<p>Ecosystem health assessments are critical for understanding ecosystem functioning under increasing climatic and anthropogenic stress, particularly across India’s heterogeneous landscapes. Here, we present a district-scale assessment (<i>n</i> = 640) integrating carbon use efficiency (CUE) and water use efficiency (WUE) over 1982–2018 to quantify spatial patterns, trade-offs, long-term evolution, and drought responses. District-mean CUE ranges from ~ 0.35 to 0.60, while WUE exhibits strong aridity-driven gradients, with higher values in humid and irrigated regions and lower values in arid districts. We estimate long-term trends and resilience using lag-1 temporal autocorrelation and classify ecosystem health based on combined changes in CUE and WUE. Approximately 55–60% of districts show increasing trends in both efficiencies, although these gains are frequently accompanied by rising evapotranspiration (ET), particularly in cropland-dominated districts, indicating growing water demand. Trade-offs between CUE and WUE are pronounced across land-cover and aridity gradients, with humid districts exhibiting higher CUE but lower WUE, and semi-arid districts prioritizing water-use efficiency. Extreme drought years, identified using climatic water deficit, lead to widespread declines in WUE across over two-thirds of districts, while CUE responses are more variable and ecosystem-specific. Overall, the results reveal spatially coherent patterns of resilience loss and efficiency trade-offs linked to water availability and management intensity. The proposed framework provides a long-term, district-scale perspective on carbon–water coupling and offers decision-relevant indicators for identifying regions vulnerable to water stress and ecosystem degradation.</p>