To efficiently mitigate the multitude of direct and indirect impacts, basin-scale drought characterization is imperative, particularly for India, where water scarcity is continually increasing. We jointly used the GRACE gravity data, PCR-GLOBWB model outputs, and in situ data to quantify the deficits based on land water storage (LWS) and groundwater storage (GWS) in Peninsular India for 35 years from January 1980 to December 2014. The results showed that the study basins experienced high interannual variations despite the minimal linear LWS trends (0.26–0.56 mm yr−1). GWS showed a slow but persistent response (longest deficit spanning ~6 years) to the seasonal variations in the hydrological fluxes and remained the major contributor to LWS. We demonstrated (1) the potential of the PCR-GLOBWB model to analyze LWS and its segregated components beyond GRACE data records, (2) the LWS-based index as a better drought indicator than traditional drought indices, and (3) GRACE-LWS as a proxy indicator of real-time groundwater monitoring without relying upon the intermittent in situ observations. This study underscores the need to revise the water allocation strategies and irrigation systems to maintain the sustainability of groundwater systems and may serve as a holistic framework for remotely monitoring the water beneath our feet, especially in the data-limited regions globally.