This study quantifies the magnitude of water that could be reallocated from irrigation to other sectors in India without compromising agricultural output. It also recommends a pathway for India’s reallocation strategy. The study attempts to provide a high-level preliminary estimate of the economic costs of inaction if the current water allocation pattern across sectors continues. Further, it stresses that inter-sectoral water transfer must be accompanied by appropriate incentives for water users across sectors along with institutional and regulatory restructuring.