Green Growth as a Pillar of Viksit Bharat: A Fixed Effects Analysis of Renewable Energy, Finance, and State-Level Development in India

Abstract As India pursues the "Viksit Bharat @2047" vision transforming into a USD 30–40 trillion developed economy by the centenary of its independence—the imperative of decoupling economic growth from carbon emissions has become a central policy challenge. This study empirically examines the role of renewable energy (RE) capacity and green finance in driving state-level economic development. Utilizing a balanced panel dataset of 30 Indian states and union territories from 2005 to 2023, we employ a Fixed Effects (FE) panel regression model to control for unobserved time-invariant heterogeneity. The results provide robust evidence that a 10% increase in installed RE capacity is associated with a 1.42% increase in Real Gross State Domestic Product (GSDP), supporting the "growth hypothesis" where energy transition acts as an engine for development. Furthermore, green finance, proxied by bank credit to non-conventional energy sectors, significantly contributes to regional growth, particularly following the Reserve Bank of India’s (RBI) systematic expansion of Priority Sector Lending (PSL) limits to INR 35 crore in 2025. Human capital investments in health and education are found to be critical moderators that enhance the absorptive capacity of states for green innovation. The findings suggest that green growth is not an impediment but a catalytic pillar of India’s roadmap to high-income status. Policy recommendations focus on the scaling of municipal green bonds, grid modernization with battery storage, and institutional reforms to standardize the national climate finance taxonomy.