The sustainability of global agriculture at higher productivity level is a concern owing to climate change, serious environmental footprints, dipping factor productivity and shrinking availability of natural resources, especially. The situation is worsening in the ‘Food Bowl of India’—Indo‐Gangetic plains (IGP) by several amalgamated factors, such as declining groundwater, unpredictable precipitation owing to climate change and cultivation of heavy water duty crops. To neutralise these issues, a field experiment was executed for the period 2019–2021 to assess the efficacy of indigenous hydrogels (P‐hydrogel and Superabsorbent polymer hydrogel‐1118) and their application methods viz., seed treatment, slurry application and soil application on crop yield and water productivity, soil moisture dynamics and profitability in a soybean–wheat cropping system under irrigation and rainfed conditions. In both study years (2019–2020 and 2020–2021), due to higher seed germination percentage, irrigation application together with seed treatment and slurry application of superabsorbent polymer hydrogel‐1118 improved system productivity by 8.1%–26.7% and system water productivity by 17.6%–33.8% over control. Wheat grain yield was enhanced by 8.0% (2019–2020) to 32.2% (2020–2021) due to superabsorbent polymer hydrogel‐1118 hydrogel with 10 cm lesser use of irrigation water compared with control (no‐hydrogel). Soil moisture content in 0–15 cm soil layer was also found higher by 1.8%–2.4% in superabsorbent polymer hydrogel‐1118 and P‐hydrogel slurry‐applied plots. Therefore, higher gross profitability (31.8%), net profitability (89.8%) and B:C (26.9%) in wheat could be attributed to increased crop yields when seeds were treated with superabsorbent polymer hydrogel‐1118. Therefore, the utilisation of modified hydrogel application, in the form of seed treatment (seed coating) and slurry application has demonstrated improvement in seed germination, crop yield and water productivity and made soybean–wheat cultivation more economical. This approach presents a feasible solution to achieving a viable production system of soybean and wheat crops by reducing irrigation amounts in the IGP of India, as well as other comparable ecological places worldwide.