In the last years, India has taken a number of initiatives to boost small hydropower development based on the assumption of being a green energy source with only limited disturbances on the social and natural environments. However, its real environmental performances have not been examined. The intention of this paper is to evaluate the potential environmental impacts of Small Hydropower Plants (SHPs) in India in light of their exemption from any Environmental Clearance procedures. A cradle-to-use analysis of a SHP planned on the Kavery River in India was carried out using the GaBi Software and the ISO 14040 guidelines. The CML 2001, LANCA, and the methods developed by Chaudhary et al. (2015) were applied to characterize the impacts. This paper goes beyond conventional LCA and the sustainability paradigm of GHG emissions, by including a comprehensive evaluation of the impacts from land use and land use change in terms of their effects on terrestrial and aquatic biodiversity, on ecosystem services and in terms of biogenic GHG emissions. Sensitivity analyses of how predefined parameters affect the performances of the dam were also carried out. Further, a distance-to-target weighting factor based on the concept of Carrying Capacity was applied. For the case study, depending on the impact category selected, the primary impacts are associated to the preconstruction, the construction, and the operation stages. These are the main contributors, in terms of impacts to ecosystem services, to biodiversity, and to global warming and eutrophication. As per material and energy inputs, concrete, steel, and electricity are the three dominating sources of impacts. The results of the sensitivity analysis suggest that the amount of organic matter washed into the reservoir as well as the plant output influence significantly the environmental performance of the dam. Based on the weighted results, Global Warming appears to be the most relevant impact with a relative contribution of 1.76E−14% to the Global Carrying Capacity threshold. The study shows the need to account for a broader spectrum of environmental categories when assessing SHPs, underpinned by the significant impacts to biodiversity and ecosystem services as evidenced by the application of land use indicators. This can have long lasting consequences on the stability of a functioning ecosystem and its ability to provide valuable services. It also shows the need to reconsider the exemption of SHPs from any environmental impact assessment procedure.