The objective of the present investigation is to develop and evaluate economic production of biofuels (ethanol) using immobilized yeast cells (Saccharomyces cerevisiae NCIM 3095) from renewable carbon source Madhuca indica (Mahua flowers). The entrapment of yeast cells in calcium alginate-polyvinyl alcohol (CA-PVA) film were found most suitable immobilizing matrix as a protective carrier to increase the stability and tolerance limit during continuous fermentation. Under similar fermentation conditions, immobilized yeast cells produced higher ethanol yield (similar to 0.48 g/g) and productivity (similar to 28 g/L/h) as compared to traditional suspended free cells system in continuous fermentation with dilution rate of 0.4/h. Further, the fermenter was coupled with solar driven membrane distillation (SDMD) process for separation and concentration of ethanol after fermentation. The new system does not require centrifugation/microfiltration for separation and/or recycle of biomass as the cells were immobilized and could be easily separated by simple filtration. The SDMD with cross flow module in rectangular shape and counter-current flow of streams (hot and cold) ensured higher ethanol flux (23 kg EtOH/m(2)/24 h) in comparison to existing literature. The new process design is compact yet flexible, eco-friendly, energy intensive and sustainable process for the development of economic biofuel production.