China implemented the Rural Primary Electrification Program in the 1980s and 1990s with the aim of accelerating rural electrification through the use of small hydropower. This study delves into the economic impact of this program, shedding light on the role of rural electrification in China’s development. Using a difference-in-differences model, we find that after the completion of the electrification program, the GDP per capita of the pilot counties increased by an additional 5.3% compared with that of the counties that would be included in the program later. The program primarily boosted the secondary industry, with less pronounced effects on primary and tertiary sectors. Moreover, the program promoted economic growth more significantly in hilly areas with abundant hydropower resources and labor resources. In addition, using nighttime light data, we find that the electrification program illuminated dark areas without light. Finally, the effect of the electrification program on township and village enterprises was an important channel through which electrification promoted economic growth.