If, as you suppose might be a possibility here, used to wasting water directly modified people, the syntax would have to change. The modifying participle clause would immediately follow the noun people:
People used to wasting water have grown.
Associating lavish water-consumption with physical growth would be a rather silly thing to do with people, although it might be true of some vegetation. But if you wanted to say the the portion of the population which wastes water has increased:
The number of people used to wasting water has grown.
But the original sentence does not have that meaning. grown there is a synonym for become and its complement is a clause that functions as a subject complement:
People have become used to wasting water.
They waste water habitually. They don't think twice about it.