Water („the elixir of life‟) is a basic need for life of all living organisms. Though the earth‟s water resources are abundant and renewable, 97% of water is saline and only 3% is fresh. Humans use water for 1. Agricultural, 2.Industrial, 3.Domestic, 4.Recreational and 5. Environmental activities and the vast majority of such uses require the less-abundant fresh water. As the world human population is growing and demands to support modern lifestyles are increasing, tremendous pressure is exerted on natural water resources leading to water stress and water crises. There is competition among nations and even among regions of a nation for the scarce water resources available. As agriculture accounts for an estimated 70% worldwide water use and rural India still predominantly depends on agriculture as the main source of income, suitable policies, strategies and plans to safeguard water resources need to be adopted for a sustainable and inclusive rural development. The present paper is basically a review of relevant literature. It shall: 1. focus on the world water scenario, 2. highlight the effect of water scarcity on sustainability and inclusiveness of development, 3. enumerate the available solutions for scientific and economic management of water resources and 4. elaborate the various attempts to tackle the water related problems by the Government of India with international assistance. The findings and conclusions may offer some useful hints, tips and guidance for nations of rest of the world to formulate their country-specific strategies of water management.