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Droughts are a common occurrence in semi-arid areas and their frequency and intensity is expected to increase further with increasing variability in rainfall distribution. Based on a study of 120 farmers from 4 districts in Karnataka and Tamil Nadu, this paper identified the range of measures farmers adopt in response to droughts. Despite significant negative externalities, farmers assign higher priority to drilling new wells rather than investing in water conservation structures or demand management strategies. Among the different strategies followed, adoption of drip irrigation and purchase of tanker water for providing life-saving irrigation to perennial crops yield the highest financial return. Expansion of micro irrigation and reuse of municipal waste water are suggested as drought mitigation strategies.