While previous studies have focused on the technical aspects of groundwater extraction and optimal cropping patterns, there is a notable lack of research on the socio-economic factors affecting groundwater access and agricultural productivity, especially at a micro-level in Punjab, India. This study, therefore, investigates the water use efficiency (WUE) and economic water productivity (EWP) of paddy and wheat crops across diverse farm sizes and districts in Punjab, offering critical insights into agricultural water management. The study is based on primary data from Punjab, India, with Sangrur, Jalandhar, Pathankot, and Bathinda districts selected for groundwater profile analysis via multistage random sampling of 246 farmers. Notably, Punjab exhibits high EWP for wheat, surpassing the national average. However, disparities exist across districts, emphasizing the importance of localized interventions. Larger farms consistently demonstrate higher WUE and EWP, underlining the significance of scale in optimizing water inputs. Factors such as farm size, crop variety, and regional variations significantly influence WUE and EWP. Tailored approaches for marginal farmers and districts with lower efficiency are crucial for promoting sustainable agricultural practices. The findings underscore the need for targeted policy interventions to enhance water use efficiency and productivity in Punjab’s agriculture sector.