There is clear evidence of climate variability over a period of time in the developing countries and these countries are vulnerable to devastation caused by drought and floods. Analysis accompanied with robust results will create an opportunity to enhance the rural livelihoods that are prone to frequent climate shocks. We consider a southern state of India namely Karnataka, which belongs to a sub-tropical region facing a huge threat from climate change. In this article, we link agricultural production to climate variables to examine the impact of climatevariability on the crop yields. We follow a distinct approach using the nonlinear transformation of climatic variables to confirm climate damage on rice yields. The proposed econometric technique used in this paper is fixed effect panel regression model to identify the causal relationship between the yield and climate variables (rainfall and temperature). A panel of district wise cross section for a period of 1992-2013, with necessary inputs, is used in the model. The analysis in this paper is based on the smaller spatial scale (district wise) with updated climatic data emphasizing on Kharif season which helps to provide better insight on climate change effect and mitigation of climate-induced damages.