structured downside-protected private investments will outperform.

Signals to Watch

Across all scenarios, a handful of indicators will tell investors whether India’s battery mission is finally moving from penalty payments to production. The first is the pace of actual GWh commissioning under the ACC-PLI scheme, as tracked by IEEFA and JMK, and the Ministry of Heavy Industries’ ongoing enforcement behaviour, as reported by outlets such as The Financial Express. A meaningful uptick in commissioned capacity, alongside a reduction in new penalty notices, would be the clearest sign that execution risk is receding.

The second is the progression of India’s overseas mineral ventures and partnerships. Concrete milestones in KABIL’s Argentine exploration, such as resource estimates or pre-feasibility studies, and the translation of the India–Brazil critical minerals pact into specific project announcements or offtake deals, will determine whether India’s diversification away from China is more than diplomatic signalling. Investors should track these alongside any follow-through from the G7’s April 2026 commitment to support critical mineral diversification, especially in the form of joint financing platforms or guarantees.

For portfolios, the bottom line is that India’s battery mission is both behind schedule and ahead of the market. The under-execution documented by IEEFA and JMK, the annulled Reasi auction and the government’s willingness to penalise defaulters all point to a bumpy path to import substitution. At the same time, the confluence of G7 diversification efforts, the India–Brazil pact, KABIL’s Argentine push and rising LP allocations to India’s private markets create a structurally favourable capital environment for the right kind of patient, risk-aware investors.

Public-market allocators should treat this as a macro and sector risk to be hedged and monitored, not a direct theme to overweight. Private-market allocators, particularly those running Category I and II AIFs or global PE resource strategies, should see it as one of the most compelling, if operationally complex, import-substitution trades in India today. The mission may only be 2.8 percent done, but that is precisely why most of the returns remain unpriced.