In MIPS processor, address bus is of 32 bits. So on addressing an instruction, a whole 32 bit instruction is fetched. How is it byte addressable then? I mean if on addressing a particular address, the memory sends 32 bits as a wholesome, how is it byte addressable?
"Byte addressable" means that a 32-bit address points to a single byte of memory, so if you increment that address, it points one byte further.
"Word addressable" means that (on a 32-bit processor) every 32-bit address points to a 32-bit word, so if you increment that address, it points four bytes further in memory.
Some machines can support both byte addressable and word addressable modes of operation. But for the naming, we're concerned with the smallest unit they can address.