Participatory watershed development has proved to be an attractive approach to rural development over recent decades (see for example, Farrington et al., 1999; and Hinchcliffe et al., 1999). Projects and programmes have been implemented across Latin America, Africa and South Asia, but it is perhaps in India where the approach has been most popular and enduring. Here, central government investment has been running at over US$ 500 million a year. This paper considers the impacts of participatory watershed development on rural water supplies for domestic use. Do watershed development projects lead to improved water resource availability and supply? Do they help to address the increasing competition for scarce water resources between domestic users, industry and irrigation? Or can they worsen the water supply situation in villages? It is focused on dryland India.