In recognition of the importance of drip irrigation, the paper addresses two important issues: factors limiting or enhancing the adoption of drip irrigation systems, and policy actions needed at different levels to speed up the adoption of drip irrigation and groundwater development. The drip method of irrigation is found to have a significant impact on resources saving, cost of cultivation, yield of crops and farm profitability. The adoption of drip irrigation is significantly influenced by experience, farm size, proportion of wider spaced crops and participation in non-farm income activities. The policies should focus on promotion of drip irrigation in those regions where scarcity of water and labour is severe and where shift towards wider-spaced crops is taking place.