Does choice of drought index influence estimates of drought-induced rice losses in India?

Drought events have critical impacts on agricultural production yet there is little consensus on how these should be measured and defined, with implications for drought research and policy. We develop a flexible rainfall-temperature drought index that captures all dry events and we classify these as Type 1 (above-average cooling degree days) and Type 2 droughts (below-average cooling degree days). Applied to a panel dataset of Indian districts over 1966-2009, Type 2 droughts are found to have negative marginal impacts comparable to those of Type 1 droughts. Irrigation more effectively reduces Type 2 drought-induced yield losses than Type 1 yield losses. Over time, Type 1 drought losses have declined while Type 2 losses have risen. Estimates of average yield losses due to Type 1 droughts are reduced by up to 27 per cent when Type 2 droughts are omitted. The associated ex-post economic costs in terms of rice production are underestimated by up to 124 per cent.