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Chapter-9

Kautilya’s Arthāŝastra’s Superiority

9.1. Introduction 643

9.2. A Brief Outline of Kautilya 643

9.3. Importance of Thoughts of Kautilya 645

9.4. Contemporary relevance of thoughts of Kautilya 648

9.5. Comparison 659

9.6. Lessons from Arthāŝastra 660

9.7. Conclusion 661

Contemporary Relevance of Economic Thoughts of Kautilya

643

9.1 Introduction

Kautilya, also known as Chanakya, is India's most illustrious political

economist of all time. He regarded economic activity as the driving force

behind the functioning of any political dispensation. In fact, he went to the

extent of saying that revenue should take priority over the army because

sustaining the army was possible out of a well-managed revenue system.

Kautilya advocated limiting the taxation power of the State, having low

rates of taxation, maintaining a gradual increase in taxation and most

importantly devising a tax structure that ensured compliance. He strongly

encouraged foreign trade, basing it on the premise that for a successful

trade contract to be established, it had to be beneficial to all. He

emphasised State control and investment in land, water and mining.

Kautilya was a true statesman who bridged the gap between experience

and vision. For Kautilya, good governance was paramount. He suggested

built-in checks and balances in systems and procedures for the

containment of malpractices. Many postulates of Kautilya's philosophy of

political economy are applicable to contemporary times.

9.2 A Brief Outline of Kautilya

Kautilya belonged to the Magadh State, which corresponds to present day

South Bihar. Magadh was then the biggest state in India. Kautilya studied

at one of the world's oldest universities, Takshasila University. He joined

Chandragupta Maurya's empire, after a brief stint with the previous

Nanda Dynasty. He served as the Mahaamatya, in the Mauryan Empire, a

post similar to the present day Prime Minister and, thus, possessed rich

experience in political administration and defence matters. Eventually,

Kautilya became an intelligent scholar, fearless thinker, capable secretary,

and astute politician.

Vishnugupt's (better known as Kautilya, or Chanakya) (c. 350-c. 275 BC)

treatise Arthāŝastra deals extensively with aspects of political, economic,

and social management and is the oldest book on management in the

world. It was written by Kautilya around 350 BC. When literally

translated, it means 'Scripture of Wealth'.

Kautilya was credited with bringing down the Nanda Dynasty and

influencing the defeat of Alexander in India when the warrior was on his

way to conquer the world. As a political thinker, he was the first to

visualise the concept of a 'nation' for the first time in human history.

During his time, India was spilt into various kingdoms. He brought all of

them together under one 'Central Governance', thus creating a nation

called 'Aryavartha', which later became India.


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Kautilya‟s Arthāŝastra is an important source of knowledge on polity,

economy and administration. However, this important document had been

forgotten for centuries. Thanks to Syamasastri, who first interpreted

Kautilya's economic and political thoughts in a book published in English in

1909, we had insights into the writings of that brilliant mind.

Though the general impression is that Kautilya had not written much

about economics, the fact is that Kautilya by taking a holistic and

integrated approach to governance had provided a new dimension to the

field of economics, which unfortunately has remained neglected all this

time. Economics works well with resource management, efficient

administration, a fair judicial system, and knowledgeable people with

integrity, capable of taking up high positions.

Kautilya's philosophy is based on the principles of "sam, dam, dand,

bhed" (persuasion, temptation, punishment, and division) as various,

different, and sequential means to achieve an end.

Nothing vindicates belief better than reality. Two thousand four hundred

years ago, Kautilya compiled the Arthāŝastra and with it he proved to be a

kingmaker as he enabled the inception of the Gupta dynasty. The

Arthāŝastra endured the test of time and it has since withstood the test of

credibility.

When a thinker demonstrates vision and foresights it is crucial and

extremely useful to understand the elements of this thought that has

present applicability. This has been our objective and the culmination of

this effort is for all to see.

We will be enriching ourselves if we learn and grasp even a fraction of the

wisdom hat Kautilya embodied. Those involved in the project certainly

feel enriched, and as our work demonstrates, this is a treatise that

encapsulates in many ways even the complexity of our current world. The

problems that existed then persist in a wider spread and magnified

manner in the contemporary world.

Herein begins the relevance of studying the Arthāŝastra. Kautilya

demonstrated an extremely vital imperative: governance, polity, politics

and progress have to be linked to the welfare of the people. Interestingly,

closer to recent times, Abraham Lincoln said, ``Democracy is for the

people, by the people and of the people”. The Arthāŝastra‟s resonant

theme holds even truer today and it is the upholding of this principle that

stands at the core of attaining development.


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In the following we give a summary of each chapter along with a précis of

the various points of contemporary relevance that the Arthāŝastra

embodies.

9.3 Importance of thoughts of Kautilya

Before evaluating Kautilyan thought, we must not forget the context in

which the Arthāŝastra was written. Kautilya was trying to create, almost

single-handedly, order out of chaos, peace out of war, a public state out of

a corrupt one. That is why his ideas were extremely complex.

On the one hand he had suggested the use of all evil means; on the other

hand he was obsessed by the idea of creating a neat administrative system,

town planning, problems of mines, rural and urban colonialisation and

settlement, with the creation of dams and canals no less than with a

monetary system and control of weights and measures. Obviously, such a

man could not be preaching political gangsters‟; he is not preaching that

the end justifies the means, the only end, which justifies the means, is the

preservation and development off the state, punishment of the wicked and

protection of the good.

His great insight lies in the discovery that any agency entrusted with the

task of maintenance of order, acquisition of what has not been achieved so

far, and distribution of surplus to the deserving in society, required

creation of an agency or authority which cannot be a common standard to

evaluate all human action, namely, the imperative of life in society, to

continue without hurting anyone in the process. Consequently, it means

that nonviolence is good because as Bhishma said in Mahabharata, anyone

who is non-violent gives life breath to the universe.

Arthāŝastra, the great Indian classic on public administration, deals with

the hierarchy of officials, the merits and failings of bureaucracy including

corruption, geographical divisions of the empire, field administration

through an all-purpose coordinating district overlord, land revenue and

taxation. The Arthāŝastra is comprised of 413 maxims. Of the fifteen

chapters of the book, public administration claims four.

Foreign relations and defence are discussed in nearly half of Arthāŝastra,

which has little concern for public administration. In brief Kautilya's

work is a comprehensive handbook of imperial administration and

diplomacy. Also, it is remarkably practical and utilitarian and it advocates

'real politics'.


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Kautilya'sArthāŝastra is unashamedly practical. This work is the loudest

proof of the practical turn of the Indian mind. It is a manual of practical

state craft for the day to day guidance of the prince - that is the ruler.

'Arthāŝastra' means the science of politics and public administration.

What Kautilya calls 'Arthāŝastra', most other Indian writers of this

shastra call by other name namely 'nitishastra' or 'rajanitishastra'?

The hallmark of the Arthāŝastra is the sharp acumen of Kautilya. The

principles of public administration implied in Arthāŝastra does not

command as much attention as the machinery of government does.

Kautilya, himself, does not give a definition of the science of public

administration. In fact, the term, 'the science of public administration is of

recent origin. According to the scholars of the ancient society and polity,

the executive - which is the administrative branch of the government -

evolved much earlier than the judicial and the legislative branches.

According to Kautilya, the science of polity is the Arthāŝastra and it,

mainly, treats public administration. It is the combination of the science of

wealth and the science of government.

The finance department and the other departments dealing with business

and allied economic activities form a vital part of the government.

All ancient Indian writers including Kautilya have invariably discussed

the following topics such as monarchy, constitution and functions of the

ministry, principles of foreign policy, problems of taxation, provincial and

local administration, theories of the origin of the state and the elements of

state and miscellaneous theories.

Kautilya says that Crown property is the main basis of production and its

profitable administration is the chief preoccupation of the state. The

concern of the state is all-embracing, replacing private enterprise to an

extent "never seen before or after in India".

Kautilya believed in a strong centralized state. For the good of the state,

the king enjoyed full freedom - meaning that he was free to practice

treachery, deceit and sacrilege if necessary.

According to him, the constituent elements of the state are the following:

1. The king who exercised political authority (The Svamiri)

2. The officials, who advised him on public administration (The Amatya)

3. Territory (Janapada)

4. The forts (The Durga)


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5. The army (The Danda)

6. The treasury (The Kosh)

7. Allies (Mitras)

Among these, the king is the most critical element. He must

attain superiority, pre-eminence and over lordship in his kingdom. He is

the personification of the state and its first citizen. He is the embodiment

of power. The principle of unity of command is reflected here.

In the eyes of Kautilya, the king and the state are indispensable -

the latter is such an essential part of society. Succession by heredity was

the general rule though exceptions also did exist.

Kautilya says, an ideal king is one who possesses the highest

qualities of leadership, intellect, energy and other personal attributes. He

must not be dilatory in his decision making, be stronger than his

counterparts of nearby countries and to be assisted by competent

ministers.

Arthāŝastra portrays a paternal king imbibed with a desire to

promote the happiness and welfare of his subjects. In the happiness of his

subjects lays his happiness, in their welfare his welfare, whatever pleases

his subjects he shall consider as good.

Hence the king shall ever be active and discharge his duties, the

root of wealth is activity and of evil its reverse. The welfare of the people

claims the first place in his eyes. The main function of the state was to

maintain law and order.

According to Kautilya, the king was a servant of the state. A king

has no personal likes; it is the likes of the subjects (that should be followed

by him). The king should surrender his individuality in the interest of his

duties and be virtually a constitutional slave.

The functions of the state were wide ranging and all-pervasive.

This means that the public administrative system designed in the state was

necessarily large and sprawling. A large civil service, to use the modern

term for officials of that day, was needed to perform the myriad functions

required. The following words of Kautilya speak of the concept of welfare

state, which is embedded in the directive principles of the constitution of

India.

"In the happiness of his subjects lays his happiness, in their

welfare his welfare, whatever pleases his subjects he shall consider as

good, but whatever pleases himself he shall not consider as good."


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9.4 Contemporary Relevance of Thoughts of Kautilya

9.4.1 Opinion of Kautilya about State Administration

Kautilya has provided an exhaustive and illustrative description of the

duties, responsibilities and role of the king, prince(s), ministers, and other

state officials. As for the state‟s political administration, Kautilya provided

a full-fledged commentary as to how this should be effectively undertaken.

He gave instructions about the defence of the state‟s boundaries,

protection of the forts, and the manner in which the invasion by the enemy

must be handled.

The Arthāŝastra classifies legal matters into civil and criminal and it

specifies elaborate guidelines for administering justice in terms of

evidence, procedures and witnesses. Furthermore, Kautilya strongly

believed in Dandniti, though he maintained that penalties must be fair and

just, and proportionate to the offence committed.

Contemporary Relevance

Current times accentuate the present applicability of this because the need

for a sound and comprehensive state administration has been accentuated

by the propensity of the powerful to flout the law and do so repeatedly.

9.4.2 Opinion of Kautilya about Conduct of Government

Attainment of good governance entails that the objectives of the state are

fulfilled and realized. This is possible through properly organized and

guided administration. This principle is relevant even today. A

government is good, if it is administered well.

Kautilya suggests that good governance should avoid extreme decisions

and extreme actions. Soft actions (Sam, Dam) and harsh actions (Dand,

Bhed) should be taken accordingly. Kautilya opines in a most modern way

- „Sovereignty is practicable only with the cooperation of others and all

administrative measures are to be taken after proper deliberations.‟ The

King and ministers were supposed to observe strict discipline. Kautilya

recommended a strict code of conduct for himself and his administrators.

Kautilya has seriously considered the problem of corruption. He has

listed, in the Arthāŝastra, about forty ways of embezzling government

funds. However, Kautilya is very practical about the problem of

corruption. Kautilya feels that it is as difficult to discover the honesty or

otherwise of an officer as it is to find out whether or not itwas the fish that

drank the water.


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This code of conduct is useful and applicable to modern executives. Even

two and a half thousand years ago, Kautilya laid stress on capping at a

quarter of their venue, the salaries of the King and his officials. For good

governance, all administrators, including the King, were considered

servants of the people. They were paid for the service rendered and not for

their ownership of anything. Compare this to the expenses on salary of

Government employees today which constitutes over 50% of the revenue.

Kautilya understood the link between the salaries paid to government

functionaries and their productivity.

One of the core themes of this chapter is that the Arthāŝastra of Kautilya

equates political governance with economic governance. The end is

economic governance while political governance is a means. Good

governance is basic to the Kautilyan idea of administration. Good

governance and stability are inextricably linked. If rulers are responsive,

accountable, removable, recallable, there is stability. If not, there is

instability. This is even more relevant in the present democratic setup.

Kautilya‟s precepts may have been in the context of the monarchical set

up. However, present rulers and administrators should be endowed with

similar qualities. In countries where they are, the progress has been

meteoric.

9.4.3 Opinion of Kautilya about Accounts and Audit

In stark contrast to the emphasis that the Arthāŝastra assigns to rural

(village) development, agriculture, and the textile industry, the status quo

in India is that these spheres have been neglected.

In the sphere of economic administration, India of today has much to

learn from Kautilya‟s Arthāŝastra. Kautilya recommends severe penalties

on the officials of public enterprises which incurred losses, and rewards

for those who showed profits.

”Profit” was a “must” in Kautilya‟s scheme of running a country‟s

administration.


Unlike in Kautilya‟s state where the king was accessible to his people every

day at least for one and a half hours, in India today it takes a long time

even to get a “hearing.”


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Some of the ground rules and measures suggested in Arthāŝastra,

particularly those which pertain to matters relating to budget, accounts

and audit, are applicable o present day India. In Kautilya‟s state, the king

could severely punish corrupt officials, however highly they were placed.

In India, those in political office are rarely convicted even if they are

corrupt or proved guilty of committing certain offences.

9.4.4 Opinion of Kautilya about Policy

Kautilya distinguished six different kinds of interests: compound interest,

periodical interest, stipulated interest, daily interest, and the use of a

pledged article. Indeed the idea of expressing interest as a percent

originated in India. Thus overall the Kautilyan system of interest seems

quite elaborate, complex and even modern.

In Arthāŝastra, there is a definite effort to formulate a wage policy based

on their ballistic understanding of the economic, social and political

factors. The emerging policy must be just, and must be consistent with the

interest of the state. In Arthāŝastra of Kautilya, the State is a party to any

labour or wage legislation together with farmers, merchants and

industrialists.


The policy suggested in Arthāŝastra attempts to strike a balance between

the delicate interests of the parties involved. Kautilya indicates that

although the state is in a privileged position of a monopolist, it should co-

operate with the private sector for proper utilization of resources.

Further, a strong private sector is a source of strength to the State. Some

of the principles outlined can be useful guidelines in the formulation of

new policies concerning labour reform and legislation.

9.4.5 Opinion of Kautilya about Role of State

Kautilya identified several areas of State intervention to facilitate the

economic life of the country.

They are as follows:

1. The superintendent of slaughterhouse

2. The superintendent of prostitutes

3. The superintendent of ships

4. The superintendent of passports

5. The office of the city superintendent.


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Kautilya‟s idea of the Passport corresponds to the modern version of this

document that facilitates movement of people. This is perhaps the first

instance of an institutionalized concept of passports that regulate the flow

of people across borders. Kautilya said that „whoever is provided with a

pass shall be at liberty to enter into, or go out of, the country.‟

Kautilya realized that the role of the State was to ensure that commercial

activities do not violate laws or are harmful for the consumer and if the

State did not establish and enforce codes of conduct, it would, in fact, raise

transaction costs. The lack of trust and guarantee of quality would

diminish commerce and increase search and verification costs for agents

undertaking commercial transactions.

Kautilya explicitly states that „Adulteration of grains, oils, alkalis, salts,

scents, and medicinal articles with similar articles of no quality shall be

punished with a fine.‟

The consumer/buyer is provided safeguards by Kautilya, i.e., „the sale or

mortgage of articles such as timber, iron, brilliant stones, ropes, skins,

earthenware, threads, fibrous garments, and woollen clothes as superior,

although they are really inferior, shall be punished with a fine.‟ Kautilya

states that „the Superintendent of Commerce shall fix a profit of five per

cent over and above the fixed price of local commodities, and ten per cent

on foreign produce. Merchants who enhance the price or realize profit

even to the extent of half a pana more than the above in the sale or

purchase of commodities shall be punished with a fine.


It is interesting to note that Kautilya tried to establish guidelines for

professional service providers also, including weavers, washer men,

boatmen, shipping agents, and even prostitutes. Modern States are still

grappling with the complexity of setting such „services „oriented guidelines

and in that light Kautilya‟s attempts to do so shows the sheer breadth of

his vision at such an early point in history. He also established explicit

guidelines for the practice of the medical profession, incorporating ideas

that seem ahead of his time.

Kautilya is perceptive enough and flexible enough to realize that the State

official might not be able to gauge the market; he thus states that „in case

of failure to sell merchandise at the fixed rate, the rate shall be altered.‟

Kautilya envisaged a role for the State to ensure that excessive price

fluctuation detrimental to commercial activities did not occur. Kautilya


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showed a highly refined understanding of the law of demand and supply

and the pernicious effects of gluts in the market.

Interestingly, Kautilya‟s Arthāŝastra is the first known treatise to discuss

such concepts. The extensive research that has been undertaken about

imperfect markets vindicates the importance that the visionary assigned to

situations that could arise from a mismatch between supply and demand.

Kautilya recommended an interventionist policy to counter a situation of

glut in the market; In this context, he stated that whenever there is an

excessive supply of merchandise, the Superintendent shall centralize its

sale and prohibit the sale of similar merchandise elsewhere before the

centralized supply is disposed of.‟

9.4.6 Opinion of Kautilya about importance of agriculture

Agriculture was the most important economic activity. Kautilya was of the

view that cultivable land is better than mines because mines fill only the

treasury while agricultural production fills both treasury and store

houses.

The Arthāŝastra spoke about the functions of a Superintendent of

Agriculture and states that the Kings hould understand the intricacies of

agriculture.


Government procurement policy, which guarantees a minimum price for

rice and wheat crops to farmers, has created a bias in their favour and a

distortion of cropping pattern, which is not market determined. At times,

these procurement policies result in such surpluses of food grain that,

given inadequate storage facilities for them, the beneficiaries of food

subsidies are Indian rats.

Professionalising agriculture, especially for large farms, would be needed

with professionally trained managers able to study global movement of

prices, modern farming techniques and use of technologies such as satellite

farming. Courses on farm management need to be more widespread.

Similarly, agriculture is completely out of the purview of the tax regime in

India. The agricultural sector that has been given a priority status for

bank lending gets completely de-prioritized for taxation. As against this,

the Arthāŝastra has highlighted the significance of taxes on agriculture

and allied activities (though it was one of the sole major sectors

contributing to state welfare).


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Arthāŝastra‟s advocacy to „tax the richer farmer maybe something that

needs to be done now when the Finance Minister is trying to find ways to

increase the tax to GDP ratio.

The importance of irrigation and providing amenities could be taken up

on apriority basis. The agricultural economy that has to compete with the

international market continues to be at the mercy of the vagaries of the

monsoon. Although India had the second largest irrigated area in the

world, the area under assured irrigation drainage is inadequate.

Some land, which was fertile earlier, has become fallow because of

inadequacy of fertilizers or the incorrect usage of fertilizers. Emphasis on

organic farming, which obviates the need to use chemical fertilizers, is an

obvious alternative. Given the fact that India has one of the natural

factories for organic manure, one wonders why organic farming has not

yet got the attention it deserves. Furthermore, this would also help to

prevent slaughter of cattle because if their manure provides a revenue

stream to the farmer, he would be averse to slaughtering them. Systematic

cropping pattern and irrigation system followed by the Kautilya Raj is

what today‟s an expert need to recognize. Farmers and consumers would

benefit if all agricultural production were produced by ecologically sound

and sustainable means.

Pricing and marketing of agro products and providing adequate

infrastructure to the agricultural sector are crucial. Evidently, as in other

spheres, many of the principles enumerated in the Arthāŝastra are

applicable to the agricultural sector in India even as we write this.

9.4.7 Opinion of Kautilya pertain to Local and Foreign

Trade

Kautilya considered trade the third pillar of economic activity and in

consonance with this the Arthāŝastra details every aspect of trade.

For instance, apart from promoting trade by improving infrastructure,

the state was required to keep trade routes free of harassment by

courtiers, state officials, thieves, and frontier guards. Kautilya appears to

mistrust traders believing them to be thieves, with a propensity to from

cartels to fix prices and make excessive profits as also to deal in stolen

property.

He prescribed heavy fines for discouraging such offences by traders and

with a view to consumer protection. Further, the law on dealings among

private merchants included:


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1. Selling on agency basis.

2. Revocation of contracts between traders.

3. Traders travelling together and pooling their goods.

Safety of goods in transit:

It was also enjoined upon the frontier officers to ensure the safe

passage of the merchandise and to make good any loss incurred.

Responsibility to recompense loss to traders vested with the village

headman barring, of course, goods that were stolen or sent away. Further

if any property of trader was lost or driven away in an area between

villages, the person responsible was the Chief Superintendent of Pastures.

(CSP). In the regions, which did not fall under the control of CSP, the

responsibility was that of Chora Raju. Finally, if the responsibility could

not be assigned on any official, the people of the village within whose

boundaries the loss had occurred, was collectively responsible to the

trader.


In recent times there has been considerable research about trade

liberalization and the numerous ways in which this can be achieved.

Kautilya‟s views on trade reflected that he grasped among other things a

point that is extremely relevant even in the present era of globalised

commerce and trade. That is: There is no autonomous mechanism that

will ensure that a nation would benefit from trade in the absence of certain

safeguards and policy measures.

It is thus seen that the importance of the trader was recognized by

Kautilya as also the importance of the rule of law, by making restoration

for any loss caused by its failure. At the same time, traders were prevented

from oppressing people. This clearly shows that the welfare of the people

was uppermost in the mind of the king.

The connotations of harassment and obstacles to trade may have changed.

However, the fact that anti-dumping measures exist or that cartelization

has to be coped with or adverse terms of trade have to account for in

certain sectors underscore that safeguards are essential even in current

times and those responsible for managing these measures should be

responsible.


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Furthermore, Kautilya was cognizant of the fact that the terms of trade

were not just dependent on the economics but also on other various

parameters. The traders had to keep in mind the political or strategic

advantages in exporting or importing from particular country. The

proliferation of free trade agreements in recent times underscores this

point because there is a definite political dimension to trade treaties and

agreements.

9.4.8 Opinion of Kautilya about inspection of servants

Kautilya recommends that public servants, „while engaged in work, they

shall be daily examined; for, men are naturally fickle-minded and like

horses at work exhibit constant change in their temper. Hence the agency

and tools, which they make use of, the place and time of the work they are

engaged in, as well as the precise form of the work, the outlay, and the

results shall always, be ascertained… hence the chief officer of each

department (adhikarana) shall thoroughly scrutinize the real amount of

the work done, the receipts realized from, and the expenditure incurred in

that departmental work both in detail and in the aggregate‟.

Kautilya admitted that some degree of corruption would always exist, and

cannot be scrutinized perfectly, „It is possible to mark the movements of

birds flying high up in the sky; but not so is it possible to ascertain the

movement of government servants of hidden purpose.‟ He therefore

recommends strictest punishment, both material land corporals, as a

disincentive to cheat.


In the Arthāŝastra, stress has been given both on fraud prevention as well

as fraud detection. Kautilya had listed several ways by which public funds

are misappropriated. Some of these frauds relevant in today‟s corporate

environment are as follows:

1. Falsification (of date) with a motive of personal profit: Showing a later

date than the one on which income was received or showing an earlier date

than the one on which expenditure was incurred and using the proceeds in

both cases for personal profit for a period.

2. Misrepresentation (of income received or expense incurred) with a motive

of personal profit: (i) Revenue due on a given date is allowed to be

collected at a later date for a consideration; (ii) Revenue not due till later

is collected earlier by force or deceit but credited on due date; (iii)

Revenue paid by one is credited in the name of another for a

consideration; (iv) Revenue for treasury realized in the capacity of a

collector is misappropriated by an individual by force or deceit.


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3. Discrepancies (arising out of wilful fraud) in:

- Personally supervised work

- account heads

- Labour and overhead charges

- work measurement

9.4.9 Opinion of Kautilya about Responsibility of Administration

Though the kingdom was a feudal monarchy, it had a well-structured

administrative machinery, containing various departments and the heads

of these departments were charged with well specified responsibilities;

They were expected to run the team actively, efficiently prudently and

profitably; The kingpin of administration was the King himself who was

advised by a group of councillors, ministers and other high officials, who

were carefully selected by the king himself after careful scrutiny of their

character, background and leadership qualities.


Though Kautilya wrote in the context of a monarchy and the governance

that prevailed in his time, there are certain fundamental points of

relevance that we can pull out of his propositions about the functioning of

all those activities that may be categorized as those that come within the

purview of the present day public sector units.

The Arthāŝastra emphasized that the King should build forts, canals,

roads, and moats and as a matter of fact it describes with considerable

detail the layout of each of these infrastructural constituents. It is not the

precise applicability of each of these specifications but the fact that it is

meticulously described in the Arthāŝastra which underscore that Kautilya

recognized that efficient provision of these amenities entailed adherence to

certain parameters.

The second aspect is Kautilya‟s exhaustive description of the duties and

responsibilities of the entire gamut of functionaries within the monarchy

ranging from ministers, councillors, and commissioners, to the officers at

the lowest level of the hierarchy. Furthermore, the Arthāŝastra

enumerates the measures such as penalties and a system of vigilance to


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ensure the efficient discharge of the responsibilities of the various tiers of

governance. Penalties were also used for the enforcement of revenue

targets and expenditure limits. Evidently, Kautilya understood the

importance of accountability and transparency the lack of which in a

number of public sector units has been a prime reason for the

proliferation of loss making public sector enterprises.

Interestingly, one can draw discernible similarities between some of the

provisions of the Arthāŝastra and the main principles of corporate

governance. For instance, according to the Cadbury Committee‟s report

(1992) on financial aspects of corporate governance, proper managerial

accountability was the key to any system of corporate governance.

The Arthāŝastra spoke of the King appointing spies to ensure a system of

vigilance that would be able to monitor the activities of various

departments and although this may not be termed as an audit it would

have served some of the purposes that an audit is supposed to fulfil. There

has been extensive research on this subject in today‟s times. However, one

of the central objectives of corporate governance is to ensure through

certain managerial and legal provisions, accountability and transparency

and this is also one of main tenets of Kautilya‟s Arthāŝastra.

9.4.10 Opinion of Kautilya about Leadership

Kautilya believed in the adage “Yatha Raja Thatha Prajah” (As the King

is, so will be the people”). Therefore he laid down the condition that “an

ideal King is one who has the highest qualities of leadership, intellect,

energy and personal attributes”.

According to Kautilya, the King had to thoroughly test the integrity of

those whom he had appointed. Kautilya also cautioned the dangers

inherent in King‟s service.


The king was not exempt from being endowed with certain qualities of

leadership if he was to be able to provide effective and productive

governance. Thus the political leaders have to set an example by adhering

to high standards of conduct and functioning. In contemporary times

there have been frequent reminders that it is not positions which sustain

an individual however powerful he/she maybe but the person concerned

that has to sustain power conferred not by abusing it but by using it in a

constructive manner for the people concerned.

Kautilya listed 34 heads of departments. Only those who had the specified

qualifications were appointed to these high posts. Except in the case of Raj


658

Purohita, the scribe (Brahmin) and army (Kshatriyas), there was no “caste

“reservation for the post of high level officials.” Thus, upward mobility in

the hierarchy was based on merit, suitability and fulfilling other

qualifications laid down for these posts. In a conflict between meritocracy

and the political economy of appointments, if the latter continues to be

given precedence India‟s potential of becoming an economic superpower

will remain untapped.

9.4.11 Opinion of Kautilya about Conservation of Sources

The emphasis assigned by Kautilya on efficient water management and

the detailed instructions on how to do so contrasts with the grossly under

tapped potential of this abundant natural resource. Millions trudge miles

to obtain water in a country which has so much of it.


The Arthāŝastra would be very instructive in the context of conservation

of our water resources. It is unfortunate that in India, despite five decades

of planning, efficient and equitable water management is still a

pipedream.

9.4.12 Opinion of Kautilya about Human Development

It is amazing to note the wide range of subjects and spheres in which

education was imparted during Kautilya‟s time. Medicine, mathematics,

military education, commercial education, statecraft, the arts, architecture

are some of the areas in which extensive training was provided. Some of

the eminent institutions of learning that flourished during the time

included Nalanda and Takshila.


The emphasis that Kautilya assigned to human capital formation is

increasingly validated in current times. A rule of thumb in the realm of

economics is that development is not possible without human capital

accumulation.


659

9.5 Comparison

, 2009

Requirements

proposed by

Characterization

of economics as

a science

Kautilya‟s

Arthāŝastra

4th

century

bc

Adam

Smith‟s

wealth of

nations

1776

Dupuit and

other

Engineers

1830-1870

Groenewegen Definition

scope

Broad

Broad

Narrow

Narrow

Narrower

Narrower

Spiegel Separate Yes No

Marshall Writing a

treatise

Yes Yes No

Barber,

Dupuit &

Landretb &

Colander

Number of

concepts

Original

Synthesis

Consistent

Reasonable

Many

Yes

Yes

Reasonable

Just 1 or 2

Yes

Not always

Very few

A few

No

Yes

Schumpeter Economy as a

system

Method or

tooled

knowledge

Recognized

existence

Yes

Scientific

Yes

Yes

Pre-scientific

Yes

No

Scientific

Yes

(Table-M. Comparison)

((99(((((((

(99999(m (9(


660

9.6 Balancing the Components of State Power and Making

Policy: Lessons from the Arthāŝastra

There are a number of important lessons that can be learned from the

Arthāŝastra that states like India and Pakistan would do well to heed.

These lessons and insights are perhaps applicable to the wider world as

well where weak or failing/failed states pose an increasing risk not only to

their own people but also to their neighbours and the international

community at large.

Perhaps the most important of these lessons is the role of governance in

the augmentation or diminution of the total power of a state. An

effectively governed state with the ability to raise sufficient revenues and

maintain internal security may not necessarily make better foreign policy

than a state that is relatively weaker on the domestic front. However, a

stable, well-ordered, and highly motivated state that excels in internal

management will be in a better position to calibrate itself to meet

challenges from its rivals, absorb shocks and defeats, and have a slightly

larger margin of error that may well make the difference between

survival and oblivion or success and failure.

By the same token, a well-governed state will have less to fear from

subversion and revolt and be in a better position to disrupt the domestic

stability of its adversaries. It would also be able to move with greater

surety toward the execution of any foreign or defence policy related tasks

that necessitate the large-scale mobilization of economic and military

power. Faster, enthusiastic, properly trained and well-remunerated

bureaucracies reduce the friction inherent in converting the intentions of

the rulers into effects on the ground. A state that neglects the quality of

the administrative elite and institutions upon which the execution of

policy depends does so at the greatest possible peril to itself.

A comparable peril against which a state must guard is the tendency to

allow the individual components of state power to fragment the making

and execution of policy. For Kautilya, whose emphasis is on the

integrated nature of state power, it would be the height of absurdity for

the administrative, economic, military and intelligence assets of a state to

be deployed without a proper coherent vision and understanding of the

common goals they seek to achieve. For, the individual components of

state power to be thus divided and operate at cross-purposes would breed

chaos and indiscipline within the state. The synthesizing element is that of

leadership -political, bureaucratic, military, and intelligence. Without

effective leadership, disorder will prevail within the state apparatus and

gravely diminish the ability of the state to either control or effectively


661

respond to challenges. Unless a country has an exceptionally high margin

of geographic security, the consequences of such discord are likely to be

fatal.

Finally, the Arthāŝastra is a monument to evanescence of states and

empires and a reflection upon the fluidity of their fortunes. The Mauryan

Empire that Kautilya helped nurture attained the objective of supreme

hegemony only to fall prey to internal decay rapidly followed by

predatory attacks from former allies and barbarians. A similar pattern

reasserted itself in the 2200 years since the eclipse of the Mauryan

Empire with the rise and fall of the Guptas, the Delhi Sultanate, the

Mughals and the British. In many respects, the subcontinent has, over the

past 60 years, become more like the internally divided, fractious, and

turbulent region it was between its imperial unifications or at the time

Kautilya presented his prescriptions. The successor states to the British

Empire in India are failing to maintain internal order, ensure fiscal

stability, military strength and sound intelligence, thereby greatly

exacerbating their mutual vulnerabilities and increasing their

susceptibility to external pressure. Reflection and sober analysis would

indicate that what is happening now has happened before and that a

point is fast being reached beyond which the breakdown of order will

become impossible to arrest. Strangely, South Asian elites have an

unusually large appetite for the foreign and defence policy paradigms

produced in Western academia. Regrettably, these imported paradigms

do not connect with the historical realities of this region and seem to have

led to the neglect of the quality of the state apparatus and governance

even though they are essential to the maintenance of state power. If India

and Pakistan are to play a role on the international stage commensurate

with their size or at least avert the tragic fate that so many states in the

subcontinent‟s history have succumbed to, they must first put their own

houses in order and crisis of the government. (t

9.7 Conclusion

Kautilya is not the past; he is the future of our country

The Arthāŝastra by Kautilya, also known as Chanakya, is not merely a

book. It‟s a library, a complete university. Written in the 3rd century B.C.,

it was studied by kings as it helped them in running their countries.

And here is another surprising revelation about the book and its impact.

The World Economic Forum has officially noted that in the world history

of the last 2,000 years, India was the richest country for1, 700 years.


662

But 300 years ago, India stopped reading/following the Arthāŝastra. And

promptly fell off the perch hat it occupied as a Soneki Chidiya. Now,

Indians seem to have rediscovered the book, leading to the query. Will

India regain its former glory?

Chanakya is not the past; he is the future of our country. Even though it

was 2,400 years old, the book covered about 180topics from economics to

financial management, fort-building, architecture, intelligence,

accountancy, taxation, the kind of friends one should keep, the type of

people to be avoided, the kind of people to be employed and so on.

Sadly, India and Indians had for a very long time forgotten the values and

mores enshrined in the Arthāŝastra. But a certain Prof. Shyama Shastri

had discovered the original writings of Chanakya in Mysore University in

1905.He studied them (India was under British rule then) and despite the

lack of computers he was able to translate the book into English in four

years. The first version was brought out in1909, exactly 100 years ago.

Kautilya‟s Arthāŝastra would be relevant for another 1,000 years. This

book is the past, present and future of India. Talking about it is like

talking about a library; about an institution. Books like this have an

impact for thousands of generations. Kautilya‟s Arthāŝastra is not the first

Arthāŝastra. There were many others before it and many others after

Chanakya.

Kautilya‟s Arthāŝastra had survived so many generations; he said it was

because of one attribute, viz., and quality. That quality had come about

due to thorough research. Chanakya had studied all the Arthāŝastras,

understood the principles and also foreseen the problems that would arise

thousands of years later and written this one book which created history.

Chanakya had described he four stages of wealth.

One, wealth identification. Where money would come from? This required

research to identify sources of wealth and opportunities to accumulate it.

Merely learning about these would not make one rich.

Therefore, the second stage was wealth creation. This would only follow as

a consequence of hard work. But after one became rich or managed to

acquire wealth, there came another challenge, that of managing wealth.

And so the third stage was wealth management through investments,

securities and so on in order to have sufficient wealth for oneself, one‟s

family and a few generations.


663

But Chanakya was a visionary who talked about the next, the fourth stage

of wealth, that is, wealth distribution. He starts with you and tells you to

make yourself secure first. And in how many verses? In 6,000 sutras on

wealth management! No other book in the world has ever covered such

details of accounting, auditing, and taxation and so on.

Chanakya was one step ahead. While most economists and other experts

were performing a post-mortem of the current situation, Chanakya had

talked about prevention being better than cure. He stated clearly that if

regular checks and balances, or auditing, were conducted from time to

time, then economic crises would not occur.

Further, it was the duty of the ruler to ensure that accounting and checks

and balances auditing took place from time to time.

One very strong sutra From among the 6,000. It was simple but powerful:

Praja sukhe sukham raja, praja chahite hitam. It meant that at the end of it

all, it (money) had to make society happy. True, money was a resource,

but finally, it should lead to happiness.

In other words, Chanakya was the first thinker in Indian history that did

not write off or disparage money.

There is no condemnation, calling the rich filthy rich. He says only money

can give happiness, but that doesn‟t mean that money is the end of

everything. He also talks about wealth.

When J.R.D. Tata was asked whether he wanted India to be a super

power, he had replied: I want India to be a happy country. And happiness,

Chanakya says, can only come about if we have the financial resources .He

is practical; Chanakya‟s greatest success is that he is very practical.

At a high level colloquium on finance and the ills of the global economic

scenario, the main speaker said that. What‟s really gone wrong is that we

have not linked corporate finance or finance and accounting to other

subjects. And the most important is economics. But it was no surprise to

find in the book, Kautilya‟s Arthāŝastra, that even in 4th century B.C.,

Kautilya had said that there could be no accounting without a link to

economics.

India was probably one of the only countries insulated from the worldwide

financial crisis, because we have always understood Arthāŝastra better

than the world.


664

Kautilya had answers to almost all questions under the sun, whether

financial management, intelligence, the kind of friends one should keep,

the type of people to be avoided, the kind of people to be employed and so

on.

Asked about the rate of taxation, Kautilya had said that taxation worked

best when it acted like a honeybee gently taking a little bit of the nectar in

a flower without disturbing the flower.

He had also suggested that administrative expenses were best kept within

25% of the revenue collection. In other words; his book was a sort of

ready reckoner for making any kind of strategic decision.

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