Recognizing the need for improving productivity, especially in rainfed agriculture and also to ensure effective natural resource management in rural India, Self Help Groups (SHGs) of women (Informal groups) in rural households have been developed as the basic institutional arrangement and implemented across the country. An attempt has been made in this paper to assess the impact of such informal group arrangements in terms of socio-economic considerations between participating and non-participating member households. Primary data collected from 750 households equally representing both participating and non- participating in SHG in southern India formed the basis for the analysis. The results of the study quantified that the public policies geared towards increasing women`s participation in SHGs under watershed development programs generate substantial income. The participation in SHGs has had a positive impact on household income, asset creation and employment generation. The study findings emphasized the need for the participation of SHGs in the watershed development programs for achieving maximum benefit especially in developing countries.