About 72 million households in rural India do not have access to electricity and rely primarily on traditional biofuels. This research investigates how rural electrification could be achieved in India using different energy sources and what the effects for climate change mitigation could be. We use the Regional Energy Model (REM) to develop scenarios for rural electrification for the period 2005–2030 and to assess the effects on greenhouse gas emissions, primary energy use and costs. We compare the business-as-usual scenario (BAU) with different electrification scenarios based on electricity from renewable energy, diesel and the grid. Our results indicate that diesel systems tend to have the highest CO2 emissions, followed by grid systems. Rural electrification with primarily renewable energy-based end-uses could save up to 99% of total CO2 emissions and 35% of primary energy use in 2030 compared to BAU. Our research indicates that electrification with decentralised diesel systems is likely to be the most expensive option. Rural electrification with renewable energy tends to be the most cost-effective option when end-uses are predominantly based on renewable energy, but turns out to be more costly than grid extensions when electric end-use devices are predominantly used. This research therefore elaborates whether renewable energy is a viable option for rural electrification and climate change mitigation in rural India and gives policy recommendations.