The purpose of this article is to assess the impact of policy interventions through watershed development (WD) on the livelihoods of the rural communities. This is done by assessing the programme in the context of a sustainable rural livelihoods framework, that is, looking at its impact on the five types of capital assets and strategies required for the means of living. The article also examines the vulnerability and stability of these capital assets, as well as analysing which people participate in the programme and enhance their livelihoods through sharing its benefits. In the light of the analysis, it is argued that watershed development holds the potential for enhanced livelihood security even in geo-climatic conditions where the watershed cannot bring direct irrigation benefits on a large scale. In such fragile environments, however, watershed development is a necessary but not a sufficient condition for sustaining rural livelihoods. While the focus of watershed development is primarily on strengthening the ecological base such as water bodies (including traditional tanks), grazing lands and wastelands, it should be complemented with other programmes which focus on landless poor households in order to make it pro-poor. In the context of low rainfall regions where improvement in irrigation facilities is slow, agriculture alone cannot support the communities. Policies and programmes should aim at creating an environment for diverse livelihood activities, which are the choice of the household rather than distress activities.
