Terrestrial ecosystems (TEs) play a crucial role in carbon sequestration and climate regulation. While interactions between surface water and ecosystems are well-studied, groundwater-ecosystem relationships remain poorly understood, particularly in groundwater-dependent regions like India. This study investigates the relationship between water table depth (WTD) and ecosystem productivity across India, considering the variation in irrigation practices, land use and climate types, from 2000 to 2021. We employ Ecosystem Water Use Efficiency (WUE_e), the rate of carbon uptake per unit of water consumed, to examine these interactions at different spatial scales. Our findings reveal a strong link between WUE_e and WTD. Shallower WTD regions, such as the lower Himalayas and Northeast India with forests and dominated by a wet/humid subtropical climate, exhibit higher WUE_e (1.5–3.5 g C/kg H₂O). Whereas deeper WTD regions like northwest India, characterized by shrublands and an arid climate, display lower WUE_e (<1 g C/kg H₂O). This suggests vegetation in arid/semi-arid regions shows higher sensitivity to water availability compared to wetter areas. This is also evident by a declining WUE_e trend and increasing elasticity of WUE_e (εWUE) to interannual climatic variability with increasing WTD in these regions. Furthermore, the study identifies potential unsustainable groundwater use for irrigation in areas like the Trans Gangetic plains. Irrigation has a strong correlation with evapotranspiration (ET) (r = 0.4–0.6) in deep WTD zones, but no correlation with WUE_e. This implies that intense and unsustainable irrigation might disrupt the natural water use strategies of vegetation. This research, by improving understanding of these interactions, aims to contribute to the sustainable management of India’s groundwater resources.