This paper discusses the results from on-farm community watersheds through groundwater management as the drivers for sustainable management of watersheds in dry land areas. The issues of sustainable development and management of the groundwater resource through integrated watershed management (IWM) approach are also dealt with, in the context of food production and security. Water use efficiency measures are needed along with integrated management of water resources in watersheds for sustaining the development initiatives. Increased rainwater and groundwater use efficiency could maintain the incomes as well as sustain development. The measures suggested in the National Water Policy to promote sustainability of groundwater should be the cornerstone in the groundwater development and regulation strategy in the country.