Since in many states surface water sources have been utilised fully, there has been a massive expansion of groundwater irrigation. With the progressive decline in the water table, farmers have resorted to the competitive deepening of wells. This has resulted in increased costs of well irrigation and in a new inequity among the well-owners and between well-owning and non-well-owning farmers. Similarly, urban water demands have increased tremendously for domestic and industrial purposes. While there has been an ever-increasing demand for water, there has hardly been any effort to develop infrastructure to treat used water. This contributes to the pollution of the existing water stock. Therefore, water resources are under severe threat not only because of the ever-increasing demand and competing demand (from various sectors), but also because of the diminishing quality caused by discharge of untreated domestic sewage and industrial effluents. The main objective of this paper is to show how the degradation of the groundwater resource base through over-extraction and pollution contributes to inequity, conflicts, competition and, above all, to indebtedness and poverty.