Unregulated groundwater extraction has led to declining groundwater tables and increasing water scarcity in the Indian subcontinent. Understanding how farmers respond to this scarcity is important from multiple perspectives—equity in access, livelihood security and resource sustainability. We present a case from the rapidly urbanizing Arkavathy sub-basin near Bangalore city in southern India where irrigation is fully groundwater dependent. Using cross-sectional data from a stratified random sample of 333 farmers from 15 villages, we investigated the factors that determine their choice of crops under conditions of water scarcity and urbanization. Binary logit analysis showed that farmers with a large landholding respond by tapping deep groundwater using borewells. Multinomial logit analysis revealed that access to groundwater, variation in the proximity to the product market (city) and labour availability influence crop choice decisions. We observe that current responses indicate what has been characterized in the literature as chasing strategies. These largely favour well-off farmers and hence are inequitable. While the choice of water-intensive crops and unregulated pumping have aggravated water stress, the uptake of water saving technologies among irrigated farmers has been low, showing that resource sustainability may not be a concern where non-farm diversification opportunities exist.