Economic growth is necessary for worldwide prosperity, but achieving sustainable economic development remains a major challenge for developing countries. A nation’s progress is intricately linked to its manufacturing sector, necessitating increased energy consumption for its growth. As energy consumption increases, both output and Total Factor Productivity Growth (TFPG) increase. If there is demand for the products in the market, firms would enhance their production, which in turn would increase the level of energy consumption, leading to pollution and environmental degradation. To avoid this degradation, the firms should use advanced and eco-friendly technology. But, this surge in energy usage comes at a cost, causing environmental pollution through the emission of harmful gases like CO, CO2, SO2, NO2, and particulate matter, which contaminate the environment. Considering the above, this study investigates the influence of environmental emissions on TFPG of manufacturing industries in India, at the state level for the period 1998–99 to 2019–20. The study has considered two alternative measures of output and labour input. The result suggests that Andhra Pradesh turns up with highest annual average TFPG under both measures of output, Y* and Z*. Highest energy intensity is shown by Madhya Pradesh (under Y*) and Punjab (under Z*). High value of energy intensity shall lead to environmental degradation. Policymakers should aim for an optimal mix between productivity growth on the one hand and environmental emissions on the other.