Drought stress encumbers the rice growth predominantly by oxidative damage to biological membranes and disturbed tissue water status. In this study, the role of salicylic acid (SA) to induce drought tolerance in aromatic fine grain rice cultivar Basmati 2000 was evaluated. SA was applied as seed and foliar treatments. For seed treatment, rice seeds were soaked in 50, 100 and 150 mg l−1 aerated solution of SA for 48 h and then dried back. Treated and untreated seeds were sown in plastic pots in a phytotron. At four leaf stage, one set of plants was subjected to drought stress, while the other remained well watered. Drought was maintained at 50 % of field capacity by watering every alternate day. For exogenous application, SA was applied 50, 100 and 150 mg l−1 at five leaf stage. In the control, SA was neither applied exogenously nor as seed treatment. Drought stress severely affected the seedling fresh and dry weight, photosynthesis, stomatal conductance, plant water relations and starch metabolism; however, SA application improved the performance of rice under both normal and stress conditions. Drought tolerance in rice was well associated with the accumulation of compatible solutes, maintenance of tissue water potential and enhanced potency of antioxidant system, which improved the integrity of cellular membranes and facilitated the rice plant to sustain photosynthesis and general metabolism. Foliar treatments were more effective than the seed treatments. Foliar application with 100 mg l−1 (FA 100) was the best treatment to induce the drought tolerance and improve the performance under normal and stress conditions compared with the control or other treatments used in this study.