Rural area electrification in developing countries helps to improve the quality of life of the people. It increases productivity and supports education. It also discourages people from migrating towards urban areas. In India about 70% of the population lives in rural area, hence it is necessary to electrify these villages to achieve inclusive economic growth. Transmission and distribution of power to this less densely populated areas which are located far away from the power generating stations is the major reason for not able to achieve 100% electrification in the country. Hence it is necessary to find out an energy source which can be decentralized to supply power to these hamlets. As India is blessed with solar energy which is omnipresent in almost all parts of the country, micro grid system which uses solar photo voltaic panels seems as the finest option. The solar photo voltaic system converts light energy into direct current power using photovoltaic effect. Battery is used to store the extra power generated during the day and used during nights. Inverters and power conditioning devices are used to convert direct current power generated by solar photo voltaic systems to alternative current, which is supplied to the load using power distribution network which adds to system cost. At present the capital cost and the land requirement for this system is higher than all other renewable energy power generation system. But it has very less operation and maintenance cost which makes it superior to other system. Moreover additional modules can be added to it when the power demand increases. This paper says about how rural area electrification can be achieved in India by solar photo voltaic system micro grid system and the challenges which has to be over come during implementation. © 2012 Elsevier Ltd. All rights reserved.