Yes, its underwatered, assuming the compost is really dry. Here's the basic rules for houseplant watering, which are:-
1. water when the surface of the compost is dry to the touch, but not so dry that its shrunken from the sides of the pot.
2. When you do water, water well, but go back after 30 minutes and empty out any tray or outer pot in which the plant is standing. Very few plants appreciate having wet feet all the time, so if the compost is still sodden when you empty the tray the first time, go back and empty it again after another 30 minutes.
Over time you will come to learn how much water to give it so that you neither flood it completely, nor give insufficient water.
As your plant is in crisis (if the compost is bone dry), I suggest remedial 'intensive care' action immediately. Fill up a bucket or container that's large enough, immerse the pot in the container, weighting it down if you have to. Leave it for an hour, then remove and stand somewhere it can drain down to let excess water disappear (on a rack in the sink or in the bath or similar). Once its stopped exuding water from the base, replace in its normal position, and in future, water as suggested above.

Thank you very much for the sound advice on my Dragon Tree crisis, I will do all in my power to rescue it.
There is only one small thing: It is planted in a very big pot which I can't really lift in order to soak. Would I be able to water it profusely, either over the course of a few days or all in one go, keeping an eye on standing water?
Thank you once again for coming to my rescue.

Hmm, well I'm wondering how you're going to be able to regularly empty out any water after 30 minutes on an ongoing basis if its difficult to lift it, but I'll leave you to find a way round that one.
Yes, but give a good soak all in one day, in other words, pour water into it, leave it 20 minutes or so, pour more water into it, leave it again, add more. Wait an hour and if any water in the outer tray has been soaked up, water again. Any left after 4 hours should be emptied out.

That's excellent, Bamboo! Thankyou very much - I'll get watering.
Assuming it's best to remove any yellow/brown leaves, would I remove the whole leaf or just the damaged part?

Erm, I'd wait and see what happens over the next week or so - you'll probably find the leaves which are part yellow will go completely yellow, then brown, or brown in parts, at which point, cut them off. If its just one brown splodge and not too unsightly, then you can leave the leaf.

Thankyou, thankyou, thankyou! I'll send you a picture once I've nursed it back to life again!

Much appreciated...

How I have the same problem , did you manage to bring this plant back to life