Analytics firm Crisil — part of Standard & Poor — said policy uncertainty and tariff caps means the sector "witnessed a material waning of developer interest" in the last financial year.
As a result, India can expect its renewable generation capacity to grow to 104GW by 2022.
Over a quarter of the 64GW of capacity that was auctioned by the federal agency SECI either received "lukewarm" or no bids at auction.
Meanwhile another 31% is facing delays after being tendered.
Crisil cited the ongoing tariff negotiation in Andhra Pradesh as an example of how the gap between policy ambition and execution is growing.
"At the end of July 2019, the state’s distributed companies owed [approximately] INR 26 billion ($36.7 million) to renewable energy generators, part of which was because the state government had been delaying payments over a tariff dispute," Crisil said.
"Such prolonged payment delays and disputes not only set a negative precedent, but also put at risk existing and planned investments," it added.
Crisil said INR 2.6 trillion ($36.7 billion) of investment was needed over the next five years in renewable energy but called on the government to set a coherent policy to encourage investment confidence.
According to Windpower Intelligence, the research division of Windpower Monthly, India has added just 1.8GW of wind capacity in 2019.