Water is necessary essential for development and sustenance of healthy ecosystems. The rapid population growth and industrialization have significantly increased the water demand in developing countries. Meeting the growing demands is challenging owing to the simultaneous increase in consumption and continuous decrease in rainfall. Innovative water management practices should be focused on to provide sufficient water for the present and future generations. However, the planning and management of water resources and variables influencing them are dynamic and complex. Traditional approaches cannot capture the dynamic characteristics of variables and their effects on future water use. This study proposes a dynamic simulation model with real data on available resources, considering the future dynamics of the population, manufacturing, and service industries. In addition, recommendations for sustainable water supply are presented. The current situation in the Visakhapatnam urban area indicates that it cannot meet the water demands in the next 5 years, with a probable deficit of up to 40%. The deficit would increase to 55% from the sixth year onwards, indicating further deterioration. The deficits can be reduced to 28% with the proposed policy of increasing canal supplies or increasing industrial recycling and sewage plant efficiencies. Moreover, combining these policies can reduce the deficit to 5% of the current situation. Water supply organizations may consider these suggested policies during planning to meet fresh water demand.