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A field study was conducted for 6 years (1998-2004) at Hyderabad to evaluate the influence of planting materials, microsite improvement and fertilizers on productivity, lawsone content and economic returns of henna (Lawsonia inermis L). The leaf yield and quality were influenced by different treatments. During rainy season the yield increase in cuttings over seedlings was 100, 50.7, 37.7, 63.8, 29.6, 61.3 % during 1998, 1999, 2000, 2001, 2002 and 2003 respectively. Whereas the increase in post-rainy season yields were 360, 26.7,100, 49.3, 41.7, and 60.7 % during 1998, 1999, 2000, 2001, 2002 and 2003 respectively. This indicates that the increase in yields was more in high rainfall years (1998, 2001, 2003) compared with the low rainfall years (1999,2000, 2002). Significant increase in leaf yields was observed with microsite improvement over the no microsite improvement during low rainfall years. The treatments having seedlings, microsite improvement and fertilizer application recorded significantly higher lawsone content. At the end of 9 years cuttings recorded 73, 112, 73 % higher gross, net monetary returns and B: C ratio respectively over the seedlings. Microsite improvement improved gross and net returns by Rs 53 150 and Rs 43 425 compared with the no microsite improvement. The comparison of regression coefficients has shown that, the rate of increase in leaf yield with rainfall differed significantly between the two planting materials and microsite improvement, indicating that seedlings are more drought tolerant than the cuttings. The microsite improvement helps in increase of yields during low rainfall years.