The interrelationship between land degradation and socio-economic development is multilayered and complex. This study, following a multi-disciplinary approach, attempts to integrate multiple data sources and methodologies to study the implications of land degradation in semi-arid India. Using remote sensing data with field validation, the extent and broad pattern of land degradation in lower Chambal valley in central India has been estimated. All villages within the study area were geo-referenced and digitized, and were superimposed on the ravine map of the district. Based on this mapping exercise, villages of the district were classified into two groups: those located within the degraded area and those situated outside. The levels of socio-economic development in these two sets of villages were compared through a number of composite indices. The evidence presented here shows that villages located within the degraded area have consistently lower levels of socio-economic development than those located outside the area. The result is true not only for over-all levels of development, but also for policy-controlled indices such as infrastructure development index. The results suggest that negative externalities arising out of adverse geographic conditions and environmental degradation may operate at different spatial scales. Even within a relatively less developed region, being located within ravines implies lower levels of development and less access to public infrastructure.