slowdown in the Indian economy, we restrict ourselves to the pre-demonetization period. Our final sample thereby comprises of a 3 year household panel.

As our explanatory variable of interest is measured on an annual basis, we scale the monthly consumption data by household size and aggregate the monthly consumption data by averaging it across all months in the year. The CMIE also disaggregates household consumption into various food and non-food categories. This allows us to decompose household expenditures into aggregate food, essential food and luxury expenditures.<sup>3</sup> Table 1C shows the summary statistics corresponding to the household survey data. Average per capita monthly household expenditures were INR 2,253 (USD 35) during this period, of which a little under a half went towards food expenditures. Essential food expenditures accounted for 45% of food expenditures while luxury expenditures comprised 13% of monthly per capita expenditures. We see that 75% of the households in the state reside – in rural areas and have low levels of education a third of the households have no adult member who has completed secondary education, while all adults have completed secondary education in only 12% of the households. Over half the households have some member employed in the informal sector while only a third of the households have any member employed in the formal sector.<sup>4</sup> A third of the households have some member employed in agricultural activities and almost half the households have some member employed as a wage laborer.

# **3 Empirical Strategy**

This section describes the empirical strategy used in the paper.

## **3.1 Rainfall Shocks and Farm Productivity**

We use a very standard empirical framework in development economics exploiting plausibly exogenous variations in district annual rainfall from its long-term mean (see for instance, Jayachandran 2006; Shah and Steinberg 2017; and Kaur 2019). The primary intuition is that in developing economies with much of the workforce (rural workforce in particular) employed in the farm sector, agricultural output is significantly determined by seasonal fluctuations in rainfall. This is particularly true in the absence of major public infrastructure in irrigation. Positive rainfall draws increase farm output, and subsequently farm incomes, which can increase the demand for local non-tradables. Recent research (see for instance Dell et al. 2012) has also shown that precipitation shocks can have aggregate effects on growth through it’s positive impact on worker productivity. As local rainfall draws are essentially random, it can therefore be used as a quasi-exogenous shifter of agricultural productivity and household consumption.

> 3 Essential food expenditure includes expenditure on cereals, pulses, fruits and vegetables, milk and meat. Luxury expenditures include snacks, packaged food, beverages, restaurant expenditures, sweets and dry fruits.

> 4 Occupations classified as informal sector are wage labourers and small businesses/traders; occupations classified as formal sector are business owners, white collar employees, industrial workers and qualified selfemployed professionals.

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