KAUTILYA'SARTHASHASTRA

TheWayofFinancialManagementandEconomicGovernance

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N

FOREWORD

—JigneshShah

Chairman,PromotionofOrientalStudiesCommittee,PriyadarshniAcademy

Chairman&GroupCEO,FinancialTechnologiesGroup

o book perhaps deserves to have as much pride of place in the personallibraries of political pundits, social scientists, and economic scholars asArthashastra,writtenbyKautilya(alsoknownasChanakyaorVishnugupt)

as farbackas300BCE.NotonlywasKautilyaamanof lettersandashrewdstatesman, but he also had profound knowledge of political science, militarystrategy, and economics. He was the best known professor of politics andeconomics at theworld renownedTakshashilaGurukul (university) in ancientIndia. He was the advisor to the first Maurya king, Chandragupta, and laterbecamethePrimeMinisterofhiskingdom.

Arthashastramayliterallymean'ScienceofMoney',althoughitisalsodefinedasapoliticalscience,scienceofpoliticaleconomy,orscienceofmaterialgainorprofit.Leavingaside themeaningof theworditself,Kautilya'sArthashastra isundoubtedly an excellent treatise on statecraft, economic policy, and militarystrategy, and provides an outline of legal and administrative structure forgoverningapoliticaleconomy.Bethatasitmay, it is inrealityadiscourseonthe administrationof finances through raising revenues fromdifferent sources,economicorotherwise,andexpendingthesameonmaintaininglawandorder,defenceof the stateand socialwelfare, asalso for regulatingeconomic, socialandotheractivitiesofthecitizensbytheState.

Arthashastra is, therefore, addressed more to the rulers than their subjects,though the latter too gainmuchknowledge of the various economic, political,and social practices prevailing during Chandragupta Maurya's times. Yet,

Arthashastra is more than mere economic history. Many of its tenets are asmuchvalidtodaytothegovernmentsaswellasthepopulaceintheirday-to-dayaffairsasduringtheMauryanera.

Since the State raises finances from all the sectors of the economy, namely,agriculture and forestry, livestock and dairy farming, export-import anddomestic trade, industry and crafts, and services of diverse hues,Kautilya hasdiscussedalltheseeconomicactivities,definedtheirobjectives,andevendrawnrulesforadministeringsuchactivitiestothebenefitofthesocietyaswellasforearning revenues for the State. Not only has he prescribed varying fees andchargesforengagingindifferentactivities,butevenprovidedelaboratefeesandpenaltiesforviolationsoftherulestopreventabuses,whichatthesametime,fillinthecoffersoftheState.

Kautilya'scontributiontoeconomicthoughtsofhistimeswasimmense.Hehada deep insight into public finance. Surprisingly, even as barbarians roamedthroughNorthernEurope,Kautilyawasdesigningaguidebookforkings,listingseveralrevenuesources,includingtaxesonland,tradeandindustry;interestandprofits on state investments and enterprises; and fines and penalties forinfringement of laws and rules, while providing simultaneously principles forinvestmentsinbasicinfrastructurelikelanddevelopment,miningandirrigationthrough theconstructionofdams, tanksand lakes,besidesoffering judiciouslyplannedsubsidiesandtaxexemptionstowomen,minors,students,disabledandtheotherneedy.

Surprisingly, hewas aware of even the cannons of taxation – fairness, equity,efficiency,andability topay,whicharenot infrequentlymissed in thepresenttimesbytherulingclasswhilerushingtoraiserevenuesthroughindiscriminatetaxation,withoutrealisingtheconsequences.Hemadeastrongpleaforavoidingdiscontentamongtaxpayers.

DuringKautilya's times, trade and commercewas booming.Kautilya had laiddowndetailedrulesfortrade,weightsandmeasures,pricefixation,etc.Hispricefixationpolicyframeworkvividlysuggeststhathewasverymuchconsciousofthe influencesofsupplyanddemandonprices,andcommoditycharacteristics.Hehad stipulated rules formarkets, sale andpurchasecontracts aswell as fordeliveries. Long before the arrival of forward and futures contracts in EuropeandNorthAmerica,Kautilyahadevendefined the term"futuresprice"asonethattakescareofwhatinthecurrentmarketparlancewecall'carryingcosts'that

includenotonlystoragecosts,but interestcostsaswellas transportcosts.Themarketrulesweresoframedastobenefitboththeproducersandtheconsumers.

What's more, he had described even the organisations of the artisans, whichappeartobeprecursorstomoderncorporations.Hehadprescribedthemannerinwhich such corporations should function, pay taxes to the state, trade in theirgoods,andfixwagesfortheirlabour.

Above all, he had understood the environmental needs as well. He hasemphasised the preservation of forests, and even wildlife, like elephants andother animals therein.His treatise is essentially aimed at developing awelfaresociety.Nowonder,heexpected theKing tobehave ina righteousmanner. Inhis own words, "In the happiness of his subjects lies his happiness, in theirwelfare,hiswelfare.Whateverpleaseshimpersonally,heshallnotconsiderasgood,butwhatevermakeshissubjectshappy,heshallconsidergood."Clearly,inKautilya'sArthashastra,therearemanyvaluablelessonstobelearnedforthepresent day rulers aswell as citizens.What surprises one is that although thissage taught us so much as far back as over 2,400 years ago, we haveconveniently forgotten most of his lessons. Had we remembered them, Indiawould have been shining gloriously as it had during the Golden Age ofChandraguptaMaurya.

Priyadarshni Academy must be congratulated for bringing out such anilluminating and scholarly publication, which must adorn the tables of ourpolitical rulers, theirmandarins,political and social scientists, economists, andcorporatemanagements.

W

PREFACE

—ShriNanikRupani

Chairman,PriyadarshniAcademy

ritten in Sanskrit, Arthashastra remains unique in the entire panoply ofIndianliteraturebecauseofitsunabashedadvocacyofpracticaleconomicsandrealpolitic.Kautilya'sphilosophyisbasedontheprinciplesof"sam,

dam,dand,bhed"(persuasion,temptation,punishment,anddivision)asvarious,different, and sequentialmeans to achieve an end. I admireKautilya's focusedapproachtoachieveagoalusinganymeansthataresequencedpragmatically.

Kautilya'sArthashastraisamasterpiece,particularlyifviewedinthecontextofthe time when the book was written. He seems to have had an encyclopedicknowledge about different aspects of governing a monarchy such as:administration, revenue, taxation, law, diplomacy, business and trade, coinage,agricultureandlandtenure,labour,peopleandthesociety,etc.

The moment I started reading the revered works of Kautilya, also calledChanakya, advisor toKingChandraguptaMaurya, themost powerfulKing inIndia in 300 BC, I was convinced that Kautilya's teachings are full of aptsolutionstoIndia'scurrentproblems.

I strongly believe that India can draw important lessons and norms fromArthashastra's rich heritage. Although the book was written over 2400 yearsago,itspreceptsaboutsocial,political,andeconomicstructureofanidealstatearerelevanteventoday.Perhapsevenmoreso!

ChanakyadreamtofanIndiathat:

•Hasaself-sufficienteconomy

•Providesequalopportunitiestoall

•Developsandefficientlymanagesland(themostvaluablesource)

•Hasminimaltaxes,collectedintheleastpainfulway

I am specially enamored by Kautilya's visionary thinking when he states, "AKingmustcollecttaxeslikeahoneybee,"enoughtosustainthestate,butnottoomuch to destroy. This is what is of utmost relevance to the Indian taxationenvironmenttoday.

Tome,Kautilya'sworkcanbebestdescribedasatreatiseoncorporatecultureand spirituality, though the word 'corporate' was not in vogue at that time.CorporateSocialResponsibility(CSR)whichimpliesthatcompaniescontributetowards the welfare of society, has become the buzzword today not only inIndia, but the world over. In my view, the principle of CSR is rooted inKautilya'sArthashastraandhisteachings.

Not only had Kautilya thought about CSR, 2400 years ago, he had alsocontemplatedabout thebestwaysofdealingwithenvironmental issues.Watermanagement, preserving forests, and nurturing land as valuable resource, allform part of his treatise. Kautilya set down a fundamental truth – "Societyundergoes constant change, leaving behind those who say 'no' to change." Inother words, "parivartan hi sansaar ka niyam hai." In today's coalitional andfactionalpolitics,therearemanywhosay 'no',notbecausewhatisproposedisbadforthecountry,butbecauseitmayharmtheirownpoliticalcareer.

ChanakyaNitiordiplomacyislegendaryalloverIndia,andispractisedinmanyareas likedefence, strategy formation,and foreign relations. InChanakyaNiti,thefocusisonhowgovernmentsshouldgovern.Iamamazedtofindthatintheareasofpublicgovernance,superintendentswereappointedinsectorslike:

•Mines,gold,trade

•Weightsandmeasures,yarnsandtextiles

•Forestproduce,armoury

•Agricultureandshipping

Onhead-hunting,Kautilyawiselysaid,"Avoidpersonswhoareangry,greedy,proud, and fearful." He stressed, "Spiritual development is paramount forinternal strength and character of the individual, material pleasures andachievements come second." "Whatever action is taken should be result-oriented,"wearenot following these rules today. If resultsarenotachievable,theconcernedpersonnelshouldbepunishedorpenalised.

Kautilya's thoughts also find reverberations in Sadhu Vaswani's philosophy,"Reward of service is more service. When you give, you are being blessed.Those who give results will be rewarded." On the role of Dhanis-Vyaparis(wealthytraders)insociety,herecommendedthattheycontributetothediggingofwells,providingdispensaries,balwadis,communitydevelopmentworkduringearthquakes,flood,etc.

Karma yoga (dedication to work), Dhyana yoga (contemplation), and Bhaktiyoga (faith) need to be integrated into our lives so that thismay increase theprofitsmadebycorporations,whichmaybeconvertedforthelargergoodofthepeople.

Kautilya opined that the "King has no individuality of his own.He is for thepeopleandofthepeople."ThisissimilartotheGandhianphilosophythatassetsare tobeheldbymanagersas trustees for their constituents.Wealso find thisperspectivereflectedintheBhoomidaanMovementinitiatedbyVinobaBhaveji.

At thisstage,Iwouldlike tomentionthatSriSriRavishankar,founderofTheArt of Living Foundation, spoke on "Role of Holistic Science in CorporateManagement" at the IMC's 4th India Calling 2004 – Asia Pacific BusinessSummitatSingapore.HearingSriSriRaviShankar,IgotremindedofKautilya'sthoughts.

Inthesamevein,Smt.InduJain,Charperson,TimesofIndiaGroupandBennet,Coleman&Co.Ltd.spokeaboutCSRandwhatdefinesCSR.

ItisPhilanthrophy?Charity?SocialObligationorDuty?CommunityDevelopment?BuildingRoads,CommunityHalls,Schools?

Providingfacilitiesforcleandrinkingwater,sanitation?Adoptingavillage?EnvironmentProtection?Treesshouldnotbeindiscriminatelycut.Deforestationisacrime.

Inshort,CSRwasdifferentlybuteloquentlyexplainedbyKautilya.Thus,CSRisnotarecentWesternphenomenon.ItiscertainlynotnewtoIndia–ithasbeenapartofourcultureforthousandsofyears.

Inmoderntimes,TatasandBirlas,followedbyquiteafewcorporates,havebeengivingbacktosocietythroughCSR.

I sincerely believe that many of the problems that India faces today can betackled with the help of the meticulous suggestions made by Kautilya withrespecttothecountry'spoliticalandeconomicadministration.

Arthashastra provides a comprehensive analysis of political administration,defencematters,agriculturaloperationsandgovernancematters,amongstotherissues.

Even though Kautilya called his treatise as the Arthashastra, it is an all-ecompassing document covering amuch larger spectrumof human activity. Itprovidedafullaccountofhowamonarchicstateshouldbeorganised,defendedfromtheexternalthreatsandattacksandhowitshouldbeconsolidatedinorderto have a central unified regime. While doing so, Kautilya's Arthashastraprovidedaverydetailedaccountofpublicfinance,agruculture,trade,selectionofofficersandministersandgovernanceofthestate,etc.

ThebureaucracywhomChanakyaenvisagedinhisArthashastracontinuedtobeamodelforkingdomsestablishedlateron.TheArthashastraprovidesthenormsfor an efficient and well functioning bureaucracy. This again is of utmostrelevancetoIndiaatpresent.

I would like to state that Kautilya's Arthashastra has been compiled in thecontext of ancient Indian culture. It is necessary to comprehend the thenprevailing environment in order to correctly grasp the teachings of such amagnumopus.

The beauty of this greatwork lies in the fact that it provides very useful andpracticalanalysis,whichwouldbevalidandrelevantforallthetimestocome.It

isamazingthatKautilya,wholivedsometwothousandfourhundredyearsago,had such a vision and foresight that is so universal in character. Though thepolitical,socialandeconomicmilieu,existingthenandnowarevastlydifferentin many ways, Kautilya's teachings were relevant then and are found morerelevantinthemoderncontexttoo.

I am proud to say that I initiated the project and it has providedmewith animmense satisfactionandprideof carryingwider the insights and teachingsofsuchafamousandalltimesgreat"TheKautilya'sArthashastra".

WithKautilyaashisMinister,ChandraGuptaMauryapresidedoverwhatwasdescribed as the initiation of golden age of India. By imbibing Chanakya'steachings, Iamsurewemayusher inanothergoldenage for India in thenearfuture.

Weshouldtakeout thebestfromKautilya'sArthashastrawhichissuitableforcontemporaryIndia.

This book has made a sincere attempt to comprehend the spirit of Kautilya'sthoughts, understand Kautilya's message, and includes references on therelevance of his teachings for the management of governments and modernIndianbusinesses.

Iamconfidentthatthisworkwouldbefoundusefulbyreadersfromallwalksoflifeand,what ismore,asa resultof thiswork,Kautilya'seconomicprincipleswouldfindsuitableapplicationsinthemanagementofvariousorganisations.

Irecommendthisstudytoalleconomicplayerssothattheymayderivepracticalinspirationstosolvethenation'smostpressingproblems.

ACKNOWLEDGEMENTS

ThethoughtofbringingoutapublicationonArthashastrafirstoccurredduringadiscussion meeting Mr. Nanik Rupani had with Dr. Vijay Bhatkar, FounderChairman, India InternationalMultiversity;Mr. P.P. Chhabria, CMD, FinolexGroup;andDr.RamTarneja, formerPresident, IMC.Mrs.GeetaRupani,wifeofMr.Rupani,fullysupportedtheidea.

ItwasdecidedthatthestudycouldbetakenupattheVedicResearchCentreinPunewhichwasjointlysetupbyPriyadarshaniAcademyandIndiaInternationalMultiversity.Thepublicationideaalsoreceivedanoverwhelmingresponsefromthe august gathering present at a talk Mr. Rupani gave at the InternationalConferenceattheArtofLivingCentreofSriSriRaviShankarjiinBangalore.

Subsequently, Mr. Rupani realized during his tenure as President, IndianMerchant's Chamber, that its Economic Research and Training Foundation, abody that conducts researchon topical issues in the areaof finance, commeceand trade, could be the appropriate platform for giving life to the publication.TheentireManagingCommitteeofIMC,particularlyMr.RamGandhiandMr.SureshKotak,lentunstintedsupporttotheidea.

A panel of experts completed the work and Mr. Jawahar Mulraj, Columnist,TimesofIndia,editeditinrecordtime.

Specialthanksarealsodueto:

Mr.JayantraoPatil,MinisterforHomeAffairs,GovernmentofMaharashtraMr.

Suresh Prabhu, Former Union Minister of Power Mr. Srichand P. Hinduja,Chairman, Hinduja Foundation Mr. Minoo Shroff, President, Forum of FreeEnterprise Mr. Arindam Chaudhuri, Dean, Centre for Economic Research &Advanced Studies, Indian Institute of Planning and Management Ms. KiranNanda,Advisor,IMC,&Director,IMCERTF

DrSRKRao,formerPrincipalEconomicAdvisor,RBIDrDKBhatia,formerEconomicAdvisor,RBIDrPRJoshi, formerDirector,DSPMerrillLynchDrVijayDeo,ScholaronKautilya

Mr. U C Dikshit, former Director of Research, RBI Ms Piya Mahtaney,EconomistandManagementConsultantMr.PNMogre,ChiefAdvisor,IMC

Mr.JitendraSanghvi,DeputySecretary-GeneralandChiefEconomist,IMC

DrMohanMathew,Economist

MsSamataDhawade,Economist

Mr.UlhasLatkar,Publisher,AmeyaInspiringBooksIndiaMerchants'Chamber

IndianMerchants'ChamberEconomicResearchandTrainingFoundation

A

INTRODUCTION

—ShaileshHaribhaktiFormerPresident,IndianMerchants'Chamber

nashritahkarmaPhalam,KaryamKarmakarotiyah,Sahsanyasimcha,yogicha,naniragnirnachakriyah.

(BhagavadGita,Chapter6)

The onewho is unattached to the fruits of his work andwhoworks as he isobligated, is in therenouncedorderof lifeandhe isa truemystic,nothewholightsnofireandperformsnoduty.

ThisverseisrecitedbyLordKrishnatohisdiscipleArjunawhileexplainingtheimportanceofperformingone'sdutiesselflessly.TheLord'swordsimplythatitis verydifficult forpeople ingeneral toperform their duties, especially in theageofKali.Everyone'sactionsareaimedatmaintainingone'sfamilyandone'sparaphernalia, but no one is working without any kind of self-interest, orpersonalgratification,beitconcentratedorextended.

To act in the Lord's consciousness is the duty of every living entity becauseevery one is part of the Supreme Being. The living entity who acts forsatisfactionofthesupremewholeandnotforpersonalsatisfactionistheperfectsanyasi,theperfectyogi.(fromBhagavadGita–AsItIsbyA.C.BhaktavedantaSwamiPrabhupada)

One can extend the application of the above thought to the performance ofgovernanceduties.Governanceisalsoafunctionwhichshouldbedischargedin

linewith this ideology.Onecansubstitute 'governance jurisdiction' inplaceof'supreme'and'electedrepresentativesandbureaucracy'for'livingentity'.

The wealth of knowledge that Indian mythological scriptures contain and itsrelevance in our current times is immense. The appropriate interpretation andapplication of the principles ingrained in these texts could help us achieveprogressandwelfarethatcanbesustainedintheyearstocome.

Wearecurrentlyfacingasituationwhereafewpolitical leadersareconcernedwithdoingeverythingintheirpowertopreservetheirvotebanksandensurethelongevityoftheircareers.Inthisprocess,neitheraretheylightinganyfire(read'progress')noraretheyperformingorallowingotherstoperformtheirduties.

OurConstitutionrecognisesthreemainpillarsofgovernance:

1.Thelegislaturewhichmakesthelaw,

2.Thejudiciarywhichinterpretsthelaw,and

3. Theexecutivewhichconsistsofboththepermanentbureaucracyaswellaselectedpoliticalpopulacewhichimplementsthelaw.

The executive is the most important in the context of democracy. History isreplete with instances where it has failed to act in the interest of themasses,whichhasledtothedestructionofcivilisation.

The stable social structure andprospering economic environment is dependentongovernance.Itiseveryone'swishthatwehaveanidealgoverningbodythatencourages sustained prosperity. The question that needs to be addressed iswhethertherecouldeverbesuchidealmachinery?

One of the earliest thoughts on this pertinent question came fromVishnugupt(better known as Kautilya, or Chanakya) (c. 350 – c. 275 BC). His treatiseArthashastra deals extensively with aspects of political, economic, and socialmanagementandistheoldestbookonmanagementintheworld.Itwaswrittenby Kautilya around 350 BC.When literally translated, it means 'Scripture ofWealth'. The book is a masterpiece and covers a wide range of topics likestatecraft, politics, military warfare, law, accounting systems, taxation, fiscalpolicies,civilrules,internalandforeigntrade,etc.NowonderscholarsthroughthecenturieshavetimeandagaindescribedKautilyaasararemastermindwho

was an expert in somany varied and specialised fields.Kautilyawas creditedwithbringingdowntheNandaDynastyandinfluencingthedefeatofAlexanderin Indiawhen thewarriorwasonhisway toconquer theworld.Asapoliticalthinker,hewasthefirsttovisualisetheconceptofa'nation'forthefirsttimeinhuman history. During his time, India was split into various kingdoms. Hebrought all of them together under one 'Central Governance', thus creating anation called 'Aryavartha', which later became India. He documented hislifelongwork inhisbookArthashastra.Forages, rulersacross theworldhavereferred to the Arthashastra for advice on building a nation based on soundeconomicsandspiritualvalues.EventhoughIndiaandIndiansneverforgottheArthashastra,thestudyandpracticalapplicationofthebooklostitsimportanceforquiteafewcenturies.However,apartfrombeingseenasascholarlywork,thisbooktodayneedstobeonceagainpresentedtoeveryonesothatitmaybepractically applied in today's world. The book has many principles andtechniques,whichonce applied, could cause tremendous improvement even inourday-to-daymanagementofthingsandsituations.

GOVERNANCE–ROLEOFETHICSIssuesrelating toethicalconducthavebeendiscussedsinceantiquity.Kautilyahasalsoofferedmanyinsights,suchas–noamountofrulesandregulationsorauditing can prevent unethical behaviour, both character-building and action-oriented ethical values are essential for a solid grounding in ethics and inoffering guidance to practice ethical behaviour. Ethical behaviour helps in themaintenance of law and order and the creation of wealth, which promoteseconomic prosperity, and religious scriptures and philosophy are sources ofethicalvalues.

Kautilya used the word 'dharma' (which in general, means 'duty') andrighteousness in personal and social conduct. He described the basic ethical(dharmic)valuesas,"Dutiescommontoall–ahimsa(abstainingfrominjurytoall living creatures); satyam (truthfulness); cleanliness; freedom from malice;compassionandtolerance."

TheGreekphilosophersPlatoandAristotleconsideredethicalvaluesasvirtues,emphasised the building of a person's good character and believed that goodconduct would naturally follow. Moral values acknowledged by Aristotleinclude courage, temperance, justice, and prudence.Additional virtues includehonesty, compassion, generosity, fidelity, integrity, and self-control. While

Aristotleaddressedtheprincipleofvirtueethics,hedidnotdiscussanyaction-orientedprinciplesofethics.Kautilyareferred tobothvirtueethicsandaction-oriented principles of ethics. But he elaborated only on the action-orientedethicalvalues,suchasrights,fairness,andservantleadership.Hewrote,"Properbehaviourismoreimportantthanbeingvirtuous."

KautilyahadstudiedtheVedasandvariousphilosophiesdeeply,buthethoughtthatadiscussionregardingpersonalcharacter-buildingwasbeyondthescopeoftheArthashastra.Forexample,hestatedaprince 'should learnphilosophyandthe three Vedas from authoritative teachers, economics from the heads of(various government) departments, and the science of government from (notonly) theoretical exponents of political science (but also) from practicingpoliticians'. With regard to this, two remarks are in order. First, Kautilyabelieved that instilling ethical values in a child kept him ethical later in lifewhether he worked as a public servant (a politician or bureaucrat) or as amerchant (or an accountant) in the private sector. Second, the grounding inethics, such as, the development of the capacity to follow one's conscience,looking beyond self-interest and showing benevolence toward others, was asimportantaslearningprofessionalskills.

Kautilya emphasised the creation of an ethical climate in the State and alsosuggested various measures to enhance it. He argued that bureaucraticorganisationswerenecessarysincenothingcanbeaccomplishedwithout them,but was also very apprehensive about the potential for corruption and thedifficultyofdetectingsuchpractices.Herecognisedthatagoodsystemofbook-keeping and auditing was necessary, but not sufficient to guarantee ethicalpractices. In otherwords, an accountingmethod, nomatter how sound,wouldnotdefeat'aggressiveandcreative'accountingpractices.

Kautilya identified several types of officials who might cause loss to thetreasury.A discussion of just two of themany types reveals the nature of hisinsights. According to Kautilya, an official who causes loss may be arrogant'abouthislearning,hiswealthorthesupporthegetsfromhighlyplacedpersons'.Thephrase'supporthegetsfromhighlyplacedpersons'impliesthepotentialforabusefromundueaccesstohighofficials.Similarly,anofficialmaybegreedy,'whichpromptshimtousefalsebalances,weightsormeasuresortomakefalseassessmentsandcalculations'.Kautilyainsistedoncharacterreferencesbeforeapersonwashired.ThispracticewhichwasstartedbyKautiyla,stillholdsmerit,as even today most companies prefer a reference before recruiting any

employeesintotheirorganisation.

KautilyasuggestedvariousmeasuresfortheKingtoadopttoimprovetheethicalclimate.Hestated,"AKingendowedwith the idealpersonalqualitiesenrichestheotherelementswhentheyarelessthanperfect,"adding,"Whatevercharacterthe King has, the other elements also come to have the same." According toKautilya,aKingshouldupholdthehighestethicalstandardsandrulethroughhisleadershipandnotbyhisauthority.Amongtheotherrecommendationsproposedwastheestablishmentofanethicalcodeofconduct.

TheseremarksbyKautiylaareparticularlytrueintoday'sdayandagebecausejustastheKingwasresponsibleforsettingethicalstandardsinhiskingdom,thesameholdstrueforthetopmanagementoftheorganisation.Itisthedutyofthemanagementnotjusttosetupacodeofconductwithintheorganisation,butalsotosetupprocedureswhichwouldensurethatthesestandardsareadheredtobyall employees. The code of ethics in an organisation should be set-up in amanner inwhich itwouldnotonly ensure that all the employees complywithapplicable laws, rules and regulations, but also engage in and promote honestand ethical conduct and abide by the policies and procedures that govern theconductofthecompany'sbusiness.Eachandeveryemployeeoftheorganisationmust take ituponhimself tohelpcreateandmaintainacultureofhighethicalstandards and commitment to compliance and, in the case of directors andofficers, maintain a work environment that encourages employees to raiseconcerns to the attention of management and promptly address employeecomplianceconcerns.

GOVERNANCE–EFFECTONSOCIETYAn administration through its policies and controlmoulds the development ofsociety.Socio-economicprogress is hugelydependant on suchpolicies.Socialaspects include religions, superstitions, urbanisation, food, entertainment,women empowerment, morality, dependence, and occupations. Economicparameters include financial administration, trade policy, tax policy, labourpolicy,andconsumerprotection.

Thecentralthemedrivingthepolicieswouldbetoestablishequality,justiceandprosperity through participation, decentralisation, accountability, andtransparency.Arthashastrawasconceivedtoprovidethenormsforanefficientandwell-functioningbureaucracy.Kautilyaattachedconsiderableimportanceto

financialmanagementoftheState,recognisingthatthefinancialstrengthoftheState is critical in normal times as also in times of war, famine, and othercalamities.

It isalsotobeappreciatedthatKautilyarecognisedthatthe 'Stateshouldrunadiversifiedeconomyactively,efficiently,prudentlyandprofitably'.Kautilyalaidemphasis on profitmaking andwealth creation.He viewedmaking profits byenterprise as pro-labour in the sense that if the enterprise is not earningprofitthenitiswastingthetimeandenergyofthelabourthatiscarryingoutthetask.HebelievedwealthcreationwouldleadtothewelfareoftheState.

The earlier view that dominated the business scenariowas the orthodox viewaccordingtowhichthesoleobjectiveofbusinesswastomakeprofit.Thenewfoundationcomeswiththeenlightenedviewofbusinesswhere,besidesearningprofit, care should be taken to ensure that it is being earned through ethicalmeans.Theconceptofbusiness isnowredefinedandsubsequently thegoalofproductionisnotrestrictedtomereprofitmaking.Accordingly,thegoalofeveryproductive industry is now meant to benefit a wide cross-section of peopleconsistingofshareholders,workers,consumers,suppliers,andfinally,thewholeofsociety.Itshouldbemadeclearthattheenlightenedviewofbusinessdoesnotsay that profit is unimportant or that it is of no consequence.Profitmaking isimportantas itcontributes towards thedevelopmentofsociety.Thecompanieswhich generate wealth are important as they can contribute towards thedevelopmentof the society fromwhich theyderive their sourcesofgeneratingincome.Whereasanyenterpriseearninglossesswallowsthehardworkoflabourandisaburdenonthesocietyandtheeconomyasawhole.

Kautilyabelievedinlinkingwagestoproductivity,anideawhichisnowbeingfollowed in the corporate world. In the age of globalisation, companies arerecognising the importance of high productivity as this leads to curtailingoverheadsandreducingunnecessaryexpenditure,resultingingoodreturns.Alsovariousperformanceappraisalprogrammesarebeingundertakenbycompaniestocheckwhetheremployeesarecarryingouttheirtaskseffectivelyandschemessuch as productivity-linked performance bonus for achieving specifiedproductivitylevelsaredesignedtoachievethedesiredgrowthrate.

Kautilya also dealt with the system of taxation in an elaborate and plannedmanner. This well-known treatise on state craft, written sometime in 300 BCwhen theMauryanEmpirewas risinggloriously, is trulyamazing, for itsdeep

studyofthecivilisationofthattimeandthesuggestionsitoffersaKingonhowto run the State in themost efficient and fruitfulmanner.Amajor portion ofArthashastra isdevoted to financialmatters including financial administration.Accordingtothefamousstatesman,theMauryansystem,sofarasitappliedtoagriculture,was a sort of state landlordism and the collection of land revenueformedanimportantsourceofrevenue.TheStatenotonlycollectedapartoftheagriculturalproducewhichwasnormallyone-sixthofthetotalquantity,butalsolevied water rates, octroi duties, tolls, and customs duties. Taxes were alsocollectedonforestproduceaswellasfromminingofmetals,etc.

Collectionof income taxwaswellorganisedand itconstitutedamajorpartoftherevenueoftheState.Generalsales-taxwasalsoleviedonsales,andthesaleand purchase of buildings was also subject to tax. Even gambling operationswerecentralisedandtaxwascollected.Ataxcalledyatravetanawasleviedonpilgrims. Though revenues were collected from all possible sources, theunderlyingphilosophywasnottoexploitorover-taxpeople,buttoprovidethemaswellastotheStateandtheKing,immunityfromexternalandinternaldanger.The revenues collected in this manner were spent on social services such aslayingofroads,settingupeducationalinstitutions,settingupnewvillages,andothersuchactivitiesbeneficialtothecommunity.

The reasonwhyKautilya gave somuch importance to public finance and thetaxation system in the Arthashastra is not far to seek. According to him, thepowerofthegovernmentdependeduponthestrengthofitstreasury.Hestated,"From the treasury, comes the power of the government, and the earthwhoseornament is the treasury, is acquired by means of the treasury and army."However,heregardedrevenueandtaxesastheearningsoftheSovereign,fortheserviceswhichwere to be rendered by him to the people, and to afford themprotectionandtomaintainlawandorder.KautilyaemphasisedthattheKingwasonlyatrusteeofthelandandhisdutywastoprotectitandtomakeitmoreandmoreproductivesothatlandrevenuecouldbecollectedasaprincipalsourceofincomefortheState.Accordingtohim,taxwasnotacompulsorycontributiontobemadebythesubjecttotheState,buttherelationshipwasbasedondharma,and it was the King's sacred duty to protect the citizens in view of the taxcollected. If theKing failed inhisduty, the subjecthada right to stoppayingtaxes,andeventodemandrefundofthetaxespaid.

KautilyahasalsodescribedingreatdetailthesystemoftaxadministrationintheMauryan Empire. It is remarkable that the present day tax system is inmany

wayssimilartothesystemoftaxationinvogueabout2400yearsago.Accordingto the Arthashastra, each tax was specific and there was no scope forarbitrariness.Thescheduleofeachpayment,andits time,mannerandquantitywerepre-determined.The landrevenuewasfixedat1/6th shareof theproduceandimportandexportdutiesweredeterminedonad-valorembasis.Theimportdutiesonforeigngoodswereroughly20%of theirvalue.Similarly, tolls, roadcess,ferrycharges,andotherlevieswereallfixed.Kautilya'sconceptoftaxationismoreorlessakintothemodernsystemoftaxation.Hisoverallemphasiswasonequityandjustice–theaffluenthadtopayhighertaxesascomparedtothenot-so-fortunate. Students, people suffering from diseases, or minors wereexempted from tax, or given suitable remissions. The revenue collectorsmaintainedupdated recordsofcollectionandexemptions.The total revenueoftheStatewascollectedfromalargenumberofsources.

Kautilya placed land revenues and taxes on commerce under the head of 'taxrevenues'. Thesewere fixed taxes and included half-yearly taxes like Bhadra,Padika, and Vasantika. Custom duties and duties on sales, taxes on trade andprofessions, and direct taxes comprised the taxes on commerce. The nontaxrevenues consisted of produce of sown lands, profits accruing from themanufactureofoil,sugarcaneandbeveragebytheState,andothertransactionscarriedonbytheState.

Kautilya also laiddown thatduringwaror emergencies like famineor floods,etc.,thetaxationsystemshouldbemademorestringentandtheKingcouldalsoraise war loans. The land revenue could be raised from 1/6th to 1/4th duringemergencies. The people engaged in commerce were required to pay bigdonationstowarefforts.

Takinganoverallview,itcanbesaidthatKautilya'sArthashastrawasthefirstauthoritative text on public finance, administration and the fiscal laws of thiscountry. His concept of tax revenue and non-tax revenue was a uniquecontribution to tax administration. It was he who gave tax revenues dueimportance in the running of the State and pointed out its far-reachingcontribution to the prosperity and stability of the Empire. It is truly a uniquetreatise. It lays down in precise terms the art of statecraft including economicandfinancialadministration.

GOVERNANCE–EXPLORED

Saktahkarmanyavidvamso,yathakurvantibharata,Kuryadvidvamstathasaktascikirsurloka-sangraham,Nabuddhi-bhedamjanayed,ajnanamkarma-saginam,Josayetsarva-karmani,vidvanyuktahsamacaran.

(BhagavadGita,Chapter2)

Astheignorantperformtheirdutieswithattachmenttoresults,thelearnedmaysimilarly act, without attachment, for the sake of leading people on the rightpath. So as not to disrupt the minds of ignorant men attached to the fruitiveresults of prescribed duties, a learned person should not induce them to stopwork.Rather,byworkinginthespiritofdevotion,heshouldengagetheminallsortsofactivities.

Asrightlysaidbyoneofourtechnocrat leaders, inthecurrentscenario,socio-economicdecisionscannotbetakeninpoliticalvacuum.Thereareleaderswhoplay to the masses. Their idea is to maintain their vote banks without caringabout long-term benefits for everyone. Here again one could look to theBhagavad Gita for guidance. Lord Krishna appreciates that many peopleperformtheirdutieswithsomepersonalgaininmind.Heexplainsthatitisthedutyof the learned toguideotherson to the rightpathwithout stopping themfromperformingtheirduties.

Governancequalitycanbemeasuredonthreeparameters:

1.Accountability

2.Integrity

3.Transparency

Agovernancesystemshouldmeasurewellineachoftheabovethreeparameterstobe regarded as sound and sustainable. It has beenhistorically observed thatgovernancesystemshaveevolvedoveraperiodoftimetoimbibeallthesethreequalities.Governance in the developed countrieswouldmeasurewell in theseaspects.

Kautilya stressed that governance should be discharged with a sense ofpragmatism. He recognised that the economic welfare of subjects and privatebusinessesisnotinconflictwiththewelfareofaState.Extendingthisthought,he enunciated the importance of promoting free trade practices and building

institutions. He propagated wealth creation justifying it as crucial forestablishing a welfare state. Entrepreneurship and astute strategy were theresourcesidentifiedbyhimforpavingthewaytowardseconomicprosperity.

Astute strategy for Kautilyameant employing the four tenets of saam, daam,dand, and bhed as various different and sequential means to achieve an end(saam–persuasion;daam–temptation;dand–punishment;bhed–division).InArthashastra he dwells at length on different aspects of governing includingsocial, political, and economic administration. His thoughts work under theassumption that 'the sourceof livelihoodofmen iswealth'.He alsodraws thecorollary that the wealth of a nation is both the territory of the State and itsinhabitantswhomayfollowavarietyofoccupations.ThusArthashastra couldbeviewedasaworkaboutthe'ScienceofEconomics'.

The aim of pursuing successful economic policies, particularly throughproductive enterprises, is also to increase the revenues of the State andappropriatethesurplusesfortheStateTreasury.Abalancehastobemaintainedbetween thewelfare of the people and augmenting the resources of the State.This presupposes two things – maintenance of law and order, and adequateadministrativemachinery.

GOVERNANCEMODELSAll across the world, various governance models/ideologies have beenimplementedandtested.Someofthemare:

1.Monarchy

2.Fascism

3.Socialism

4.Democracy

We could judge them by Kautilya's principles, and rate them on theiraccountability,transparency,andintegrity.

MONARCHYAmonarchyisaformofgovernment thathasamonarchastheHeadofState.

Oneof thedistinguishingcharacteristicsofmonarchy is that theHeadofStateusually reigns for life; in a Republic, the Head of State (often called thePresident) isnormallyelected foracertain timeperiod.Therearecurrently29extantmonarchiesintheworld.

Since1800,manyoftheworld'smonarchieshaveceasedtohaveamonarchandhave become republics, or become parliamentary democracies. Democraticcountries thatretainmonarchyhavebydefinitionlimitedthemonarch'spower,withmosthavingbecomeconstitutionalmonarchies.

Inanabsolutemonarchy,themonarchhaspowerovereveryaspectofthestate,and a constitution may be granted or withdrawn, while in a constitutionalmonarchyheissubjecttoitaswellasanycitizen(thoughitmaygranthimsuchprivileges as inviolability). Modern versions tend to survive only in societieswithsufficienttechnologytoallowtheconcentrationandorganisationofpower,butnottoalloweducationandrapidcommunication.Theeconomicstructureofsuch monarchies is often of concentrated wealth, with the majority of thepopulation living either as agricultural serfs, or, as in Gulf monarchies, apaternalistic model showering benefits on the citizens (while politically theymayremainsubjects)andimportingcheapforeignlabour.

KautilyawroteArthashastrainanerawhenmonarchywasprevalent.Itneedstobekept inmind thatKautilya is not theoriginatorofArthashastra but that hereliedonsimilartreatisesfromthepast.Itcanbeobservedthatthismodelreliesmore on dand and bhed. The qualities of a monarch would translate into thequality of monarchy. The general masses would be subjugated to a singleindividual's wish. As people become conscious about their rights, suchmonarchieseitherhadtoadaptorfadeoutofexistence.

The idea of adaptationwas to imbibe qualities of accountability, transparencyand integrity. Towards this end, constitutional monarchies took shape. In aconstitutionalmonarchytheelectorateisgivenimportance.Insuchmonarchies,themonarchservesasasymbolofcontinuityandstatehood.Manymonarchiesareconstitutedbytraditionorbycodifiedlawsothatthemonarchhaslittlerealpolitical power. The power would vest with the Parliament or the ExecutiveCouncil.

FASCISM

Merriam-Webster defines fascism as "a political philosophy, movement, orregimethatexaltsnation,andoftenrace,abovetheindividualandthatstandsfora centralised autocratic government headed by a dictatorial leader, severeeconomicandsocialregimentation,andforciblesuppressionofopposition."TheAmerican Heritage Dictionary describes it as "A system of government thatexercises a dictatorship of the extreme right, typically through themerging ofstateandbusinessleadership,togetherwithbelligerentnationalism."Mussolini,oneof themainproponents ofFascism, defined it as a right-wing ideology inoppositiontosocialism,liberalism,democracy,andindividualism.

Fascism is characterised by a very high degree of nationalism, economiccorporatism, a powerful, dictatorial leader who portrays the nation, state orcollective,assuperiortotheindividualsorgroupscomposingit.Fascismisalsotypifiedbytotalitarianattemptstoimposestatecontroloverallaspectsoflife–political,social,cultural,andeconomic.Thefasciststateregulatesandcontrols(as opposed to nationalising) the means of production. Fascism uses explicitpopulist rhetoric; calls for a heroic mass effort to restore past greatness; anddemandsloyaltytoasingleleader,oftentothepointofacultofpersonality.

Analysingthismodelfromgovernanceperspective,onecouldappreciatethatthebase ideology is that of a group's requirement taking predominance overindividuals.Onecouldassumethatintegrityisanecessarypartofsuchideology.However, the other qualities – accountability and transparency – are vitiated.Due to its totalitarian nature, the system is prone to excesses. Under thecamouflageofnationalism,manypersonalcausescouldbeforwarded.

Thismodelalsoextensivelyreliesondand(punishment).Withpeopleinvolved,agovernancemodelhastobeablendofallthefourtenets.Abiastowardsonewillresultinthemodelbeingrejected.AfterthedefeatofFascistItalyandNaziGermany in World War II, the term has taken on an extremely pejorativemeaning, largely in reaction to the crimes against humanity committed by theNazis.Today,very fewgroupsproclaim themselvesas fascist, and the term isoften used to describe individuals or political groups who are perceived tobehave in an authoritarian or totalitarian manner; by silencing opposition,judging personal behaviour, promoting racism, or otherwise attempting toconcentratepowerandcreatehatetowardsthe'enemiesofthestate'.Becauseofthe pejorative meaning of the term there is a great deal of controversysurroundingthequestionofwhatpoliticalmovementsandgovernmentsbelongtofascism.

SOCIALISTDEMOCRACYSocialism isan ideologyofa socialandeconomicsystemwhere themeansofproductionarecollectivelyownedandadministeredbyallofsociety.Amongstother things, this is intended to produce a more evenly spread distribution ofwealth. 'Socialist' ideologies tend to emphasise economic cooperation overeconomic competition; virtually all envision some sort of economic planning(many, but by nomeans all, favour central planning).All advocate placing atleastsomeofthemeansofproduction–andatleastsomeofthedistributionofgoods and services – into collective or cooperative ownership. The idea ofabolitionofprivatepropertybecameapartoftheideaintheearly19thcentury.

Historically, the ideology of socialism grew up hand in handwith the rise oforganisedlabour.Inmanypartsoftheworld,thetwoarestillstronglyassociatedwithoneanother;inotherparts,theyhavebecometwoverydistinctmovements.

This model imbibed most of the qualities that Kautilya envisaged as agovernancemodel.Thewelfareofthestate/groupwasgivenimportance.Asthegroup was also responsible for regulations, integrity and accountability wereassured. Representation from the masses in governance germinated in thismodel.Therewasafeelingofbelongingthatbegantogrow.

However, this system did not adequately recognise the importance of "Bhed(Differentiation)". As human beings, everyone likes to be appreciated andrewarded for specific achievements. Not only are the group's benefits to beprotected,butindividualwantsalsoneedtobeaddressed.Intheabsenceofsuchincentives,performancegetsaffected.Thisresultsindiscontent.

The Founder Fathers of Independent Indiawere drawn to the socialistmodel.Given the state of affairs in those times, such models also seemed pertinent.With around two centuries of British rule, the common Indian would havelackedentrepreneurshipabilities.Further,theavailabilityofresourcestosupportbusiness was limited. As a result, central planning and allocation of scarceresourcesintoavenuesofprimeimportancemadesense.

Thus, most of the production facilities were owned by the government.Employmentopportunitieswerecentralised.Industriallicensingwasintroducedtocontrolandmonitorprivateenterprises.Theideabehindsuchlegislationswasto offer a cross-section of people, an environment conducive to growth andprosperity. However, too much of power started resting with the executive

bureaucracy. Such concentration of power led to corruption. Integrity of thegovernancemachinerystartedrusting.Accountabilitycouldnotbeimposeddueto the lack of differentiation mechanisms between performance and non-performance.

With the economy in dire straits, the governance machinery had to beoverhauled.Thefirststeptowardsthiswastakenupinearly1990s.Indiastartedrecognisingcapitalisminabetterlight.ThegovernancestrategywasmouldedinlinewithKaultilya's ideas and bhed was accepted as an important strategy topromote statewelfare. Our system has now evolved into a 'mixed democraticeconomy'.

CAPITALISTDEMOCRACYCapitalism has been defined in various ways. In common usage, it means aneconomic or socio-economic system in which the means of production areoverwhelmingly privately owned and operated for profit, decisions regardinginvestmentofcapitalaremadeprivately,andwhereproduction,distribution,andthepricesofgoods,services,andlabourareaffectedbytheforcesofsupplyanddemand.

WhilemostpeopleregardtheWesterndevelopedcountriesascapitalist,someofthese economiesmay bemore strictly called 'mixed economies', because theycontainstate-ownedmeansofproductionandsignificantgovernmenteconomicinterventionism.

This is by far themost sustainablegovernancemodel that one could currentlyobserve. It could alsobe called a successfulmodel as countriespractising thissystem have attained a high level of economic prosperity. This overcomes allmajordrawbacksofothermodelsdiscussedbefore.Indiahasseenitsprosperitylevelsincreasingafteradoptionofcertaincapitalistideologies.

A set of broad characteristics are generally agreed on by both advocates andcritics of capitalism. These are as follows (along with comparisons withKautilya'sideology):

1.Privatesectorandprivateproperty–acceptanceofprincipleofdifferentiation

2.Freeenterprise–Kautilyainsistedonderegulationoftradeandpromotionofadministrativemachinery

3.Profit–thetemptationtoundertakeworkdiligently

4. Unequal distribution of wealth – all the above resulting in wealthdiscriminationwhichinturnresultsingreedandwhichdrivesefficiencieshigher

5.Competition,self-organisation,theexistenceofmarkets(includingthelabourmarket) and the pursuit of self-interest – these factors aid in maintaining thequalitativecharacteristicsofaccountability,transparency,andintegrity.

GOVERNANCE:CORPORATELEVELIn the current corporate andmanagement scenario,we find a lack of businessethics.Eventhoughmoderncorporationshavedevelopedabasicframeworkof'Corporate Governance' it has merely become yet another piece of documentwhichthemanagementsigns.Evensomeof thetopmultinationalshaveaverywell-definedcorporategovernancestructure.However,thepracticalapplicationsare hardly being noticed. This has become a very serious problem when oneconsidersthatcorporationsarebecomingtheprimemoversofsociety.CorporategovernanceisnotanewconceptandhasbeeninexistenceinAsiafromtheearlydaysofcivilisation.But,withrapidchangesinthebusinessenvironment,suchasglobalisation, deregulation, disintermediation, institutionalisation, and taxreforms, theconceptand scopeofcorporategovernanceneeds tobe re-shapedandreinforced.

Corporategovernance is aprocessor a setof systemsandprocesses toensurethatthecompanyismanagedtosuitthebestinterestsofall.Thesystemswhichcan ensure this may include structural and organisational matters. Thestakeholdersmaybe internalstakeholders(promoters,members,workmen,andexecutives)andexternalstakeholders(shareholders,customers,lenders,dealers,vendors,bankers,community,government,andregulators).

Corporategovernanceisconcernedwiththeestablishmentofasystemwherebythe directors are entrusted with responsibilities and duties in relation to thedirectionofcorporateaffairs.Itisconcernedwithaccountabilityofpersonswhoare managing it, towards the stakeholders. It is concerned with the morals,ethics, values, parameters of conduct and behaviour of the company and itsmanagement.

Theconceptofcorporategovernancehingesontotaltransparency,integrityandaccountabilityofthemanagement,whicharetheverysameprinciplesthatwere

consideredthepillarsofgoodgovernancebyKautilya.Itisasystemofmakingthemanagementaccountabletotheshareholdersfortheeffectivemanagementofthecompany,intheinterestsofthecompanyandalsowithadequateconcernforethics and values. Corporate governance recognises issues like maintainingcontinuityby successionplanning, identifyingopportunities, facingchallenges,andmanagingchangeswithin thebusinessandallocationof resources towardstherightpriority.

Corporategovernancedealswithlaws,procedures,practices,rules,etc.relatingto corporate functioning in our country. The emerging new global investmentenvironmentisforcingcompaniestofollowmoreandmorestringentpractices.However, the decision to practice good governance is a subjectivemanagerialdecision,andhenceinvolvesanelementoftrust.

CorporateGovernancemainlyconsistsoftwoelements:

•Long-termrelationship,whichhastodealwithchecksandbalances,incentiveofmanagersandcommunicationsbetweenmanagementandinvestors.

• Transactional relationship involving matters relating to disclosure andauthority.

TheIndiancorporatesectorisatthecrossroadsasfarasthelegalstructureandinternalmanagement,control,andadministrationofcorporationsisconcerned.Itis facedwithnumerous issuesdemonstrating the ineffective implementationoflaws and the code of business ethics. If certain instances ofmalpractices, taxevasion,andmanagement infightingareanyevidence, thecorporatesectorandthegovernmentneedtohaveanurgentlookatthewholescenarioprevailinginthecountrytoensuregoodcorporategovernance.

Qualitative improvement incorporategovernanceinourcountry, isbasedonacode of good corporate practices andmeaningful disclosure of information toshareholderswhichholdsthekeytocorporatesuccess.Thisisnecessaryinthecontextofthechangingprofileofcorporateownership,withtheincreasingflowof foreign investment, preferential allotment of shares to the promoters ofcompanies and the new role being given to mutual funds. This means bettergovernance andmanagement of corporate bodies, prompt compliance of legaland financial obligations and adherence to ecological and environmentalstandards. The benefit of such governance must accrue to the investors,

customers,lendersoffinanceandtothesocietyatlarge.

Kautilya understood the importance of accountability and transparency for theeffective administration of the State. However, even in contemporary society,principlesofcorporategovernanceare foundedon transparency, responsibility,accountability,andfairness.

Corporate governance represents themoral framework, the ethical framework,and thevalue frameworkunderwhichanenterprise takesdecisions.Corporategovernance essentially consists of three aspects – the first is transparency inoperations. Greater the transparency, lesser the scope for corrupt practices ormischief,astherisksandthebenefitswillbeclearlyunderstoodbyallwhoareinvesting inacapitalmarketoranenterprise.This formof transparency isnotjust restricted to corporates and business houses, but also to the government.With the introduction of the Right to Information Act by the government, itclearlyreflectsanationalpolicyshiftinpublicadministrationfromacultureofconfidentialitytooneofopenness.TheActallowsanyonetherighttoaccessalltypes of recorded information held by a public authority, subject to certainlimitedexceptions.

The second aspect is accountability,which follows from transparency becauseresponsibilities should be fixed easily for actions taken, or not taken. In atransparentprocess,everybodyknowshowadecisionis takenandit iseasytoidentify thosewhoareguiltyand takeactionagainst them.The thirdaspectofgood governance is giving value to investors in terms of creation of wealth,reasonablereturnsandgoodmarketcapitalisation.

Wheninvestmentstakeplaceinemergingmarkets,theinvestorswanttobesurethat not only are the capital markets or enterprises, with which they areinvesting, managed competently, but that they also have good corporategovernance. In other words, when investments take place across nationalborders, the investors want to be sure that not only is their capital handledeffectively and adds to the creation of wealth, but the business decisions aretakeninamannerwhichisnotillegalorinvolvingmoralhazards.

However, in the same context, Kautilya in his Arthashastra mentioned theappointment of spies to ensure a system of vigilance to monitor variousdepartments.Inarealsensethismaynotbeconsideredasanauditbutitservedthefunctioningofanaudit, i.e.,ofkeepingacheckonthevariousfunctionsof

thebusinessentity.Thus,theroleoftheauditcommitteesisofmoresignificanceinmoderndaybusiness.

Managing corporate governance is a complicated task as many corporates inIndia are family-managed and some are professionallymanaged. Governing afamily business ismore complicatedbecause of the central role playedby thefamily that owns and typically leads the business. In a family business, thebusiness, the family, and the ownership group all need governance. In familybusinesses (companieswhose ownership is controlled by a single family) andother kinds of family enterprises including family foundations and familyinvestment funds, the lack of effective governance is a major cause oforganisationalproblems.Incaseoffamilyownedbusinesses,goodandefficientgovernanceresultsinthreefundamentalingredientsforsuccess:

•Clarityonroles,rights,andresponsibilitiesforallmembersofthethreecircles

• Encouraging family members, business employees, and owners to actresponsibly

•Regulatingappropriatefamilyandownerinclusioninbusinessdiscussions

In the present day scenario, investor protection is a matter of paramountimportance.SecuritiesandExchangeBoardofIndia(SEBI),asaregulator,hasbeen chargedwith the statutory responsibility in this regard and is concernedwith corporate governance, so as to overcome any jurisdictional impediment.Thecompany lawon theotherhand takescareof thebasic requirementof theform of corporate governance structure; SEBI is concerned with the dynamicsubstanceofcorporategovernancepractice.KautilyasaysinArthashastra,"Tobegoodisnoble;totellthepeoplehowtobegoodisnobler."SEBIisengagedinsucha'nobler'endeavour!

In India, the debate of corporate governance was initiated after a Code waspresented by the Confederation of Indian Industry (CII) in 1997, which wasfollowedbyanumberofothercommitteesandtask-forces.Theenforcementofcodesforgoodcorporatepracticeshasbecomerelevantandisimportantforthefuture of corporates in India. The Birla Committee helped create a freshmomentuminthedebateofcorporategovernancebyissuingspecificclausesinthe Listing Agreement as prescribed by SEBI. The Birla Committee wasfollowed by the Narayana Murthy Committee (appointed by SEBI) and the

Naresh Chandra Committee (appointed by Department of Company Affairs)which focused on issues of transparency and accountability dimensions in theboardprocess.TheNareshChandraCommitteeReportwasbasedon theauditfunctionandauditcommitteeoftheboard.

SEBIhasrevisedClause49ofthelistingagreementtoimprovethestandardofcorporate governance in India. These changes primarily strengthened therequirements in the areas of board composition and procedures, auditcommitteesanditsresponsibilities,riskmanagementandmostimportantofall,theclauserequirestheCEO/CFOtocertifythatthefinancialstatementsdonotcontain any materially untrue statement, nor any significant omission or anymisleadingstatements.Italsorequiresthemtostatethattheyhaveevaluatedtheeffectivenessoftheinternalcontrolsystemsandhavedisclosedtotheauditorsaswell as the audit committee of any deficiencies in design and operation ofinternalcontrols.Thedecisivereasonfortheinclusionofthisparticularclauseisto make the top managements more accountable for their decisions in theworkingsofthecompany.

The regulatory and legislative framework can only make more efficient theexisting practices of corporate governance, but the corporates also have to beself-drivensoastoruntheorganisationbypayingattentiontoaccountabilityandtransparency,soastopropagateawell-articulatedmessagethatinthelongrun,ethical behaviour and efficient social corporate actions go hand in hand topromote good corporate governance, and thus bring about sustainableprofitabilityofthecompanies.

CONCLUSIONEtanyapitukarmani,sangamtyaktvaphalanica,Kartavyanitimeparthaniscitammatamuttamam.

(BhagavadGita,Chapter18)

All theseactivitiesshouldbeperformedwithoutattachmentoranyexpectationofresult.Theyshouldbeperformedasamatterofduty,OsonofPartha.Thatismyfinalopinion.

Governance is a functionwhichneeds to be dischargedwith utmost goodwill.Theleader,ortheruler,shouldselflesslydevotehistimetowardsthebettermentofthesocietyheresidesin.

AsKautilyawrites:

Prajasukhesukhamrajah,prajahnamcahitehitam,Natmapriyamhitamrajah,prajanaamtupriyamhitam

In the happiness of his subjects lies the king's happiness; in their welfare hiswelfare.Heshallnotconsiderasgoodonlythatwhichpleaseshimbuttreatasbeneficialtohimwhateverpleaseshissubjects.

Kautilya's Arthashastra is a unique Indian text that hasn't lost its relevance incontemporary India.The very reason that this book appeals to our generation,evenafterover2400years,showsthatKautilyahasfine-tunedeachconceptingreatdetail,provinghisfarsightedness.KautilyastatedthattheKingshouldrulehisStateandtakecareofhissubjectsandalsolookaftertheoveralldevelopmentofthesociety,similarly,todayacompany'sboardofdirectorsactsonbehalfoftheshareholdersandsafeguardstheirbestinterestsatalltimes.Eventhoughtheresponsibility of managing the company's affairs is left in the hands of theexecutive officers, it is the board of directors who oversees andmonitors theworkonaregularbasis.Thisveryconceptof'agencytheory'canbechartedbacktoKautilya'stimes.

Thereforeinthe21stcentury,stabilityandprosperitywilldependonthecreationofstrongcorporategovernancesystems.It is important that themomentumforreform of corporate governance regime be maintained. The principles ofcorporategovernancewhichhavebeenhandedovertousbyKautilya,canhelpintheprocess.Eventhoughtheymightnotbeabletopreventfutureshocks,theycouldpreventasetbackfrombecomingacrisis.

CONTENTS

Foreword

Preface

Acknowledgements

Introduction

1.Kautilya'sArthashastra:AnOverview

2.KautilyaasanEconomist

3.FreeMarketEconomy

4.ConceptualisingGoodGovernance

5.PublicGovernance

6.Agriculture

7.ForeignTrade

8.DomesticTrade

9.GovernmentFinance

10.PublicSector

11.HeadHunting

12.WaterManagement

13.Education

14.IssuesofRelevancetoContemporaryIndia

15.ConcludingObservations

Annexure:MaximsandLessonsFromTheArthashastra

Bibliography

I

1KAUTILYA'SARTHASHASTRA:ANOVERVIEW

n thirdcenturyBC livedKautiliya,oneof themost fascinatingcharacters inIndian history. His seminal work,Arthashastra, ought to be read by all, betheystatesmen,businessmanagersoracademicscholars.

Indeed, Kautiliya's Arthashastra is being studied, not only in India, buteverywhere in theworld, for its deep insights and relevance, even 2400 yearsafteritwaswritten.InordertotrulyappreciatethesignificanceofArthashastra,it is necessary to go back in time and study ancient Indian culture. Kautilyabelonged to theMagadhState,which corresponds to present daySouthBihar.Magadh was then the biggest state in India. Kautilya (who was also calledChanakya or Vishnugupta) studied at one of the world's oldest universities,Takshasila University. The subjects studied there were politics, defence,architecture, medicine, and a few others. He joined Chandragupta Maurya'sempire, after a brief stintwith the previousNandaDynasty.He served as theMahaamatya, in theMauryan empire, a post similar to the present day PrimeMinister and, thus, possessed rich experience in political administration anddefence matters. Eventually, Kautilya became an intelligent scholar, fearlessthinker,capablesecretary,andastutepolitician.

Later, he retired from active politics and took upon the monumental task ofwriting the Arthashastra. Being a profound scholar, he studied the literatureavailable to him on subjects like philosophy, religion, politics and diplomacy.However,hecameoutwithanindependentaccountandcommentaryofhisownin the form of Arthashastra. This document is more a tome than a book oneconomics. Kautilya wrote a comprehensive account encompassing politicaladministration and defencematters. In the process, he came to the conclusionthateconomicswasthemostimportantaspectofpubliclifeasitprovidedthebasisforhumanexistenceandsurvival.

Kautilyaconcentratedonthingsthatwererelevanttohistime,viz.,agriculture,cattle-breeding and trade. However, while commenting on other matters ofadministration, Kautilya made reference to different dimensions that have astrong bearing on economics. Thus, Kautilya provided a detailed analysis ofpublic finance, taxation, public expenditure, and investments, appointment ofministersandotherstateofficialsandmanyothermattersconcerninggovernanceofthestate.

OfspecialinteresttothereadersinIndiawouldbeanelaboratedescriptionofhowpublic fundscangetmisappropriated andhowsuchpracticescouldbecontainedandcontrolled.As for agriculture,Kautilyawent intominutedetailsaboutcultivation,farmingandtradingtransactionsessentiallyinfarmproducts.Looking at the whole document, it can definitely be said that Kautilya wasattemptingtosetdownwaysofachieving'excellenceineconomicandbusinessmanagement'.

ECONOMICTHOUGHTPROCESSKautilya'smajorcontributiontotheeconomicthoughtprocesscouldbeseeninthe area of public finance. He attached considerable importance to financialmanagementbytheStaterecognisingthatthefinancialstrengthoftheStateiscriticalinnormaltimesasalsointimesofwar,famine,andothercalamities.Kautilya referred to seven different sources of revenue, classifying them asroutinesources(liketaxesonlandandcommerce)andadditionalsources(suchas interest and profits). At the same time, he enumerated 15 heads ofexpenditure. While levying taxes, he advocated fairness and equity as thebasisoftaxation.Healsomadeastrongcaseforavoidingdiscontentamongthetaxpayers,asthewelfareofcitizenswasuppermostinhismind.Theconceptofsubsidies and exemptions seems to have prevailed inKautilya's times too.Heindicated that these exemptions shouldbe judiciouslyplannedandprovided towomen,minors,students,disabledandothers.

Whilecommentingonpublicfinance,Kautilyashowedremarkableforesightandsuggestedways for investments invirgin land, dams, tanks, irrigation andmining. How relevant this is even today can be seen from thementionmadeabout conservation of water resources in the last two Budgets. These assetsundoubtedlywere of critical importance inKautilya's times from the point ofviewofeconomicplanning. It isnecessary toextend this logicandprepareanexhaustive list of productive assets in the context of a modern economy like

India. Kautilya's suggestions as regards investments are admirably suited toIndiaandimportantlessonscanbedrawnfromArthashastrainthisregard.

Equally important is Kautilya's contribution in themanagement of agriculturewhich he believed was the basis for any economy. Kautilya pointed out that,besides providing foodgrains to feed the people, agriculture also providedrevenue,employmentandfoodforthearmypersonneltotheStateand,hence,hetreated land as a very important asset.He had an exhaustivemethodology forcultivation, selection of seeds and, more importantly, forecasting weatherconditions,andrainfall.Given thefact that thiswasdone2400yearsago, it isremarkable that he advocated a scientific approach to farm operations andmanagement.

Kautilya classified land into arable and non-cultivable land. Arable land wasgiventothefarmersforlifeonlyandKautilyainsistedthattaxeswerepaidbyfarmers. India, at present, is engaged in a debate about tax on agriculturalincome,which still remains inconclusive.Kautilyaprovideda rationaldefenceof his decision. He also advocated that rich farmers be taxed at higher rates.Kautilya argued for maintaining data on agriculture, since this providednecessary information for revenue assessment and collection. He madesuggestionsfortheimprovementoflandrecordstoo.Thisisyetanothersubjectwhichneeds tobeemphasised in thepresent context asmany Indian statesdonothaveproperlandrecords.Absenceoflandrecordsinhibitsthecarryingoutoflandreforms.

Kautilyaalsopointedoutthatirrigationshouldbeplannedandthereshouldbeaprovisionforbufferstock,whichisaStateresponsibility.Kautilyarealisedtheneed to give relief to needy citizens and hence suggested that tax-free landshouldbeallocatedtocertainspecifiedcategoriesofpeople.

Kautilyawroteaveryscientificandarticulatebookonagriculturaleconomics.Itis amazing that he showed suchgreat vision and foresightwhile talking aboutagriculture, which ensured a sustainable basis for human existence andlivelihood.

TRADEANDCOMMERCEKautilya's Arthashastra also discusses trade and commerce. Trade,whether infarm goods or othermanufactured items,was largely under the control of the

Stateduringhistime.TradingoperationsweresupervisedandcontrolledbytheSuperintendentofTrade.ThepricesoftradedgoodswerefixedbytheStateafterundertakingtheprocessofcosting,allowingaprofitmarginof5%ondomesticgoodsand10%onforeigngoods.Inhisbook,exportsandimportsrefernottoforeign countries, but to neighbouring Indian states. Kautilya laid downprocedures for such foreign trade transactions, along with methods for pricefixationtoo.

Kautilyaattachedconsiderableimportancetoweightsandmeasuresusedfortrade,whichwere standardised in those days.While themedium of exchangewas silver and copper coins, barters were practised whenever necessary.Kautilyaalsomadesuggestionsforthedevelopmentandmaintenanceoftraderoutes. Today, we talk about the importance of the Golden Quadrilateralhighway! It must be remembered that Kautilya emphasised that interests oftraders, consumers and the ruling state must be borne in mind whileorganisingtradeandcommerce.Hehadtheconceptofwelfarestateonhismindinallhisteachings.Thisisinteresting,becausetoday,balancingvariousinterestsinordertointroduceVAThasbecomeamajorissue.

We also find references to industry, mining and manufacturing in Kautilya'sArthashastra.Notmodern industry, of course, but industries that existed then.Referenceismadetothetextileindustryengagedintheproductionofwool,barkfibre,cottonandhemp.Chariotswereusedinthosetimesandhence,industrialactivityinthemanufactureofsuchitemsexistedinKautilya'stimes.

Apart from investmentofState funds inmines,Kautilyamadesuggestions forrenewal and renovation of discardedmines. It is interesting that gold andsilverheldgreatappealinKautilya'stimestoo.Besides,minesforcopper,lead,tin, and iron orewere developed.Manufacture of defenceweapons, coins andimplements for farming operations were undertaken in those times. Thereexisted a total State monopoly on mining and manufacturing and the privatesector did not exist in any form in these sectors. The State enjoyed acommanding position on treasury and defence operations and hence its totalcontrolontherelevantindustrialactivity.

LABOURPOLICYANDHRDPRACTICESKautilya devoted a lot of his attention to labour policies and human resourcedevelopmentmatters.However, thesewerewith reference toState service and

procedures to be followed by the State for the recruitment of ministers,secretariesandotherofficers.Besides,detailedprocedureswereindicatedforconducting tests, fixing remuneration, for rotation of duties, andpromotions. While laying down these guidelines, Kautilya opined that thetreatment of the labour force had to be fair, yet strict. Even though theconceptofHRDhasnotbeenmentionedspecificallyinKautilya'sArthashastra,all these guidelines give an impression thatKautilyawas propounding 'humanresourcedevelopment'inadetailedmanner.Hebelievedinthewelfarestateandhislabourpolicyandadministrativeprocedureswereintunewiththatspiritinabroadsense.

Kautilyaputforwardanelaborateprocessofselectionofministers,secretaries,palace attendants, financial accountants, administrative officers, secret agents,and ambassadors of State. Apart from their technical competence andknowledge, Kautilya stipulated that qualities, such as, spirit, intelligence,integrity and loyalty must be thoroughly examined. Kautilya also indicatedmethodsforsalaryfixationandinsistedthattherebedifferentiationinsalaryinorder to compensate officers with superior qualities. He also explained howduties and responsibilities ofState officers shouldbe fixed andwhat penaltiesshouldbeimposedfornon-fulfillmentofduties.

Kautilyawasalsoawareof theneedforeducationandtrainingof thedifferentfunctionaries. He drew up detailed instructions about the training andfamiliarisationoftheKingandtheheirapparentwithvarioussubjectsrelevanttoadministrationanddefence.

HRDmattershavebecomeveryimportantinIndia.Theneweconomicregime,with its focusonglobalisation,hasmade it imperative toadopt anappropriateHRD approach. Lessons can be drawn from Kautilya's Arthashastra on howHRD can be conveniently tackled in the current economic circumstanceprevailinginIndia.

GOVERNANCEItisfinallynecessarytounderstandtheconceptofgovernance,asexplainedbyKautilya.HewroteaboutgovernanceinthecontextofamonarchicStateandtheprinciplesenumeratedbyhimwerewithreferencetogovernanceofsuchaState.TheCEO of the State is theKing andKautilya described in detail theKing'sduties, his background, andhis supremeposition in allmatters concerning the

State.Kautilyaprescribedacomprehensivedailyroutine,divided intosevenphases from earlymorning to late evening, so that theKing's timewas spenteffectivelyonefficient administration.According toKautilya, theKing shouldpossessknowledgeofphilosophy,oldscriptures,politicalethics,diplomacy,andthefunctioningoftheeconomy.

In terms of good governance, Kautilya commented that the King shouldadminister lawand justice.He said that theKingwas the final arbiter and thefountainof justice.Theclassificationof legalmatters intocivilandcriminal isfound in Kautilya's Arthashastra. He laid down elaborate guidelines foradministering justice in termsofevidence,procedures,andwitnesses.KautilyastronglybelievedinDandniti, thoughhemaintainedthatpenaltiesmustbefairandjust,andproportionatetotheoffencecommitted.

As for the State's political administration, Kautilya provided a full-fledgedcommentaryonhowthisshouldbeeffectivelyundertaken.Hegaveinstructionsabout the defence of the State's boundaries, protection of the forts, and themanner inwhichan invasionby theenemyshouldbehandled.Theday-to-dayfunctionstobeperformedbytheprince,ministersandotherstateofficialsweredescribed by Kautilya. He also assigned importance to expanding andconsolidating the State's position. Kautilya was preoccupied with the task ofconsolidation of theMaurya Empire into a unified central regime and havingachieved these goals, he knew exactly how this task could be accomplished.Kautilya believed in the end result and hencewas not too sensitive about themeans deployed. He upheld moral and ethical standards in his personal life.However, he was straightforward in recommending means, fair or foul, inachieving the goals of the State. In fact,many scholars criticised him on thisscore.

Yet another aspect of good governance enumerated by Kautilya concernsmisappropriation of state funds. He prepared an exhaustive list of dubiousmethods employed for embezzlement of funds and other similarmalpractices.He explained how checks and balances should be administrated for thecontainmentofmalpractices.Thisisperhapsamongthemostimportantlessonsthat can be learnt by the administrators of India. Identifying corrupt practicesandprescribingstrictandstringentremediesandpenaltiesforthecontainmentofsuch practices is the most urgent task and challenge faced by India. TheenforcementmachinerycouldbenefitfromthestudyofKautilya'sArthashastraspecificallyfromthispointofview.

RELEVANCEOFKAUTILYA'SARTHASHASTRAAdeepunderstandingofKautilya'sArthashastrawouldofferimportantlessonsin contemporary times too. Even though the circumstances prevailing inKautilya'stimeswerevastlydifferent,histeachingshaveauniversalappeal.Hewaschartingapathforeconomicprosperitythroughentrepreneurshipandastutestrategising to achieve prosperity under any situation. Kautilya realised thatwealth creation was crucial for establishing a welfare state. He outlined andadvocated appropriate strategies for creation, protection and conservation of anation'swealth.

Kautilya's specific commentary on areas like public finance and treasury,investments inproductiveassets, techniquesof agriculture andcattlebreeding,andtradeandcommercewouldbefoundtobeveryusefulandrelevant to thisday.Obviously,thesestrategiesneedtobesuitablyadapted,giventheprevailingpolitical and social environment as also the availability of advancedtechnologies.Apartfromthesespecificissues,Kautilya'sArthashastracouldbetreatedasthequintessenceoftheartofgoodgovernance.

Apart from broad principles of governance, Kautilya provided techniques forenforcementoflawandjustice.Theuniversalityofhisteachingsstemsfromhisfocuson techniques required toenforceprinciples.Hissenseofpragmatisminmatters of governance needs to be imbibed by politicians and practisingmanagers,apartfromresearchscholars.

India is endowedwith a rich treasure troveof knowledge,withbooks such asArthashastra and other such documents that have been well-preserved overmany centuries. The present day economic administrators would immenselybenefit fromKautilya's teachingswith suitably adapted applications in diverseareasofoureconomy.

Kautilya's emphasis on excellence in economic and business managementremainsrelevantintoday'sglobalisedenvironment.

I

2KAUTILYAASANECONOMIST

nKautilya'sArthashastra,thereareanumberofeconomicconceptsandideaswhich have parallels in the modern theory of economics. Often Kautilya'seconomic theories are implicit rather than explicit, which is understandable

becausehedidnotwriteabookoneconomicsasweknowit tobe today.Theeconomic ideas expressed in the Arthashastra are not new to the moderneconomist, butwhat is amazing is thatKautilya had developed these thoughtssome 2, 400 years ago.Many of the same ideas have been rediscovered andrestatedsincehistime.

PerhapsonecouldcallKautilyathe'FatherofEconomicsinIndia'!Ifonewereto read his thoughts on domestic commercial policies, one knows that heunderstood well the relationship between demand and supply in thedetermination of price. He even wrote about the estimation of demand andcontrolofsupply.Accordingtohim,akingshouldnotarbitrarilyfixthepriceofaproductwithoutregard to itssupplyanddemand.Even today, largelyfor social considerations,pricesofcertainproducts arearbitrarily fixed,whichhave their effects on other areas, usually fiscal. For example, kerosene issubsidisedforsocialreasons,asitisacheapfuel.ThissubsidyisbornebytheState,andState-ownedoilcompanies.However,itisalsomisusedasasubstitutefordiesel,whichharmstheenvironment.

Kautilyaadvocatedtheconceptof 'justprice.'The 'justprice'wasdesignedtomaintaintheincentiveforbusinesspeoplebyallowingthemfivetotenpercentprofit in their operations. As State-owned businesses competed with privatebusinesses,theconflictofinterestwasclear.Kautilyasuggestedsomeparityinpricebemaintainedsuchthattheprivatesectorwasnotchokedoff.Heindicatedthatanarbitrarypricecannotbedictatedfromabovewithoutregardtothecostof production, the ratio of supply to demand, a reasonable level of profit,etc.When there was a glut of any commodity, the State (designated state official

Panyadhyaska) was expected to intervene and centralise the sale of thatcommodity so that the price did not slump.Apparently, the entire supplywaspurchasedanditssalecarriedoutthroughtheagencyofthestateatafixedprice.

All in all the text reveals a definite attempt to strike a reasonable balancebetweentheinterestsofthestate,thetradersandtheconsumers.Oftenhowever,theinterestsoftheconsumersareregardedassupreme.ThePanyadhyaksawasexpectedtobeanexpertindeterminingthevaluesofvariouscommoditiesandalways be updatedwith the demand and supply situations of the commoditiesinvolved. Any kind of price collusion by the groups and associations ofmerchantswasdiscouragedbyheavyfines.

FOREIGNTRADEWell before the World Trade Organisation, Kautilya clearly understood theadvantagesofforeigntradeandstronglyencouragedit.Infact,herecommendedthatexpertsbesenttostudyforeignmarketsanddeterminewhichcommoditiescould be imported and exported profitably. He encouraged imports butunderstood that it could not be a one-way trade; hence, for the long term, hesuggestedabalancebetweenimportandexportbemaintained.

Hedoesnotdisplayanyofthefearsofforeigntradethatthemercantilistsafterhim had displayed.He stated thatbefore a successful trade contract canbeestablished,itmustbebeneficialtoallcountriesinvolved,surelyaprinciplethatwouldunderliemoderndaytradeagreementsbetweencountries.Theremustbeapriceadvantageandaprofittobemade.Hence,thepossibilityofincreasedconsumptionandaprofitmotiveseemtobethedominantfactorsinencouragingforeign trade.Foreign trade,however,wasregulated–noteverythingcouldbeimportedorexported.Kautilyalaiddowngeneralandspecificpoliciesregardingallaspectsoftrade,whichseemtoocomplexandstrangelymodern.

TRADEPOLICYTherewasaclear-cutrolefortheStateinseekingandanalysing'marketaccess.'In someways the role envisaged byKautilya for the State in seeking foreignmarkets, i.e., analysis of price and demand, tariff and transportation costs andmarket information, is very similar to the brief of modern Trade PolicyDepartmentsinvariouscountries.

"Havingascertainedthevalueoflocalproduceascomparedwiththatofforeign

produce that can be obtained in barter, the superintendent will find out (bycalculation) whether there is any margin left for profit after meeting thepayments (to the foreign King) such as the toll (sulka), road—cess (vartanf),conveyance-cess(ativahika),taxpayableatmilitarystations(gulmadeya),ferrycharges(taradeya),subsistencetothemerchantandhisfollowers(bhakta),andtheportionofmerchandisepayabletotheforeignKing(bhága)."

For Kautilya, information gathering and lobbying was a prerequisite fortradeactivities,"havinggatheredinformationastotransactionsincommercialtownsalongthebanksofrivers,he(theofficer)shalltransporthismerchandisetoprofitablemarketsandavoidunprofitableones."

RISKANDUNCERTAINTYKautilya related the levels of risk and uncertainty to levels of profits andinterests. He opined that higher levels of risk and uncertainty need to becompensatedbythechanceofreceivinghigherprofitsorinterest.Forexample,he recommended the allowable profit on imports to be twice as high as ondomesticgoods.Theassociated riskwasconsidered tobe an important reasonforallowing10%ofprofitsonimportsandonly5%ondomesticproducts.Thiswasbecausenotonlydidimportsrequirealock-inoflargeamountsofcapital,butalsobecauseofthedangerofgoodsbeingstolenintransit.

Showing an early understanding of risk and reward,Kautilya provides a verydetailedanalysisofinterestratestructuresandtheimportanceofhavingcorrectstructuresofinterestratesanddebtrecoverymechanisms.Kautilyaprovidesfordifferent interestratestructuresfordifferentsectorsof theeconomy.Hestates,"Five panas per month per hundred is commercial interest (vyávaháriki); tenpanaspermonthperhundredprevailsamong forests; twentypanaspermonthperhundredprevailsamongsea-traders(sámudránám),"clearlyshowingthattheriskier the venture, the greater the interest should be taking into account thehigher risk.Kautilyabelieved that the State should have somewatch overcommercialactivities thataffect thegeneralwelfareof theState, i.e., "Thenatureofthetransactionsbetweencreditorsanddebtors,onwhichthewelfareofthekingdomdepends,shallalwaysbescrutinised."Thisideaissimilartopresentdaysystemsof'watchdogs'thatsupervisecommercialactivities(CentralBanks,SecuritiesandExchangesBoards,etc. )andprovide legitimacyandsecurity tothemtomakethebusinessenvironmentrobust.

UnlikeAristotle,whoconsideredcharginginterestonloansasunjust,Kautilyaoutlinedastructureofratesbaseduponthetypeofloans,factorsaffectinginterest rate,methods of calculating interest and the circumstances wheninterestmaynotbecollectedbythe lenders. Interest rates inhis timevariedfrom 1.25-2% per month, primarily, depending upon two factors – the riskinvolvedandthepotentialproductivityofthemoneyborrowed.Theinterestrateonsecuredloanforpersonalneedssuchastomeetmarriageexpensewasatthelowerendofthespectrum,at1.25%permonth.Theratewashigherfortrade.Inthecaseofordinarylocaltradetheratewasfivepercentpermonth,buttheratedoubledforthosetradinginforestproducts.Thetraderswhotravelledtoforestareas were subjected to greater risk from animals and robbers; further, thebusiness in forest products wasmore profitable. The highest rate of 20% permonthwaschargedtothosewhoengagedinoverseastrade,consideredtobethemostriskybutalsothemostprofitableofbusinesses.Commercialbankerstodaywouldsalivateatthethoughtofsuchrates!

The rate of interestwas alsohighon loans takenby agroupof people, ratherthanthattakenbyanindividual.Itwasfeltthatsincethegroupwouldsharetheburdenofinterest,itwouldnotfallheavilyonanyoneindividual.Moreover,thegroup was generally in a better position to pay high interest because it wasinvolved in larger projects with greater profit potential such as foreign trade.CreditorscouldnotchargeaninterestnotapprovedbytheState.

Further, certain groups of people, due to their inability to pay (sickness,bankruptcy), or due to the nature of their work (student) were exempt frompayinginterest–theprivilege,however,hadtobeearnedbythepersonbytheprocessof law.Fivedifferentkindsof interestweredistinguishedbyKautilya:compoundinterest,periodicalinterest,stipulatedinterest,dailyinterest,andtheuseofapledgedarticle.IndeedtheideaofexpressinginterestasapercentageoriginatedinIndia.Thus,overall,theKautilyansystemofinterestseemsquiteelaborate,complexandevenmodern.

WAGESKautilya used three criteria in prescribing wages for state employees. Heindicated that thewage shouldbehighenough tomaintain the loyaltyofhighranking officials, to evoke the needed efficiency and effort, and to reflect therelative standing of their occupation. He recommended that the aggregatewage bill of the State should not exceed one—fourth of its revenue. The

FinanceCommissionwoulddowelltostudythechapteronwages!

In determining wages in private industries, Kautilya used a variety of factorssuchasthequalityandquantityofwork,marketvalueofthefinalproduct,themarketvalueoftheinputs,etc.Thewagedifferedbetweentheindustriesbasedupon skill and technology required, and within the industry based upon thequalityandquantityofworkdone.Higherwageswerepaid forovertimeworkdone during holidays. The labour market was quite competitive. Those whocouldnotcompete,joinedtheranksoftheunemployedandtheunskilledlabourforcewith theirwages appreciably reduced.The concept of contractualwagesalso existed. The quality and the quantity of work to be performed werespecified for a certain sum of wages. A general review of the industries,described by Kautilya indicates a trend toward specialisation and use ofmechanicaldevicestoimprovethequalityandquantityofoutput.

InArthashastra,thereisadefiniteefforttoformulateawagepolicybasedontherealistic understanding of the economic, social, and political factors. Theemerging policymust be just, andmust be consistent with the interest of thestate as a capitalist. For Kautilya, the State is a party to any labour or wagelegislation together with farmers, merchants and industrialists. The policysuggested in Arthashastra attempts to strike a balance between the delicateinterests of the parties involved. Kautilya indicates that although the Stateholds a privileged position of amonopolist, it should co-operatewith theprivatesectorforproperutilisationofresources.Further,astrongprivatesectorisasourceofstrengthtotheState.

MONEYANDBANKINGInKautilya's economy, there is no restriction on the supplyofmoney. Thesupply and demand for money seem to take care of themselves without anyinterference from the State. It seems the restriction on the supply of moneycomesfromtheavailabilityofgoldandsilver–thetwoimportantmetalsusedinthemanufactureofcoins.Inmanufacturingcoins,bothgold(forgoldcoins)andsilver(forsilvercoins)hadtobemixedwithdefiniteproportionsofotheralloys.Any individual could have his gold or silver converted into coins at the Statemint for a fee.Different denominations of coinswere used for transactions. Itseemsthesupplyofmoneywasnotusedforcontrollingeconomicactivities.

Kautliyaalsoenvisagedtheideaofarudimentarybankingsystemthatkeptthe

wealth of guilds and artisans in safekeeping. He recommends that the bankershould have a good understanding of the workings of the artisans, should bereliable,andbeapersonofgoodstanding.Moderndaybanks indeedserveallthesefunctions,i.e.,theyhavetobuildtrustandstaturewithintheircommunitytoconducttheirbusinessandhavetohaveagoodunderstandingofmarketstobesuccessful. InKautliya'swords, "thosewhocanbeexpected to relievemisery,whocangiveinstructionstoartisans,whocanbetrustedwithdeposits,whocanplanartisticworkaftertheirowndesign,andwhocanberelieduponbyguildsof artisans, may receive the deposits of the guilds. The guilds (srení) shallreceivetheirdepositsbackintimesofdistress."

OnemustmarvelatthedepthofKautilya'spragmaticphilosophyunderlyinghisworkinArthashastra.Althoughhedidnotwriteabookoneconomicsperse,hehasexpressedandhighlightedmanyeconomicideaswhenitcomestomanagingtheaffairsoftheStateasearlyasinthe3rdcenturyBC.Sincethen,manyofhiseconomic thoughts have been rediscovered and restated by many prominenteconomistsandphilosophers.Kautilyashouldearnhisrightfulplaceamongthestalwartsofeconomicideas.

K

3FREEMARKETECONOMY

autilyabelievedthattheStatehadaroleinthemarketasaregulator.Suchaviewwould not be very different from the actual practice in current freemarket economies, where the State is expected to provide the institutions

requiredfortheefficientconductofeconomicactivities.ThischapterfocusesonKautilya'sconceptofamarketeconomy,howgovernmentscanplaytheroleofafacilitator, the need for institution-building for the efficient functioning of amarketsystemandhowaconsumer's interestcouldbeprotectedbypreventingunfairtradepractices.Allofthesearerelevant,andstrikeachordinthemindsoftoday'sconsumers.Kautilyawasmeticulousinoutlining,indetail,thetechniqueof controlling practically every aspect of economic activity. However, hisprescription for controlwas to discipline and streamline the various economicactivities for the greatest economicwelfare of the state.Kautilya viewed thewelfareoftheStatetobecoterminouswiththeprosperityofitssubjects.Heoutlined the techniques for regulating agriculture, domestic non-agriculturalbusinesses,aswellasforeigntrade.

Definite wage structure and policies were instituted in accordance with theproduct produced. The employee and employer relationshipwasmonitored toprevent exploitationof labourordisruptionofproductionby theworkers.TheStateensuredthatallthecontractualobligationsbetweenthemwerefulfilled,asthiswouldbeintheinterestoftheStatetoseethatproductiondidnotcease.Theoutputwasnotallowedtobesoldatthepointoforigin,itwastobesoldonlyindesignated market places so that price regulation on products could besystematicallyapplied.TheStatedeterminedthepricesofproductsbasedupontheestimateofdemandandsupply.Thepricewassoregulatedthatitallowedaprofitof5%forlocalbusiness,andabout10%forforeigntrade.TheStateoftencontrolledthesupplyifthepredeterminedpricecouldnotbemaintained.Italsoprovidedsocialoverheadcapitalandoftengavetaxincentivesforbusinessestooperateprofitably.

In theory, the State had absolute control over all aspects of economicactivities;inpractice,itallowedandevenencouragedthegrowthofprivatebusinesses. It was recognised that the wealth of a state depended upon thewealthofthepeople,hence,itcouldnotstifleindividualinitiativesinproductionand profit.While the economicwelfare of the subjects and private businesseswere not in conflict with the welfare of a State, Kautilya streamlined alleconomic, administrative, political, legal and social activities to strengthen theState. Though Kautilya envisaged a very strong supervisory role for thegovernment in the conduct of commercial activities as evidenced in the aboveparagraph, he did not believe that the State had a role in centralising andplanning commercial activities. Kautilya felt no need for either price,production, or quantity controls for consumer goods. "There shall be norestrictiononthetimeofsaleofthosecommoditiesforwhichthereisfrequentdemand;norshalltheybesubjecttotheevilsofcentralisation(sankuladosha)."

THESTATEASAFACILITATORThe Kautilyan State considered it its duty to facilitate transactions; it alsodeemed it important to regulate the nature of transactions for the maximumwelfareoftheState.Intermsoffacilitatingcommercialactivities,Kautilyalaidstress on the 'removal of thorns' to society by protecting artisans (guilds) andtheircommercial interests. In theKautilyanState 'thosewhoconspire to lowerthequalityof theworksofartisans, tohinder their income,or toobstruct theirsaleorpurchaseshallbefined'.

Giventheprideofplaceincurrentliterature(i.e.,ineconomics,politicalscience,andpublic policy) to transaction costs and the business environment,KautilyawasindeedaddressingeconomicissuesthatcontinuetoremainseriousconcernsofthemodernState.InsomewaysKautilya'sstressontheStateasaregulatorisveryinteresting.HefavouredfreetradeandbelievedthattheStateshouldcreatemechanismstoprotectandpromotecommercialactivities;atthesametime,hefavouredasituationwheretheStateshouldhaveamajorroleintheconductofcommerce.TheDepartment ofCommerce in theKautilyan systemhad a veryimportant role as facilitator. It also had distinct roles in domestic commercialpolicy and trade policy. "The Superintendent of Commerce shall ascertaindemandorabsenceofdemandfor,andriseorfallinthepriceof,variouskindsofmerchandisewhichmaybetheproductseitherofland,orofwater,andwhichmayhavebeenbroughtineitherbylandorbywater.Heshallalsoascertainthetimesuitablefortheirdistribution,centralisation,purchase,andsale."

INSTITUTIONBUILDINGThe Kautilyan idea of institution-building for States and markets, and theemphasislaidonthemissimilartomodernideas.Kautilyarealisedthatsettingdomesticstandardsandinstitutionalisingthemthroughlawswasveryessential.To this effect he recommended a separate superintendent of weights andmeasures who would strictly enforce such standards in the market. Theimportance of exacting standards was not lost on Kautilya, "weights(pratimánáni) shall bemade of iron or of stones available in the countries ofMagadhaandMekala;orofsuchthingsaswillneithercontractwhenwetted,norexpandundertheinfluenceofheat."

In our modern world, the concept of maintaining market confidence throughmaintenance of effective standards has been thoroughly institutionalised. Theidea of standards has expanded to include various issues such as health andsafety,labour,environment,etc.

Kautilyalaiddownverystrictrulesonwhatconstitutesa 'legal'agreement, therole of trial and transparency and the importance of having the maximumamountofinformationtoresolvealldisputesfairly.Kautilyastandsoutamongancientphilosophersforhavingidentifiedandproposedsucharefined(giventheantiquity) ideaof contracts and their legal basis.ForKautilya, the elementoftransparency in agreements was foremost. All agreements needed to havewitnesses,neededtoberecordedandthewitnessescouldnotbethosewhohadacriminalrecord(i.e.condemnable).Thosewerethegoodolddays!

In Kautilyan times, oral contracts that were otherwise unlawful, were valid.Those who voluntarily heard such contracts (stroti) could bear witness to it.Contractswere declared invalid if, for example, one of the parties to it or thewitness, was under provocation, anxiety, intoxication or was a lunatic. TheArthashastra is alsoperhaps theearliest treatiseknown inhistory to recognisethe collective legalrights of a grouporbody of people. InKautilyan India,thereweregroupsofmerchantsandprofessionalsorganisedtogetherinto'srenis'or co-operatives who specialised in some economic activity. In essence, theywere early representations of the modern idea of the firm or corporation.Kautilyaallowedintra-firmcontractsasacceptable,"agreementsenteredintobymembers of any association (srenis) among themselves shall be valid thoughenteredintoinprivate."Kautilyaalsoemphasisedthatdisputescouldbeamong'merchants or trade-guilds', i.e., a body of people and another party. Kautilya

alsolaidoutlawsforcontractsthatinvolvedco-operativeundertakingsorjointefforts.

In fact, the idea of the 'contract' and the agents who can enter into them isextended. "Theabove rules (i.e., the rulesof agreements) shall also apply to...countries(desa),castes,families,andassemblies."Thisisasurprisinglyevolvedidea,andKautilyaisthefirstknownsourcetoenunciatesuchacomprehensiveview of the nature of contracting parties to include individuals, firms,communitiesaswellasnationsandStates(desa).

The process of arbitration and trial that ensures proper enforceability ofcontracts has been given much importance in Arthashastra. Kautilya laidstressontheproperregistrationofcaseswiththemaximuminformation;healsorecommended harsh fines and punishment for those who give wronginformation. Kautilya recommended, "the year, the season, the month, thefortnight(paksha),thedate,thenature,andplaceofthedeed,theamountofthedebt as well as the country, the residence, the caste, the gotra, the name andoccupationofboththeplaintiffandthedefendant,bothofwhommustbefittosue and defend (kritasamarthávasthayoh); having been registered first, thestatementsofthepartiesshallbetakendowninsuchorderasisrequiredbythecase. These statements shall then be thoroughly scrutinised." To maintaintransparency in the arbitration and trial process, Kautilya forbids the idea ofcounter-suits. "In cases other than duels, robbery, as well as disputes amongmerchants or trade-guilds, the defendant shall file no counter-case against theplaintiff."IntheKautilyansystem,thereisaprovisionforadjournmenttogivethedefendanttimetopreparehisbriefandassuchisinconsonancewithmodernideasofarbitration.Kautilyastatesthat 'thedefendantmaybeallowedthreeorsevennights topreparehis defense. If he is not readywithhis defensewithinthattime,heshallbepunishedwithafine."Ourpresentjudicialsystem,withitsbacklog of lakhs of cases, could do with such a strict adherence to timestandards.

The Kautilyan arbitration system recognised several kinds of disputes andcategorisedthemunderdifferentheadswithdetailedinstructionsonthespecificnature and treatment of such disputes. The Arthashastra recognised disputesrelatedtobuildings,saleofbuildings,boundarydisputesandthoserelatedtothedeterminationofboundaries,disputesrelated to landandwaterresources,non-performanceofagreements,recoveryofdebts,disputesconcerningdeposits,co-operativeundertakings,disputesrelatedtomerchantsandtradeguilds,rescission

ofpurchase and sale and salewithout ownership, disputes related to titles andownershipanddefamation.

STATEINTERVENTIONKautilyaidentifiedseveralareasofStateinterventionandappointedofficialstofacilitatetheeconomiclifeofthecountry.Theyareasfollows:

1.Thesuperintendentofslaughterhouse

2.Thesuperintendentofprostitutes

3.Thesuperintendentofships

4.Thesuperintendentofpassports

5.Theofficeofthecitysuperintendent

Kautilya's idea of the passport corresponds to the modern version of thisdocumentthatfacilitatesmovementofpeople.Thisisperhapsthefirstinstanceof an institutionalised concept of passports that regulated the flow of peopleacrossborders.

Kautilya said that 'whoever is providedwith a pass shall be at liberty to enterinto,orgooutofthecountry.Whoever,beinganativeofthecountryentersintoorgoesoutof thecountrywithoutapass shallbe fined12panas.Heshallbepunishedwiththefirstamercementforproducingafalsepass.Aforeignerguiltyofthesameoffenceshallbepunishedwiththehighestamercement.

PREVENTIONOFUNFAIRTRADEPRACTICESKautilya realised that the role of the State was to ensure that commercialactivitiesdonotviolatelawsorareharmfulfortheconsumer,andiftheStatedidnot establish and enforce codes of conduct, itwould, in fact, raise transactioncosts.Thelackoftrustandguaranteeofqualitywoulddiminishcommerceandincrease search and verification costs for agents undertaking commercialtransactions. Kautilya explicitly states, "Adulteration of grains, oils, alkalis,salts, scents, andmedicinal articleswith similar articles of no quality shall bepunished with a fine." The consumer or buyer is provided safeguards byKautilya, i.e., "the sale or mortgage of articles such as timber, iron, brilliant

stones,ropes,skins,earthenware,threads,fibrousgarments,andwoolenclothesassuperiorthoughiftheyarereallyinferiorshallbepunishedwithafine."

ItisinterestingtonotethatKautilyatriedtoestablishguidelinesforprofessionalserviceprovidersalso,includingweavers,washermen,boatmen,shippingagentsand even prostitutes.Modern States are still grapplingwith the complexity ofsettingsuch 'service'orientedguidelinesandin that lightKautilya'sattemptsatthesameshowsthesheerbreadthofhisvisionatsuchanearlypointinhistory.Kautilya also established explicit guidelines for the practice of the medicalprofession, incorporating ideas that seem strangely modern, i.e., "Physiciansundertaking medical treatment without intimating (to the government) thedangerousnatureof thedisease shall, if thepatient dies, bepunishedwith thefirstamercement.Ifthedeathofapatientundertreatmentisduetocarelessnessin the treatment, the physician shall be punished with the middlemostamercement.Growthofdiseaseduetonegligenceorindifference(karmavadha)ofaphysicianshallberegardedasassaultorviolence."

For Kautilya, the welfare of the State and the people of the State wereparamount. It is natural that Kautilyawould recommendmeasures that wouldsafeguard consumers from price escalation and inflation. Kautilya sees thesolution throughstrictcontrolofmarketbehaviour, includingsetting theupperfloorforprices.Thus,insomeways,Kautilyawasanadvocateofpricecontrolsinthedomesticmarket,unfortunatelysomepeopleinterpretthisas 'planned'or'control' economy. In reality, Kautilya's policies, when seen in totality,represent a very pro-merchant and artisan stance,with the State playingthe role of facilitator and protector of commercial interests. But theKautilyanState, likeanymodernState, saw thewelfareofcitizensaspriority,andthussafeguardsagainstmonopolybehaviourandpriceescalationhadtobefactoredintothebargain.

Kautilya showed an understanding of collusive and monopoly behaviour andcreated safeguards to protect the market and consumers from its ill-effects.Kautilya clearly stated, "Merchantswho conspire either to prevent the sale ofmerchandiseortosellorpurchasecommoditiesathigherpricesshallbefined."Toensure that consumersand traders receiveda fairprice,Kautilya says, "theSuperintendentofCommerceshall fixaprofitof fivepercentoverandabovethe fixed price of local commodities, and ten per cent on foreign produce.Merchantswho enhance thepriceor realise profit even to the extent of half apana more than the above in the sale or purchase of commodities shall be

punishedwithafine."ButKautilyaisperceptiveenoughandflexibleenoughtorealisethattheStateofficialmightnotbeabletogaugethemarket,hethusstatesthat"incaseoffailuretosellcollectedmerchandisewholesaleatthefixedrate,therateshallbealtered."

KautilyaenvisagedarolefortheStatetoensurethatexcessivepricefluctuationdetrimental to commercial activities did not occur. Kautilya showed a highlyrefined understanding of the law of demand and supply and the perniciouseffects of gluts in the market (it is important to reiterate here that Kautilya'sArthashastra is the first known treatise to discuss such concepts, and thusKautilya is indeed the Father of Economics). Kautilya recommended aninterventionistpolicy incaseofgluts in themarket, i.e., "whenever there isanexcessivesupplyofmerchandise,theSuperintendentshallcentraliseitssaleandprohibitthesaleofsimilarmerchandiseelsewhere,beforethecentralisedsupplyisdisposedof."

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4CONCEPTUALISINGGOODGOVERNANCE

autilya's Arthashastra is an important source of knowledge on polity,economy and administration.However, this important document had beenforgotten for centuries. Thanks to Syamasastri, who first interpreted

Kautilya's economic and political thoughts in a book published in English in1909,wehadinsightsintothewritingsofthatbrilliantmind.Sincethen,alargenumberofscholarsandideologistsfromtheEastandtheWeststudiedthebookandfoundthatitwasafascinatingsourceontheancientIndianpoliticalsystem,economicactivityandadministration,bothpublicandprivate.

TheauthenticityofKautilya'speriod,theroleheplayedasPrimeMinistertoputan end to the evil regime of the Nandas and create a new rule underChandragupta Maurya, has been confirmed by scholars the world over.Kautilya's Arthashastra is basically a book on governance. Politicaladministration and economic administration for good governance are itsimportant aspects. However, the book includes a large number of subjectsrelatedtosocial,politicalandeconomicaspectsoflife.Itisaninterdisciplinaryworkrunningoverseveralchapters,comprising6000Sanskritverses.

The Arthashastra ismore a practical guidemeant for kings than a theoreticalcomposition.TheArthashastraisatomeonhowtheKingshouldruleandwhataimsheshouldstrivefor.Kautilyaknewthedrawbacksofanevilruler.HeknewthateventhestrongrepublicsthatexistedinIndiaandlatersuccumbedeasilytoPersian and Greek invasions, fell primarily because of maladministration. Herealised theneed for creatinga strongandcentralisedmonarchybenevolent tothepeople.Hecouldvisualisetherealisationofastrongnormalruleinplaceofan evil one. He succeeded in creating an ideal state ruled by an ideal king,ChandraguptaMaurya.HeadministeredthekingdomasPrimeMinisterandthenwrotetheArthashastraasaguidelineforthebenefitoftheKing.

The relevanceofKautilya'sArthashastra to present day India and, indeed, thewhole world need not be doubted. The work is relevant in many ways. Forexample,governanceingeneralandgoodgovernanceinparticulararethemostrelevantaspects.ThoseonanendlesssearchforgoodgovernancecanexpectatreasuretroveintheArthashastra.Anumberofmodernthinkers,fromHobbesto Rawls, including Gandhi and Marx believed that human beings concededcoercive power to the state only in the hope of realising good governance.Kautilya's treatise on the art of government and administration, the duties ofkings, ministers, officials and art of diplomacy is a guideline on goodgovernance.

TheKingisexpectedtobehaveinarighteousmanner."Inthehappinessofhissubjects lies his happiness, in theirwelfare, hiswelfare.Whateverpleaseshim personally he shall not consider as good but whatever makes hissubjectshappyheshallconsidergood."

ElsewhereKautilyamaintains,"theKingshouldlookto thebodilycomfortsofhis servants byproviding such emoluments as can infuse in them the spirit ofenthusiasm to work. He should not violate the course of righteousness andwealth. Thus, he shall not only maintain his servants, but also increase theirsubsistenceandwagesinconsiderationoftheirlearningandwork."

ForKautilya,artha(wealth)followeddharma(righteousness).Arthahasawiderconnotationthanmerewealth;thematerialwell-beingofapersonbeingonlyapartofit.

GoodgovernanceinKautilya'smindwasaimedatthewelfareofthepeople.Theprinciples of good governance in Kautilya'sArthashastra are well-drawn out.The King has no individuality. His duties merged into his personality. Hehimselfwasoneof theorgansof thestate,albeit themost importantorgan. InArthashastra,polityandsocietyaremergedandbotharerestrained.

Ingoodgovernance, theobjectivesof the stateare tobe fulfilledand realised.This is possible through a properly organised and guided administration. Thisprincipleisrelevanteventoday.Agovernmentisgood,ifitisadministeredwell.Kautilya suggests that good governance should avoid extreme decisions andextremeactions.Softactions(sama,dana)andharshactions(danda)shouldbetakenaccordingly. Inwhat seems tobeaverymodern toneofvoice,Kautilyaopines, "Sovereignty is practicable onlywith the cooperationof others and all

administrativemeasures are to be taken after proper deliberations." The Kingandministersweresupposedtoobservestrictdiscipline.Kautilyarecommendeda strict code of conduct for himself and for his administrators. This code ofconductisusefulandapplicabletomodernexecutives.

Even 2400 years ago, Kautilya emphasised capping at a quarter of therevenue the salaries of the king and his officials. For good governance alladministrators,includingtheking,wereconsideredservantsofthepeople.Theywere paid for the service rendered and not for their ownership of anything.Compare this to the expenses on the salary of government employees today,which constitutes over 50% of the revenue. In some states even 80% of therevenueisspentonsalaries,wagesandpensions.

It was the duty of the king to maintain law and order in society and toensure protection of life, liberty, and property. Dereliction of duty in thisrespect had to be compensated from the king's property. Inmodern times, theproblem of law and order has become very difficult. Protection of individuallibertiesdoesnotseemtobealwayspossible.Andnever,ever,woulditbepaidforbythepersonalpropertyoftheleader.Agooddealofpublicmoneyisspentonmaintaininglawandorder.Noprogressanddevelopmentispossiblewithoutlawandorderadministration.

Ministersandsecretariesaredirectlyresponsibleforadministration.Theymustbeselectedwithgreatcare.Theirabilitiesmustbetestedbeforetheirselection.Theyshouldbetestedaccordingtothejobstheywillbeassigned.Theirabilitiesand sincerities should be tested from time to time. All these measures arerelevanttothecivilservantsinpresentadministration.

Kautilya also deals with the problem of corruption, in facthe points outabout 40 ways by which government funds can be embezzled. However,Kautilyahasaveryrealisticperceptionaboutdealingwiththismalaise.Hefeelsthatitisdifficulttodiscoverthehonesty,orotherwise,ofanofficer.Accordingto Kautilya, for good governance preventive and punitivemeasures to punishcorruptcivilservantsmustbeadopted.

Good governance and stability go hand in hand. If rulers are responsive,responsible, accountable, removable, recallable, there will be stability, if not,therewouldbeinstability.Thisisveryessentialinthepresentdemocraticsetup.As inKautilya'smonarchicalsetup,similarqualitiesare required inour rulers

andadministrators.

TheArthashastraequatespoliticalgovernancewitheconomicgovernance.Theend is economic governance while political governance is the means. But aseconomic objectives are not realised in the absence of political ones, thenpoliticalgovernancebecomesanendandeconomicgovernancethemeans.'Theend justifies the means', this is supposed to be the basis of Kautilyan andMachiavellian philosophy. Political power and material wealth according toKautilya are the means and ends of governance. And good governance –politicaloreconomic–dependsuponjustifyingtheendsandmeansasthesocio,economic and political conditions. Good governance is fundamental to theKautilyanideaofadministration.Judgingbythecountlessgovernancescandalsthat are uncovered nearly every day in India, a reading ofArthashastra, andimbibing its principles, ought to be the topmost priority for our leaders, bothpoliticalandcorporate.

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5PUBLICGOVERNANCE

PARTI:PRINCIPLESOFECONOMICADMINISTRATIONhecardinalprincipleofeconomicadministrationwaslaiddowninKautilya'sArthashastra in the following words – "The root of wealth is economicactivity and lack of it bringsmaterial distress. In the absence of fruitful

economic activity, both currentprosperity and future growth are in danger ofdestruction.TheKingshallpopulatethecountrysidebycreatingnewvillagesonvirginlandsorrevivingabandonedvillagesites."

IMPORTANCEOFVILLAGEECONOMYWhereas Kautilya enjoined upon the King to populate the countryside,unfortunately, in today's India, the reverse is taking place. People from ruralareas are migrating to urban centers, resulting in proliferation of slums, thatbecomebreedinggroundsforcrime,prostitution,drug trafficking,diseasesetc.The Government of India (and State governments) should follow Kautilya'ssuggestions on decongesting big cities. It is, therefore, heartening to note theformerPresidentofIndiaDr.A.P.J.AbdulKalam'ssuggestionsofinitiatingtheprojectcalledProvidingUrbanAmenitiesinRuralAreasverymuchinlinewithKautilyan thoughts. Rajiv Gandhi's Grameen Vidyutikaran Yojana providesincentivesforthe'ruralisationofpopulation'.

Kautilyamakes someveryuseful suggestions in thebook suchas, arable landshouldbeallottedtotaxpayersfortheirlifetime.Landallottedtoallthosewhodonotcultivateit,shouldbeconfiscatedandgiventoothers.ThelosssufferedbytheStateduetonon-cultivationshouldbemadegoodbytheattendingholderof the land. To boost agriculture, Kautilyamade itmandatory for the king toprotect farmers from being harassed by overdue fines, taxes and demands forlabour. The King would promote trade and commerce by setting up markettowns and trade routes, both by land and by water. He should build water

resources,reservoirsthroughoutthecountryandconstructwideroads.Heshouldprotect trade routes fromharassmentbyhisowncourtiers,officials,or thievesandfrontierguards.InIndiatoday,personsdealingininter-stateandevenintra-state trade experience considerable harassment by officials. It is commonknowledgethatheavybribesarepaidsothatworkmayproceedsmoothly.

CONCEPTOFMIXEDECONOMYANDPUBLICSECTORKautilyawasforemostamongpoliticaleconomists,whopropoundedtheconceptof 'mixed economy'. According to him, the State should run a diversifiedeconomy actively, efficiently, prudently, and profitably. For example, anyofficial who did not generate adequate profits in crown undertakings waspunishedfor,'swallowingthelabourofworkers'.Acrucialcommandwasgivento the Chief Controller of State Trading that he 'should generate profits andavoidlosses'.Onewishesthatourpoliticianswouldreadandunderstandthis.

WhentheState'scommoditiesweresoldbyprivatemerchants,theyhadtopay a charge to compensate the State for profit, which the State wouldotherwisehavegotbysellingdirectly.Thus,itisobviousthatforKautilyatheword'profit'isnotanathemabutamustinbusiness.Hadpost-Independencesocialism in India not derided profits, the financial health of the public sectorandindeedoftheGovernmentwhichborrowedheavilytofinanceit,wouldhavebeenvastlybetter.

According toKautilya, public and private sectors had their own roles to play.Land was in the public sector, the State held all virgin lands, forests andwaterresources.Arable landwasboth inpublicandprivate sectors.Evenminingand fishingwereheldbyboth sectors.While theactualmakingof saltwasdonebythelesseesofsaltpans,theChiefSaltControllercollectedrevenuesbefore it couldbemarketed (saltwasalso imported).TheStatehadmonopolyover the manufacture and sale of alcoholic liquor, gambling, prostitution andbetting.Further,saleandpurchaseandmanufactureofgold,silverandpreciousstoneswereunderthecontroloftheState.

LOCALANDFOREIGNTRADEBothprivatemerchantsand theStatewere involved in localand foreign trade.TheChiefControllerofTradingwasresponsiblefortheequitabledistributionoflocalandforeigngoods,bufferstocks,saleofcrown'scommoditiesandpublicdistribution. The Chief Controller of Private Trading kept a watch over

merchants,inspectingtheirweightsandmeasurementsperiodicallyandensuringthattheydidnothoard,adulterate,oraddextramark-ups.

JANAPADASANDECONOMICACTIVITYMostof theproductiveeconomicactivities tookplace in theJanapada,or selfsufficientvillages.AccordingtoKautilya,"Powercomesfromthecountryside,which is the source of all activity." An ideal Janapada should be capable ofproducing awidevariety of commodities to support the nativepopulation andalso immigrants from outside. People should be predominantly agriculturists,artistsandcraftsmendevotedtowork;theyshouldbeloyalandintelligent.Othereconomicactivitieswere trade,buildingfortsandwater reservoirs,miningandmanufacture. The textile industry was also encouraged. The spinning of yarnwas decentralised and was carried out by women. Weaving was bothdecentralisedbycontractingworkouttoweaversonapieceratebasisandwasalso carried out by the State under its supervision in specially built weavingshedsforspecialtypeofcloth.MakingofsaltwasaStatemonopolyandillegalmanufactureofsaltwasseverelypunished.

Labour and employmentwerenot overlookedor ignoredbyKautilya.Womenand children had specific roles to play in the schemes of employment both inpublicandprivatesectors.Aninterestingaspectofemploymentoflabouristhatwageswererelatedtoproductivityinsomesectorsoftheeconomy.AlargepartofthelabourforcethatworkedforafixedsalarywasintheStatesector.Butthe totalwagebillwasnot toexceedafourthof the totalrevenue.Onewishesthe Finance Commission goes through these ideas. Self-employed craftsmenformed guilds called srenis and had their own rules and guidelines regardingwages and payments. Linking wages and salaries to productivity is an idealformula.Ifimplemented,thiswouldgoalongwayinreducingcostsandhaveafavourableeffectonlabour-outputratio,especiallyinindustries.

BUDGETACCOUNTSANDAUDIT:REVENUEBUDGETINGThecouncilor inchargeofbudgetmakinghadtofirstestimate therevenueforthetaxyearbydeterminingthelikelyrevenuefromeachsphereofactivityunderdifferent heads of accounts, total them up by place of activity to arrive at thegrandtotal.DeductionsweremadeforexpenditureontheKing;standardrationsforothersandexemptionsgrantedbytheKingbydecree,ororally.Outstandingrevenuewasestimatedbytakingintoaccounttheworksunderconstructionfrom

which revenuewas to accrue only on completion, unpaid fines and penalties,dues recoverable and advances to be repaid by officials.Kautilya'smethod ofcalculating net revenue was to deduct expenditure from income taking intoaccount the actual as well as deferred payments. It appears that Kautilya'smethodsdescribedabovedidnot allow forbudget estimates, revisedestimatesandactuals,whicharepractisedinIndiatodaybyFinanceMinisters!

In modern India, alas, the process is reversed. Political compulsions lead tovarious concessions being granted to different sectors, often vote banks. Theexpenditureisfirstdetermined,andthentheexercisetoraiserevenuefromneworexisting sourcesbegins.Back tobasics, aspropounded in theArthashastra,maybeagoodpracticetofollow.

MAINTENANCEOFACCOUNTBOOKSIn the account books, every entry was to have the date of transaction on thereceipt side, whilst revenue was to be classified according to main heads ofaccounts,viz.,costprice,share(bhaga),transactiontax(vaiji),monopolytaxes,fixed taxes, manufacturing charges, fines, and penalties. On the debit side,expenditurewas classified under I I broad heads, such as charitable expenses,palace expenditure, administration, foreign affairs, maintenance of granary,ordinancedepots,warehouses,manufacturingexpenses,labourcharges,defence,cattleandpastures,forestsandgamesanctuariesandfirewood,fodderandotherconsumables.Strictauditofaccountswasrecommended.Today,onehasonlytoread variousCAG reports to knowhowbadly accounts aremaintained by thestate agencies in India. Responsibility of auditors was underscored in theArthashastra. Failure to conform to regulationswas a punishable offence.The auditor had to be ready when the accounts officer presented himself foraudit,otherwisehewouldbepunished.

High officials were responsible for rendering the accounts for their sphere ofactivity without any contradiction in them. Those who told lies or madecontradictory statements were liable to pay a heavy penalty. The quantum ofpenaltiesrangedfrom12panasto200panas.Similarly,elaboratepenaltieswereimposed on those officialswhose activities resulted in a loss to the State, forlying about accounts, for interpolating entries in the accounts, for not beingreadyforauditandformakingcontradictorystatementsintheaccounts.Fearofseverepunishmentkeptunscrupulousandirresponsibleauditorsonguardwhiletheypreparedauditreports.

PARTII:GOVERNANCE:ADMINISTRATION:RULEOFKINGThe manual of administration in Kautilya's Arthashastra described theorganisation of the apparatus of the state and prescribes the duties andresponsibilities of every key official, either for maintaining order or forcollecting revenues. It also dealt with civil service discipline and theenforcementofpeoples'civicresponsibility.Thecodeoflawandjusticecoveredbothcivilandcriminallawandwasbasicallyapenalcode.Theextensiveandgraded penalties and fines prescribed in it had the twin objectives ofdeterringtransgressionsandcollectingrevenuefortheState.

The State was governed by the King with the assistance of councilors andministers, through threemethods, viz., thatwhich theKing sawwith his owneyes, thatwhichheknew indirectly through reports submitted to himand thatwhichheinferredaboutworknotdonebyknowingabouttheworkthathadbeendone. TheKing thoroughly investigated all the qualities of any onewhom hewasconsideringforappointmentasaminister.TheKingwasaccessibletohispeopleeverydayforone-and-halfhouraftersunrise.Wheninthecourt,hewould not make petitioners wait at the door (but attend to them promptlyhimself). Kautilya averred that when the kingwas inaccessible to the people,theywouldcrossovertotheenemy.

Asmentionedearlier, thebasicprincipleonwhichgovernancelaywas,"Inthehappiness of his subjects lies his happiness; in their welfare, his welfare." InIndiatoday,thesituationstandsincontrast towhatKautilyaenjoinedupontheKing. Our rulers, viz., ministers, Members of Parliament, Members ofLegislativeAssemblies, evendistrict collectors are not easily accessible to theaam janta. As a result, middlemen find a flourishing business to redress thegrievancesofthepeople.Alas,inmodernIndia,overathirdofourelectedMPshavecriminalrecords,andsomeforthemostheinousofcrimes.

So long as they are only accused but not convicted (and the legal process isslower than the proverbial snail) they can continue to remain electedrepresentatives. Thus, Kautilyan feudalism, based on the King promoting thewelfareofthepeople,canbeadoptedtodemocracy.

CIVILADMINISTRATIONThe King was in charge of an elaborate machinery to control civiladministration. The heads of the administrationwere the treasurer, chancellor,

chief comptroller, and auditor. Under the chancellor were frontier governors,provincialgovernors,andjudges.Underprovincialgovernorsweremagistrates.Under the chief comptroller and auditor were city commander, cityadministrators, ministers, head of manufacturing establishments, and citygovernor-generals. Under the ministers were forest commanders and dandapalav, chief forest officers and the heads of departments directly under chiefcomptrollerandauditor.

CIVICSERVICEAn honest, efficient and experienced civil service (i.e., bureaucracy) is a sinequanon forefficient, equitableand justgovernance.Kautilyaknew thata fewcivil servantswould feel the temptation tobite intoabitof theState'swealth.Therefore,Kautilya recommended thatonly thoseofficialswhodidnoteat theKing'swealth,but increased it in justwaysshouldbemadepermanent incivilservice.Whileanofficernegligentorremissinhisworkwouldbefineddoublehiswagesandlossesincurred,anofficerwhoaccomplishedataskasorderedordidbetterthanthat,wouldbepromotedandrewarded.

STRUCTUREOFSALARIESANDWAGESKautilya'sArthashastra specified the amountsof salaries tobepaid tovariouscategories of civil servants. The total salary bill of the State had to bedetermined inaccordancewith the cityandcountryside's capacity topay,anditwasnottoexceedone-fourthoftherevenueoftheState.Iftheamountoftheactualcashinthetreasurywasinadequate,salariescouldbepaidpartlyincash,andpartlyinkind.Graincouldbesubstitutedforcashwagesaccordingtotheformulathatanannualsalaryorwageof60panaswasequaltooneadhakaofgrainperday.ThisissimilartotheFoodforWorkProgrammethathasbeenrecentlylaunchedinIndia.Thetotalwageorsalarybillnotexceedingone-fourthof theState's revenue, should have been themodel for both central andmanystategovernmentsthathavebeenspending50%oftheirrevenueonservicesandpensions.

FRAUDSANDPUNISHMENTKautilya's Arthashastra details an elaborate salary structure for the King'sofficials. The highest salary was 48,000 panas per annum (received by thecouncilors, royal scribe, and royalpurohita). The treasurer and the chancellorwere entitled to 24,000 panas per annum. The governor general of the city,

Rastrapala,waspaid12,000panasperannum.Thelowestsalarywas60panasper annum.Kautilyawas aware of financial frauds committed by governmentofficials.Heobservedthattheycouldenrichthemselvesimproperlyintwoways–eitherbycheating thegovernmentorbyexploiting thepublic.Heprescribedpunishment for each typeof fraud.He listed40waysof 'stealing' governmentwealth.

AfewexamplesmentionedbyKautilyaaboutofficialscheatingthegovernmentinclude, construction using government property for personal profits,falsification of the date of receipt of income,misuse of government property,etc.

CONSUMERPROTECTIONTheArthashastracontainsmeasuresforconsumerprotectionandthewelfareofthe people. It has also prescribed how much to pay to artisans, craftsmen,goldsmithsandmerchants.Toprotectconsumersitwasmademandatorythatallbalancesandweightswereboughtfromthechiefsuperintendentofweightsandmeasures.Italsodescribesvariouswaysbywhichmerchantscheatconsumers,fore.g.,fraudinweighing,substitutionoforiginalproductsoringredientswithfakeones.

Kautilya also listed the wages to be paid to basemetal workers, artisans andcraftsmen;weavers,washermenandtailors;doctors;andentertainers.Fromtheseveral minute details regarding employment, salaries and wages detailed inArthashastra,itisobviousthatunemploymentandbeggingcannotberuledoutin the kingdom. In fact, Kautilya prohibited beggars, entertainers, andmendicants from moving about during the monsoons. The punishment fortransgressionwaswhippingwithanironrod.

If we examine the kinds of corruption and fraud committed by the King'sofficials,werealisethatnothingsignificanthaschangedoverthecenturies.Thedifference is that inmanycases thegovernmentofficialsgetawayunpunishedfortheirmisdeedsinpresentIndiawhereasstrictpunishmentswereslappedoncorrupt officials in earlier times. The punishments ranged from 'wealthpunishments' to the lowest standardpenalty. In somecases,publichumiliationwas recommended, such as, smearing the face and body with cowdung andparading the errantofficial inpublic areas, or shavingoff theirhair.Can suchpunishments be meted out in India today? Even if a law is passed in the

Parliamentitcouldbechallengedbytheaccusedinthecourtoflaw.Sinceafewlawmakers have themselves been accusedof crimes, it is highlyunlikely thattheywouldwanttolegislatepenalproceedings.

III.CONCLUSIONIsKautilya'sArthashastrarelevanttoIndiatoday?It istruethattheidealStateKautilyaenvisaged inhis treatisewasa feudalmonarchy,where theKingwasthesolemasterofhiskingdom.DemocraticIndiatodayhasafederalpolityandgovernments,bothatthecenterandatthestates,dependingonthevotescastbythe electorate. The State cannot have its ownway onmany issues, even if itwantstofollowmethodsandmeasuressuggestedinArthashastra.

Legislature,judicature,executiveandpublicopinion(freedomofthepress)are the four pillars of democracy. Despite its constraints, India can benefitfromthewisdomofKautilyaasexpressedinArthashastra.Whenhe(Kautilya)discussestheeconomy,justadministrationorrelationsbetweenStates(nations),we can learn from his wisdom. Kautilya's state was run on the principle ofdharma(righteousness).

Compared to Kautilya's emphasis on rural (village) development, the highimportancehegavetoagricultureanddecentralisationoftextileindustrytoday,one finds these areas areneglected.Unlike inKautilya'sStatewhere theKingwasaccessible tohispeopleeverydayat least foroneandhalfhours, in India,today, it takes a long time to even get a hearing from the State when peopleapproachit.

In the sphere of economic administration also, India has much to learn fromArthashastra. Kautilya recommends severe penalties on officials of publicenterpriseswho incur losses, and rewards for thosewhoshowedprofits.Profitwasamust inKautilya's schemeof runningpublicenterprises,unlike thewaythingsarenow.

ThoughKautilya'sArthashastrawaswritteninthethirdcenturyBC,thebookisrelevant to India even in the 21st century. The ground rules and measuressuggested in itespecially inmatters relating to thebudget,accountsandauditsareapplicableeventodaytoIndianconditions.Witnesstheinnumerablefraudsmentioned in theCAG reports. InKautilya's State, the king could take actionagainst erring officials and severely punish them, however highly placed they

were.InIndia,IASofficersoftherankofjointsecretaryandabove,cannotbearrestedwithout clearance from higher authorities, evenwhen they are caughtred-handedbytheAnti-CorruptionBureauorCBI.

TheauditorsinArthashastrawereliabletopayseverefinesandbepenalisedforanywrongdoing.Theycouldnotescapetheiraccountabilitytothecrown.Indiacould adopt such measures to tighten the audits of public and private sectorcompanies. In conclusion, the relevance of Kautilya's Arthashastra to Indiatodaysofarasgovernanceisconcernedis:

• Firstly, Kautilya's State had adopted a mixed economy structure, in whichpublic,private,andjointventuresofbothpublicandprivatesectorsfunctionedside by side. At present, India also has a similar economic framework.WhatwiththeStatehavingashare(oftenamajorshare)insomecompanies,ithasallthethreetypesintheeconomy.

Indiashouldmakeprofitthemainobjectiveforitspublicenterprises.

•Secondly,highpriority shouldbegiven to agriculture,water reservoirs, roadbuildingandforestdevelopmentassuggestedbyKautilya.

•Thirdly,peopleshouldhaveeasyaccesstotheState'shighofficialstogettheirgrievancesredressed.Thereshouldbenoharassmentofpeoplebytaxcollectors,customs and tax officials. Officials who harass people should be dealt withseverely.

•Fourthly,ruralareasandvillagesshouldbedevelopedtodecongestpopulationin urban areas and cities. Industries should be decentralised and employment,especially ofwomen, should be given priority.Kautilya's observation that theState depends on the prosperity of villages and village population echoesGandhiji'sviewonthesubject.

•Fifthly,auditorsshouldbedealtwithseverelyiftheyfailintheirdutiesandfortheiromissionsandcommissionswhichcauselossestotheState.

• Lastly, irrespective of political party in power, the government both at thecenterandatthestatelevelshouldrealisethattheStateisforthewelfareofthepeopleandpeoplearenottheretoserveitasacolytesorservants.

KautilyaemphasisedthiswisdominArthashastra.

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6AGRICULTURE

autilyahadabrilliantmind,whichwasbothrealisticandintuitive!This isevidentfromhisapproachtomanagingagriculture.TheArthashastrastatesthatthemainactivitiesoftheeconomywereagriculture,cattlerearing,and

commerce. Among the three, Chanakya considered agriculture to be themostimportant constituent of the economy. Arthashastra, with its focus on theimportanceofagriculture,issurelyasourceofinspirationandlearningintoday'sIndia, given its wisdom on economic development and growth. Arthashastrapointedoutthattheresponsibilityofagovernmentwasnot,ofcourse,limitedto ensuring the proper planning and allocation of central funds but alsoproper management and implementation of policies in accordance withstandardsandprocedures.KautilyawasoftheopinionthataKingmustalsolearnaboutagriculture.

It extends, too, over the whole of the general government sector, includingregions,districtsandmunicipalities,aswellascentralgovernment institutions.This task can be extremely difficult where there is a large degree ofdecentralisationaccompaniedbyshortagesinmanagementandauditcapacity.

Kautilya opined that the government should also ensure strong financialmanagement systems to be introduced in agencies and organisations at thevillage levelwhich interfacewith thepublicandprivate sectors.Such systemsshould also be in place in public corporations that are subject to governmentregulation.Thisisnotrulingoutthefactthatinallofthese,soundandreliablestandardsofgovernanceareoftenneeded.

AmajorfocusinArthashastraistheroleofcitizensintheagriculturalsector.Itsuggested the provision of a special officer titled Sitadhayaksha orSuperintendent of Agriculture (for crown lands). The book also containedinformation related to farmers ingeneralas itwasmeant to informandadvise

theSuperintendentwithregardtoincreasingtheproductiononthelandsownedby the Crown. During Kautilya's time, agriculture, cattle breeding, and tradeweregroupedintoacategorycalledVarta.

Kautilya indicated that agriculture should receive policy and administrativesupportfromgovernmentofficials.Forproductionofcrops,supplyofgoodseedandotherpurchases,inputsneedtobearranged.Assistancehadbeprovidedtomake available other resources such as labour, machinery, implements, andbullocks. Contingency plans were made for alternative crops in case themonsoonfailedorfloodsoccurred.Irrigationwasprovidedwherever thewatersourceexisted.Arrangementsweremadetoprotectcrops,harvest,andtosafelystoretheproduce.

The Arthashastra has a lot of valuable information about themanagement ofagriculture, measurement of rainfall, astrology, and astronomy related toagriculture,meteorological aspects of agriculture, kinds of crops, advantage incultivating certain classes of crops, the growth of crops, treatment of seeds,manuring,andharvesting.

Thetaxationissueisalsowell-addressed.

"Possessed with knowledge of the science of agriculture, watermanagement,andmanagingcropsandtrees,orassistedbythosewhoaretrained in such sciences, the superintendent of agriculture shall in timecollecttheseedsofallkindsofgrains,flowers,fruits,vegetables,bulbousroots, fruits of creepers, fiber-producing plants such as hibiscus andcotton."

InKautilya's time,clearorderswere issued to thesuperintendent tomakesurethatthefarmersandthelabourerswerenothamperedintheiractivitiesandthattheirworkdidnotsuffer.

"Theworkof the abovemen shall not sufferonaccountof anywantofploughsandothernecessaryimplements,orofbullocks.Norshalltherebeanydelayinprocuringforthemtheassistanceofblacksmiths,carpenters,basketsellers,rope-makers,aswellasthosewhocatchsnakes,andsimilarpersons. Any loss in production because of the above persons shouldinvitefineequaltotheloss."

METEOROLOGY

Even in Kautilya's times, weather forecasting was of prime importance andpeoplepossessedahighlevelofmeterologicalknowledge.

"Threearethecloudsthatcontinuouslyrainforsevendays;eightyaretheythatpourminutedrops;andsixtyaretheythatappearwiththesunshine–this is called rainfall. Where rain, free from wind and unmingled withsunshine,fallssoastorenderthreeturnsofploughingpossible,therethereapingofgoodharvestiscertain."

Theforecastofrainwasmadebyobservingplanets,viz.,theposition,movementand cloudiness of Jupiter, from the rise, setting, andmovement ofVenus, andfrom changes in the appearance of the Sun. In regions where cultivation wasdependantsolelyontherain,landwasclassifiedassuitablefordrycropsiftherainfallwasabout16dronas (about25inches)ayearandforwetcrops, if therainfallwas1½timesthat(about37½inchesayear).Agoodrainyseasonwaswhen one-third of the annual rainfall occurs at the beginning (SrayanaJuly/August)andattheendoftheseason(KartikaOctober/November)andtwo-thirds in themiddle (Praushtapada August/September and Asvayuja inSeptember.About13½dronasinthecountryofasmakas;23dronasinavanti;andanimmensequantityinwesterncountries(aparántánám),thebordersoftheHimalayas, and the countries where water channels are made use of inagriculture(kulyávápánám).

OWNERSHIPOFLANDScholars differ on the point of the prevalence of private ownership of land inancient India. But so far as Arthashastra is concerned, it recognises privateownershipinland,thoughitpresupposestheexistenceofState-ownedorcrownlands. All unoccupied land belonged to the State. Unoccupied land wasallotted to villages. The grants of the agricultural landweremade for thefarmer'slifetimeonly,meaningthatthefarmerswerenotabsoluteowners.However,thedescriptionandexistenceofSitadhayakshaprovestheexistenceofState farms. Nevertheless, lands not under the supervision of theSitadhayakshabelongedtoprivateowners.RecordsofagriculturalandotherpropertiesinthevillagesweremaintainedbytheGoposandtheSthanikas,whoworkedunder the Samahart andwere in noway related to the Sitadhayaksha.Moreover, the kshetrika, the owner of the field, was distinguished from theupavasa, the tenant.Whenneitherparty couldprove their claim in connectionwith disputes regarding boundaries between two fields, the disputed territorywassurrenderedtotheking.Likewise,iftheownerofalandwasnottraced,the

landwas then controlled by the king. Arthashastra alsomentioned the gift oflandtopriests,preceptors,andothers,intheformofgrantstoBrahmins.Thus,in Kautilyan times, there was private ownership of land, although minesbelongedtotheState.

CROPPINGPATTERNTheArthashastraenjoinedthatahandfulofseedsbathedinwaterbesownfirstandthefollowingmantrarecited:

"PrajápatyeKasyapáyadéváyanamah.SadáSítámedhyatámdévíbíjéshuchadhanéshucha.Chandavátahé."

This means, "Salutation to God Prajapáti Kasyapa. Agriculture may alwaysflourishandtheGoddess(mayreside)inseedsandwealth.Chandavatahe."

Kautilyashowedfarmerstheadvantageofcultivatingdifferentclassesofcrops,whichisrelevanteventoday.

"Rice crops and the like are the best. Vegetables are intermediate; andsugarcaneis theworst(verydifficult togrow)for it issubject tovariousevilsandrequiresmuchattentionandexpendituretoreap."

His words are quite relevant today in India to farmers, as well as the stateagricultural departments, as they can advantageously use this advice to theirbenefit.Infact,Indiahasoneoftheworld'shighestproductionofsugarcaneand,notsurprisingly,oneofthelowestlevelsofgroundwaterresources!

Arthashastrasaysthatanyonewhobroughtnewlandundercultivationistobegranted exemption from payment of agricultural taxes for two years. ThoughKautilyaadvisedtheKingtobefirmandrelentlessintheexecutionofthestatepolicy, he adopted a very soft attitude towards the flora and fauna of thelandasalso towards theanimalson land.Causingpain toquadrupedsorcuttingtendershootswereregardedaspunishableoffences.Fruitandflower-bearingplantswereunderthespecialcareoftheState.

In Arthashastra, several chapters are devoted to animal husbandry. Kautilyadealtwithvariouskindsofanimals,theirherding,grooming,training,marking,feeding,andmilking.Infact,theStateownedlargeherdsofcattle.Atthesame

time,cattlewerealsoownedprivately.TheGodhyaksha (thesuperintendentofcattle)maintainedacompleterecordofanimalsinalltheherdsbelongingtotheState.

IRRIGATIONKautilya's Arthashastra established the rules for building reservoirs and dams,and mentioned irrigated fields being more valuable than rainfed fields. Forbuildingor improving irrigation facilities, the followingexamples forpaymentofwaterratesweregrantedbyArthashastra:

•Newtanksandembankments–fiveyears

•Renovatingruinedorabandonedwaterworks–fouryears

•Cleaningwaterworksover-grownwithweeds–threeyears

Anyone leasing, hiring, sharing or acceptingwaterworks as a pledge,with theright to use them, had to keep them in good condition.The owner could givewater toothers (bydredgingchannelsorbuilding suitable structures) in returnforashareoftheproducegrowninthefields,parksorgardens.Intheabsenceofan owner, either charitable individuals or the people of the village actingtogetherhadtomaintainwaterworks.

Unfortunately,post-IndependentIndiahasnotfullyutiliseditswaterresources.Though the population has nearly doubled since Independence, the area formajorcropsundercultivationhasgrownonly10%.Wheatistheonlyexception,for which the gross area under cultivation has almost doubled. Currently, 27million hectares area is under wheat cultivation. Old cropping patterns, oldvarietiesofseeds,oldmethodsofproductionarenolongersufficientorrelevant.In order to feed a billion people, we now need improved varieties of cropspecies,increasesinproductivityandextendedirrigationprojects.Waterhastobeharnessed.Traditionalirrigationprojectshadtheirlimitations;theycouldnotalways prevent famine and floods. Besides, therewere social dimensions too.They were always linked to caste hierarchy, with dominant landholders of avillage controlling even the decentralised tanks. As stated in Arthashatra, thegovernmentneedstorealise that irrigatedfieldsaremorevaluablethanrainfedfieldstohelpincreaseagriculturalproductivity.

AGRICULTURALTAXATION

AGRICULTURALTAXATIONThe Arthashastra advocated against excessive taxation and stated that bothextremes should be avoided, namely, either complete absence of taxes orexorbitant taxation. The taxes for agriculturists varied between 1/6th, 1/8th,and 1/10th of their produce depending upon their circumstances. Thistaxationwasnotprogressivebutproportionaltofluctuatingincomes.Anexcessprofittaxwasalsocollected.

PROFITMARGINSArthashastraindicatedtheprofitmarginallowedtomerchantsas:

1-5%forlocallyproducedgoods,and

2-10%forimportedgoods.

PRICESUPPORTArthashastrastatesthatwhenthesupplyofacommodityisinexcessofdemand,theChiefControllerofStateTradinghastobuildupabufferstockbypayingapricehigher than themarketprice.When themarketprice reaches the supportlevel,heshallchangetheprice,accordingtothesituation.

FUTURESSimilarly, the price of any commodity was fixed taking into account theinvestment made, the quantity to be delivered, duty, interest, rent and otherexpenses.

SUSTAINABLEFARMINGWhile talkingof sustainable farming, the followingwords are relevant – "Theseedsofgrainsaretobeexposedtomistandheatforsevennights;theseedsofkosi(mungbean,blackgram,etc.)aretreatedsimilarlyforthreetofivenights;theseedsofsugarcaneandthe likeareplasteredat thecutendinamixtureofhoney, lard, ghee and cowdung; seeds of bulbous rootswith honey and ghee;cotton and hard seeds with cow dung; and pits for trees are to be burnt, andmanuredwithbonesandcowdungonproperoccasions."

Kautilya'sArthasastraisatreasure-troveofscientificinformationonavarietyof

subjectsincludingagriculture.Itisnowuniversallyacknowledgedthatnolong-term economic growth programme is feasible in India without including thedevelopment of the agricultural sector.Beforewe understand the relevance ofKautilya'smanagementstrategy,speciallyforIndianagriculture,it isimportanttounderstandthecurrentstatusofIndianagriculture.

CURRENTSTATUSOFAGRICULTUREININDIATheagricultural sectorhas avital place in India's economicdevelopment as itrepresents 22% of the country's Gross Domestic Product (GDP) and provideslivelihoodto58%ofthecountry'spopulationandaccountsforasixthofthetotalvalueofthecounty'sexports.Intheemergingpost-WTOworldeconomicorder,Indiaiswidelyexpectedtobenefitintheareaofagriculture.ThisisoneareainwhichIndiacanemergeasapotentialglobalcompetitiveplayer.TheWTOrulesandregulationshavefocusedontherateoftariffsandwideningthemarketforglobal competitors. In order to harness the potential of agro exports however,adequateruralinfrastructureandfacilitiesneedtobeprovided.

In India, it is only from the fourth five-year-plan that the agricultural sectorreceivedpriority statuswithplanoutlaysbeingmore thandoubled.More thanfinancialsupporttotheagriculturalsector,itsgrowthhasbeenstultifiedbecauseof politics and being a state subject under the Constitution. This has led toseveral inefficiencies including restrictions on inter-state movement of goods,excessive subsidies on certain types of fertilisers leading to their overuse andpricesupportsystemsthatencouragecroppingpatternsnotnecessarilybasedonmarketeconomics.

Consequently, competitiveness and development has taken a backseat. Thedevelopment of rural road networks has been ignored for years, which isessential to bring Indian agriculture on to a global competitive platform.As aresultofpoorroadsandtheabsenceofacoldstoragechain,itisestimatedthatathird of fruits and vegetables harvested get lost in transit. Little wonder thatproductivityinIndiaisamongstthelowestintheworld.

Thepercentage share of the investment and capital formation in agriculture togrosscapitalformationinthecountryhasshownasteepdecline.It isnowjustunder 8% compared to over 15% a few years ago. Equally, the issue ofavailability of additional irrigation facilities has also not been sufficientlyemphasised.Itissadthatevenafteroveradecadeofreforms,thesectorhasto

relyonthevagariesofmonsoon.This isreflectedin thegrowthofagriculturalproduce that registered a drop in production for four fiscal years since 1991(initialisationofreforms).Evenpriorto1996,agriculturalgrowthhadaveragedat 3.3% per year between 1980 and 1995. Of course, the fact that India hasachievedselfsufficiencyinfoodgrainproductionisamatterofpride.However,ithasyettoexploititsfullpotentialintheexportofagriculturalgoods.

The need thus arises to study the implications of globalisation on Indianagriculture.We need to take a holistic approach by studying areas of strengthandweaknessandhavepoliciesthatencourageproductivityandexportsandnotmerelyprotectpoliticalconstituencies.

OnecansaythatIndia'slowexportofagriculturalproductscouldbeattributedtothreemajorreasons:

•Qualitystandards

•Competitivepricing

•Thetermsandconditionsuponwhichimportsubstitutionisencouraged

Farmers are now being persuaded to switch over to organic farming and thusphase out the consumption of chemical fertilisers. Organic farming should beusedas themost appropriate environment-friendlymechanism toarrest furtherdegradationoftheenvironment.Constantuseofpesticidesnotonlypollutesthebasicformativecomponentsofecology,butalsoaffectshumanandcattlehealth.For instance, spraying Endosulphan on cashew crops in Kasaragod, Keralacausedmentaldisordersamongpeoplewholivednearby.

Thegovernment,throughtheStateMarketingBoards,needstoplayavitalrolein promoting standardisation, grading, quality certification, market-ledextensions and training farmers andmarket functionaries inmarketing relatedareas.Indianagriculturesuffersfromamismatchbetweenfoodcropsandcashcrops,lowyieldsperhectareexceptforwheat,volatilityinproductionandwidedisparitiesofproductivityoverregionsandcrops.DomesticproductionofpulsesandoilseedsarestillbelowthedomesticrequirementsandIndiaimportspulsesand edible oils to bridge the gap. Government procurement policy, whichguaranteesaminimumpriceforriceandwheatcrops tofarmers,hascreatedabias in their favour and a distortion of cropping pattern which is not marketdetermined. At times these procurement policies result in such surpluses of

foodgrain that, due to inadequate storage facilities, the beneficiaries of foodsubsidies are Indian rats! The movement of agricultural produce which,accordingtotheIndianConstitution,isaStatesubject,isalsorestricted,therebydeprivingtheIndianfarmerthebenefitofanaturallylargedomesticmarket.

RELEVANCEInterestingly, the relevance and importance of an agro-based sector continueseven today. Kautilya outlined these issues 2400 years ago. It seems thatArthashastra has a solution to most of the problems in India. To begin withArthashastrasuggestedthecreationofapostforasuperintendentofagricultureandidentifiedtheimportanceofagricultureinthecountry.ThebookalsoarguesthattheKingshouldunderstandtheintricaciesofagriculture.Commercialisationof agriculture, especially of large farms,would be neededwith professionallytrainedmanagersabletostudytheglobalmovementofprices,modernfarmingtechniques and use of technologies such as satellite farming.Courses on farmmanagement need to bemorewidespread. Similarly, agriculture is completelyoutofthetaxregimeinIndia.Theagriculturalsectorthathasbeengivenprioritystatusforbanklendinggetscompletelyde-prioritisedwhenitcomestotaxation.As against this, the Arthashastra has highlighted the significance of taxes onagricultureand itsalliedactivities (though itwasoneof thesolemajorsectorscontributingtostatewelfare).

Arthashastra insisted that the richer farmerbe taxed,which shouldperhapsbedonenowwhentheFinanceMinisteristryingtofindwaystoincreasetheratiooftaxtoGDP.

The importanceof irrigation andproviding amenities shouldbe takenupon aprioritybasis.Theeconomywhichhastocompetewiththeinternationalmarketis yet depending on the vagaries of monsoon. Although India has the secondlargest irrigated area in theworld, the area under assured irrigation orwith atleastminimaldrainageisinadequate.Someofthefertilelandhaslostitsfertilitybecauseofinadequatefertilisersorincorrectusageoffertilisersandinincorrectproportions. This is the result of prolonged subsidies on nitrogenous fertiliser(urea)while no such subsidywas given for phosphatic and potasic fertilisers,thereby encouraging farmers to overuse what was available, leading to thepermanent loss of soil quality.Thus, a subsidy intitiated for the benefit of thefarmersisactuallyworkingtotheirpermanentdetriment.

The emphasis on organic farming, which obviates the need to use chemicalfertilisers,isanobviousalternative.GiventhefactthatIndiahasoneofthefewnatural factoriesfororganicmanureonewonderswhyorganicfarminghasnotyetgot theattention itdeserves.Thiswouldalsohelpprevent the slaughterofcattle.Thecattleisslaughteredoncetheyareofnocommercialuse.However,iftheir manure provides a revenue stream to the farmer he would be averse toslaughteringthem.Kautilya,withhis loveforanimalswouldagree.Systematiccropping patterns and irrigation systems followed by theKautilyaRaj iswhattoday's experts need to adapt. Farmers and consumers would benefit if allagricultural production was produced by ecologically sound and sustainablemeans.

Pricing andmarketing agro products andproviding adequate infrastructure areequally crucial. Of all the factors, the cost of production is themost tangiblefactor thatdecides thepriceand it takes intoaccount alloperational and fixeddemands. To conclude, one can positively say that application and validity ofquiteafewofthesuggestionsofArthashastracanbetestedwhichwillbenefitthefarmerstoday.

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7FOREIGNTRADE

INTRODUCTIONautilya'sArthashastradescribedindetailthetradeandcommercecarriedonwith foreign countries, and the active interest of theMauryan Empire topromote such trade.Goodswere imported fromChina,Ceylon, and other

countries. Interestingly, the tradewasnot free from levies.Levies knownas avartanam were collected on all foreign commodities imported to the country.LeviescalledDvarodayawhichwaspaidbytheconcernedbusinessmanfortheimportofforeigngoodswasinadditiontotheferryfeesofallkinds.Thishelpedaugmentthetaxcollection.However,themediumoftaxpaymentwaseitheringold bars or in coins. Kautilya in his treatise elaborated on the extraction ofmetals fromores, themanufactureofmetallic alloys and themintingof coins.Forsilvercoinshehasusedthetermkarshapanas.

Coins of foreign originwere also in circulation in the State. Thus, for a longperiod of thousand years or even more, India's foreign trade was of 'surplusnature'.Withacontinuous inflowofgold in the formofcoinsorbarsusedbyforeign traders to purchase Indian commodities, India was transformed into'Suvarna Bhoomi' or 'golden land.' Greek coins with a punch mark were incirculationastheofficialcurrency.Later,Romancoinsespeciallythosemadeofgold and silver were brought in by traders. Trade with the Roman EmpireflourishedfromfirstcenturyB.C.FromRome,Indiaimportedchemicals,wines,highqualitypottery,somemetalalloysandgoldandsilverintheformofcoinsand bars, and exported silk and their articles, spices, precious stones, jewelry,etc.ThistradewasgenerallyveryfavourableforIndia.

Kautilya,apartfrombeingamanofwisdomandperfectstrategies,propoundedduties – Nitishastra – as the ideal way of living for every individual of thesociety. His principles of foreign trade are even today taught in universities,

basedastheywereonthetheoryofcomparativeadvantage.Hisartofdiplomacyis well known across India and practised in the areas of defence, strategyformationandforeignrelations.

The land revenuewas fixed at 1/6th the share of the produce, and import andexport duties were determined on ad valorem basis. Import duties on foreigngoodswere roughly 20%of their value. Interestingly India,which had importdutiesoftenexceeding100%tillafewyearsago,hasnowreachedthelevelof20%. Similarly, tolls, road cess, ferry charges and other levieswere all fixed.Kautilya's concept of taxation is more or less akin to the modern system oftaxation.Hisoverallemphasiswasonequityandjusticeintaxation.

TRADEASREVENUEGENERATORTradewasmostlycarriedoutbytheStateandprivatetradewasallowedinareasotherthaninwhichtheStatehadmonopoly.Therevenuesraisedthroughtradingwentpartlytofinancethearmyandtoexpandterritories.

SUPERVISIONANDCONTROLOVERTRADINGInordertohaveeffectivecontrolovertrade,monitoringwasdonethrough7outof 34 departments envisaged. The head of each of the department was calledadhyaksha or chief controller in the present-day parlance. The sevendepartments overseeing andmonitoring trade activitieswere: (i)State Trading,(ii) Private Trading, (iii) Customs and Octroi, (iv) Ports, (v) Weights andMeasures,(vi)ShippingandFerries,and(vii)SurveyorandTimekeeper.

Therebeingneitheraircargonorrailwaysatthattime,mentionismadeonlyofshipping and ferries. In State trading, the sale of goods over which the stateexercisedmonopoly,collectionofthetransactiontax(vzaji)andtaxonexportofcrown commodities was the main function. In private trading, the controllerensuredorderlymarketingandpreventedtradersfrommakingexcessiveprofits.Hewasalsoresponsibleforconsumerprotection.

Further, sulka (duty) represented customs duty levied on imports and exports.This duty was collected not at the frontier posts, but at the gates of fortifiedcities,particularly,ofthecapital.Kautilyapointsoutthatnotonlyforeigngoods,but also domestically produced goods which entered the city from thecountrysideweresubjecttosulka.Likewisethegoodsproducedinthecityandsentoutsidewerealsosubjecttoduty.

Thus, therewasnodistinctionbetween theoctroi and customsduty–perhapsduetotherelativelysmallersizeoftheareawhichconstitutedthecountry.Sincesulka (duty)was levied at the gate of entry of the city, therewas noneed forgovernment control over the sale of goods in the countryside. However, thegovernment exercised control and prohibited sale of goods at the places ofproduction such as mines, fields and gardens. Penalties were prescribed forviolationofthebanonsaleatplacesofproduction,andthepenaltieswerequitestiff.Salewasallowedindesignatedmarketswheretheprivatemerchantscameunder the control and purview of the Controller of Private Trade. The ChiefController of Shipping and Ferries was entrusted with a wide range ofresponsibilitieswhich included,amongothers, supervisingmaritimesafetyandreserve,runningshippingservices,hiringshipsandboatswithorwithoutcrew,organising ferries, controlling themovements of foreignmerchants, collectingrevenuesuchasroadcess,customsdutyandferrychargesandensuringsecuritybykeepingawatchoverundesirablepersonsusingtheferries.

IMPORTSOFGOODSConsistent with the policy of providing services to the people, the sale ofimportedgoodswaspermitted inasmanyplacesaspossibleso that theywerereadilyavailable to thepeople in townsandthecountryside. Infact,assistancewasprovided toencourage importof foreigngoods required in thecountry. Inotherwords,therewasnorestrictionontheimportsofgoods,incasethesewererequiredbythepeoplesothattheydidnotfeeloppressedforwantofgoods.

Tradersweregiventwoincentives:

(i)Localmerchantswhobroughtinforeigngoodsbycaravansorbywaterroutesenjoyedexemptionfromtaxes,so that theycouldmakeaprofit.Thisspecifiesthe basic principle ofmanagement, i.e., to encourage entrepreneurship. Thosemerchantswhotooktheriskoftraveltoimportgoodswereencouragedthroughtaxexemption.

(ii) Foreignmerchantswere not allowed to be sued inmoney disputes unlesstheyhadlegalstatusinthecountry;theirlocalpartnerscould,however,besued.Thus, the liabilitywasalwayson thecitizens toensurefair tradepracticesandbettergoodsfortheconsumers.Thus,thesystemprovidedbothforanincentivetoforeigntradeaswellasstrictproceduresandpenaltiestoensurefairness.The

thresholdlimitofprofitwasalsoindicated.Traderswereallowedprofitmarginsof:

•5%onlocallyproducedgoods.

•10%onimportedgoods.

Whentherewasanexcesssupplyofacommodity,theChiefControllerofStateTradingwouldbuildupabufferstockbypayingapricehigherthanthemarketprice.However,whenthemarketpricereacheditsstartprice,theControllerwasauthorised to change the price andworkout a strategy.Further, the pricewasfixed taking into account the investment, the quantity to be delivered, date,interestrateandotherexpenses.

EXPORTSONGOVERNMENTACCOUNTSince there was no paper money prevailing then, foreign trade was on barterbasis.ItwastheStateTradingOfficewhichdeterminedthelevelofexpensestobedeductedforarrivingattheallowableprofitmargin.Basically,thereweretwomaintypesofexpenses,onerelatingtocaravanswhichincludedcustomduties,road cess, escort charges, tax payable atmilitary stations, ferry charges, dailyallowancespaidtomerchantsandtheirassistants,andtwo,thesharepayabletotheforeignking.Inaddition, thecostofhiringshipsandboats,andprovisionsforthejourneyrequired,wouldalsobeincluded.

Arthashastra insisted upon foreign trade resulting in a profit and discouragedtradetoareasfoundtobeunprofitable.Sotheriskandrewardsystemwasverymuch prevalent in theKautilyan era.Nevertheless, the terms of tradewas notjustdependentoneconomicsbutalsoonothervariousparameters.The tradershad to keep in mind the political or strategic advantages in exporting to orimportingfromaparticularcountry.EchoesofsuchstrategicconsiderationscanbefoundtodayinthecontinuedimportofpalmoilfromMalaysiadespiteself-sufficiencyinitthankstotheTechnologyMission.

Withregardtotrade,someprecautionswereindicated;

(i)Whengoodsweretransportedoverland,thechiefcontrollerneededtoensurethat not more than a quarter of the goods were of high value, presumably topreventtheftofanentireconsignmentofvaluablegoods.

(ii)Various officers such as frontier officers and governorswere contacted toensuresafetyofgoodsintransit.

(iii)Extra precautions had to be taken in case the caravan contained goods ofhighvalue.

(iv)Intheeventthatthecaravancouldnotreachitsdestination,thegoodscouldbesoldwhereveritwasatthetime.

Whengoodsweretransportedbywater,seasonalchangesinweatherhadtobeconsideredtoavoiddamage.

A

8DOMESTICTRADE

INTRODUCTIONfteragricultureandmanufacturing,tradewasconsideredtobethethirdmostimportant activity. It was the King's responsibility to promote trade andcommercebysettingup trade routesover landandwaterand todesignate

marketsandtownsincludingports.Itwasclearthatthesetraderoutesweretobekeptfreeofharassmentbycourtiers,stateofficials,thievesandfrontierguards,andthattheserouteswerenottobedamagedbyherdsofcattle.Inotherwords,cattlerearingwhichwasabigpartoftheagriculturaleconomicareawouldinnowayinterferewiththetraderoutes.

I.PROTECTIONOFTRADEROUTESTheKinghadtoprotect thoseusingtraderoutesfromharassmentbycourtiers,state officials, thieves and frontier guards. Frontier officers had tomake goodwhatwas lost.Kautilyafelt that justas itwas impossiblenot to tastehoneyorpoisonwhichwasonthetipofone'stongue,soalsoitwasimpossibleforthosedealing with government funds not to taste, at least a little bit, of the King'swealth

Thisisapowerfulassertionsignifyingtwofacts.Firstistherealisationthattraderouteswereimportantforthedevelopmentoftheeconomyandtheirsafetythusneeded to be assured. The second is a warning about corruption in mattersrelatingtotrade.Undernocircumstancesshouldthosewhowereentrustedwiththe jobofmaintainingsafetyof traderoutesbepermitted to indulge incorruptpracticeswhichbyvirtueofholdingpublicofficewouldsucceedindivertingtheresources from the State to private hands. Even at that time, the King or hisadvisors were aware of the possibility of the officials and frontier guardsindulgingincorruption.

II.TYPOLOGYOFDOMESTICTRADETheconceptofgrossmarginswaspractisedinKautilya'stimeratherthanthatof'valueadded'.TheKingprescribedthatgrossmarginsofthetradershouldnotbeexcessive so that the products available to the consumers were at reasonablerates. Unlike today, profit margins were not market determined, perhaps, inkeeping with an era in which a benevolent king cared for the welfare of thepeople. The system of State trading was well established and there wereprescriptions on how trading was to be conducted. Kautilya's Arthashastrameant 'the scienceofmaterialgain'. It isveryclear that its aimwas tobenefitpeople. According to Syhamasastri, "Kautilya belongs to that school ofpoliticianswhosepolicy is to justify themeansby thenoble end sought tobeachieved,"whichKautilyaasaconquerorhadtowinatanycosts.ForKautilya,theendwasmoreimportantandrankedhigherthanthemeans.

Modern economics talks about the concept of 'value add'. Kautilya broadlydividestheeconomyintothreesectors:(i)state/government/king,(ii)private,and (iii) service providers such as banks and financial institutions. Kautilya'sArthashastrawas very clear about the role of different sectors, but itwas theKingwhowasat the centerofdecisionmaking. In trade involving theprivatesector,onlythesafetyoftherouteswasensuredbytheState,andcompensationinthecaseoflosswasprescribed.Saleproceedsfromminingactivityaccruedtothe State, since it controlled the land. Private trade, however, consisted ofselling manufactured products to households; these were supplemented byimports,incaseofshortage.Exportswerefreelyencouraged.Thetradecontrolsystemwaswelldefinedandarticulated.Oneofthepolicieslaiddownwasthatcommoditiesweretobebroughttodesignatedmarketswhereonlytheseweretobesold,andnotattheirplaceofproduction.Theofficersinchargeofthesaleofgovernment commodities had to deposit the proceeds in a boxwith a lidwithonlyoneholesothattherewasnoscopefortakingoutthesameoncedeposited.Attheendoftheday,accountswouldbegivenandthemoneyhandedoveraftertaking thebalance stock.Thepolicyand theprocedure laiddownshowed thatKautilyawas fullyconsciousof thepossibilityofofficials engaging incorruptpractices.

III.RELATIVEMERITSOFDIFFERENTTYPESOFECONOMICACTIVITY•AnidealJanapadawasonewhichwaseasilydefinedandwhichhadalotof

productive land with cultivable fields, mines, timber forests, elephant forests,andpastures.

•Agriculturewasthemostimportanteconomicactivity.Cultivablelandisbetterthan mines because mines fill only the treasury while agricultural productionfillsbothtreasuryandstorehouses.

•TheKinghadtoensurethatagriculturewasprotectedfromharassmentbynotlevying onerous taxes or fines, and by not making undue demands for freelabour.

•Buildingforts(defencepreparedness),waterworksandreservoirsasthesourceofcrops.

•Traderouteswerealsoameansofout-maneuveringtheenemybecauseitwasthroughthesethat theKingcouldsendsecretagentsandbringinweaponsandotherwarmaterial.

• It was better to have a large production of low valueminerals than a smallproductionofhighvalueones.

•Productiveforestsshouldbelarge,nearthebordersofthecountrywithariverandyieldmaterialofhighvalue.

•Itwasbetter tohavea largenumberof traderoutesevenif theywerenotallbuilt to high standards. Kautilya's order of preference for establishing traderoutes: land route preferably to the south, a water route on the coast and theinlandwaterway.

•Cart-tracksandtracksusablebydraughtanimalswerepreferredoverfootpaths.As earlier mentioned, trade was the third pillar of economic activity, and theArthashastra details every aspect of trade. Apart from promoting trade byimproving infrastructure, the State was required to keep trade routes free ofharassment by courtiers, state officials, thieves and frontier guards. Kautilyaappearstomistrusttradersbelievingthemtobethieveswithapropensitytoformcartelstofixpricesandmakeexcessiveprofitsasalsotodealinstolenproperty.He prescribed heavy fines to discourage such offences by traders and with aviewtoprotectconsumers.

Further,thelawondealingsamongprivatemerchantsincluded:

(a)Sellingonagencybasis

(b)Revocationofcontractsbetweentraders

(c)Traderstravellingtogetherandpoolingtheirgoods

IV.SAFETYINTRANSITItwasalsoenjoineduponthefrontierofficerstoensurethesafepassageofthemerchandiseandtomakegoodanylossincurred.Responsibilitytorecompenseloss to traders vestedwith the village headman, barring, of course, goods thatwere stolenor sent away.Further, if anypropertyof traderwas lost ordrivenaway in an area between villages, the person responsible was the ChiefSuperintendent of Pastures (CSP). In the regionswhich did not fall under thecontrol of CSP, the responsibility was that of Chora Raju. Finally, if theresponsibilitycouldnotbefixedonanyofficial,thepeopleofthevillagewithinwhose boundaries the loss had occurred were collectively responsible to thetrader. It is thus seen that the importance of the trader was recognised byKautilya as also the importance of the rule of law, by restoration for any losscaused.At thesame time traderswereprevented fromoppressingpeople.Thisclearlyshows that thewelfareof thepeoplewasuppermost in themindof theKing.

APPENDIX:CHIEFCONTROLLEROFPRIVATETRADING(a)Responsibilities

(i)Toensurefairtradinginnewandoldarticles

(ii) To allow sale/pledging of old articles only if seller/ pledger wouldprovideproofofownership

(iii) To inspect the weights and measures used by merchants in order topreventfraudulentuse.

(b)ContractoverMerchants

(i)Toensurethatprofitmarginsof5%ondomesticallyproducedgoods,and10%onimportedgoodswereadheredto

(ii)Toensurethatgoodsweresoldatthepricesfixedforthem

(iii)Toensurethatmerchantsdidnotdealinstolengoods.

(c)AssistancetoMerchants

(i)Toprovideappropriateexemptions, ifgoodsheldbythemerchantsweredamagedforunforeseenreasons.

(d)BrokersandMiddlemen

(i)Toensurethatmerchantsdidnotcountthebrokeragepaidtomiddlemenaspartoftheircostsincalculatingtheirprofitmargins

(ii) To allow brokers to hold stocks of grain and other commodities to theextenttheywereauthorised

(iii)Toconfiscate any stockheldbybrokers in excessof authorised limits,and to deliver these to the chief controller of state trading for sale to thepublic.

(e)OrderlyMarketing

Toprevent thecollectivepurchasebymerchantsofcommoditiesas longasthegoodsofanearlierjointpurchaseremainedunsold.

T

9GOVERNMENTFINANCE

hewordArthashastrameans'Scienceofwealthcreation'.Kautilya,however,usedthewordinamuchbroadercontexttoincludemanyoftheactivitiesofa state-economic, political, social, military and others that may affect its

wealth.Kautilya'sArthashastraisamasterpieceparticularlyinthecontextofthetime when the book was written. He seems to have an encyclopedic and allencompassingknowledgeaboutdifferentaspectsofgoverningamonarchysuchas administration, revenue, taxation, law, diplomacy, business and trade,coinage,agricultureandlandtenure,labour,peopleandthesociety,etc.KautilyaemphasisedthattheStateissustainedbytherevenueitcollectsfromitssubjects.HisultimateobjectivewasnottobenefittheKing,buttobenefitthepeople.He thought a strong and wealthy monarchy would be in a position toprotecttheinterestofthepeopleagainstinvasionbyotherkings.

Kautilya established the principles of taxation and the sources of revenue andexpenditure. In essence, it is one of the earliest recorded guidelines of PublicFinance. He also categorised types of revenue incomes and laid down thesystems for audits which are comparable to existing mechanisms. Moreover,Kautiliyastates,"thatwhichremainsafterdeductingalltheexpenditurealreadyincurredandexcludingallrevenuetoberealisedisnetbalance(nívi)whichmayhavebeen either just realisedor brought forward."This concept is akin to themoderntheoryoffiscalbalanceandideasofaudit,andKautilyacanbecreditedforinstitutionalisingsuchconceptsintheframeworkofgovernanceandpolicy.

PRINCIPLESOFTAXATIONKautilya'sdiscussionof taxationhas severalunderlyingprinciples– the taxingpower of the state should be limited, tax should not be felt to be heavy orexcessive,taxhikesshouldbeintroducedgradually,taxshouldbeleviedintheproperplace, timeand form,and tax level shouldbeequitableand reasonable.

Kautilya noted that a ruler should not taxat his pleasure.He took extremecare inavoiding fiscal tyrannyandconsequentpublicdiscontent.According tohim, "Disloyal and indifferent subjects will endeavour to destroy even strongkings." He stressed that subjects should be taxed in such a way that theymaintain their ability to bear future burden, and, if necessary, a heavier one.Increaseintaxshouldbegradualduringtimesofprosperity.

Eventoday,oneofKautilya'smaximsontaxationisverymuchaliveandcallsfor adherence by the governments all over the world. According to Kautilya,"Taxation should not be a painful process for the people. There should beleniency and caution while deciding the tax structure. Ideally, governmentsshouldcollecttaxeslikeahoneybee,whichsucksjusttherightamountofhoneyfromtheflowersothatbothcansurvive.Taxesshouldbecollectedinsmallandnotinlargeproportions."Hedidadvocateproportionatelyhigherincometaxontherichandhighersalestaxontheluxurygoods.However,toKautilya,itwasessential that a ruler supply sufficient overhead capital and developmentalassistance,orencourageitthroughtaxexemptions.Further,aKingshoulddirectexpendituretoprofitableprojectsandhaveinhandsufficientreserveofmoney,food,clothing,andammunitiontomeettheneedimposedbycalamities,warorother emergencies. Many groups were exempt from tax either due to theirinability to pay (handicapped conditions), or the service theywere engaged in(priest).Thelandtaxandtaxontraderswerecollectedonlyiftherewasaprofitabove the normal level. The schedule of taxes on production and sales waspreparedaftercarefullycalculatingthecostofproductionandthenormalprofits,thelengthoftimeneededtosell theproduct, thelevelofunsoldinventory,thefluctuationsofthemarket,etc.Taxationbythestatetookintoconsiderationtheconditions necessary for ensuring the stability and welfare of the tax payer.Differentkindsoftaxesexistedsuchasdirectandindirecttaxes,salesandexcisetaxes, incomeandvalue added taxes. It seemsKautilya's schemeof taxationinvolved the elements of sacrifice by the taxpayer, direct benefit to thetaxpayers,redistributionofincome(thestatetookcareofthepoor),andtaxincentivesfordesiredinvestments.Oneoftheuniquefeaturesofhistaxpolicywas to allow for a normal amount of profit for businesses before the taxwascollected.Kautilya'staxsystemseemsquitecomprehensive,particularlyinlightoftheantiquityofhiswriting.However,someofhisideasontaxationexistedinIndianliteratureevenbeforeKautilyapennedthem.

CLASSIFICATIONOFPUBLICREVENUE

Kautilyaidentifiedanexhaustivelistasthesourcesofgovernmentrevenue,andput the actual administration of revenue collection on the department underwhichthatparticularactivitywascovered.TheCollectorGeneral(i.e.,thechiefofrevenue)wastoconsolidatetherevenuefromalldepartmentsintothecentraltreasury.Thus,aninstitutionalmechanismforrevenuecollectionwassetup.Thesystemisverysimilartomodernsystemsofrevenuecollectionandmanagement,whereby the actual collection was de-centralised while the consolidation andauditwascentralised.

SourcesofrevenuementionedinArthasastraundertheircorrespondingmoderncategoriescanbehighlightedasbelow:

Corporate Taxes: The corporation or guild of artisans and handicrafts-men(kárusilpiganah)

IndirectTaxes:Liquor,slaughterofanimals,threads,oils,ghee,sugar(kshára),thestategoldsmith(sauvarnika), thewarehouseofmerchandise, rivers, ferries,boats, and ships, road-cess (vartani), ropes (rajjú) and ropes to bind thieves(chórarajjú)andtaxesonminerals.

Land and Property Tax: Town houses and building sites (vástuka), pasturegrounds,agriculturalproduce,flowergardens,fruit-gardens,vegetablegardens,wetfields.Alargepartoftaxonagriculturewasreceivedinkind.

Customsduty:Sulkawascollectedonallimportedgoodsatthecity-gatesandthe work of collecting customs duty was supervised by Sulkadhyaksha, viz.,Superintendentofcustoms.

FeesandGovernmentServicecharges:Tolls,fines,weightsandmeasures,thetown-clerk(nágaraka), thesuperintendentofcoinage(lakshanádhyakshah), thesuperintendentofsealsandpassports.

IncomeTaxes:Producefromcrownlands(sita),portionofproducepayabletothegovernment(bhága).

Entertainmenttaxes:Prostitutestaxesandgamblingcharges.

PUBLICEXPENDITUREItems of expenditure were classified under 15 heads. This was known as

Vyayasarira, 'the body of expenditure'. The majority of items involveexpenditureonStateaccounts.Onlyafewmayberegardedasconstituting theprivypurseof theKing.Perhapsthemost importantpublicpolicyideas in thissectioncomefromKautilya'sanalysisofproductiveandcapitalexpenditureasopposedtonon-productiveexpenditure.IntheArthashastra,acleardistinctionismade between revenue invested, i.e., capital expenditure and currentexpenditure. For Kautilya, there were two kinds of expenditure, viz., dailyexpenditureandprofitableexpenditure.DailyexpenditurewastheobligationoftheStatetomaintaincertainservicesandfunctionsforthepeople,i.e.,theday-to-dayexpenditureof runninganadministration.ForKautilya the 'expenditure'thatearnedrevenue'onceinapaksha',amonth,orinayeariscalledprofitableexpenditure. Kautilya understood that such profitable expenditure, in essence,puts a check on spending from the current account. Investment of capital(vikshépa) isameans tocheckexpenditure(vyayapratyayah).KautilyarealisestheimportanceofcapitalexpenditurethroughwhichtheStatecanearnrevenueinthelongrun;hestates,"theKingwillhavetosufferintheendifhecurtailstheamountofexpenditureonprofitableworks."

The emphasis on a proper system of audit and the quality of revenueadministration is exceptional. In essence, it reflects Kautilya's focus oninstitutionbuildingandmanagement.

Kautilya underlined the categories of works that needed to be done by therevenue department – "The business of upkeeping the government(samsthánam), the routine work (prachárah), the collection of necessaries oflife,thecollectionandauditofallkindsofrevenue;theseconstitutetheworkinhand.Thatwhichhasbeencreditedtothetreasury;thatwhichhasbeentakenbythe King; that which has been spent in connection with the capital city notentered(intheregister)orcontinuedfromyearbeforelast, theroyalcommanddictatedororallyintimatedtobeentered(intheregister),alltheseconstitutetheworkaccomplished.Preparationofplans forprofitableworks,balanceof finesdue, demand for arrears of revenue kept in abeyance, and examination ofaccounts,theseconstitutewhatiscalledpartofworkinhand."

Thefunctionofa'wisecollector-general',accordingtoKautilya,was'increasingthe income and decreasing the expenditure', amaxim that goeswell with ourcurrentideasofcuttingdownonfiscaldeficit.

GOVERNMENTSERVANTSANDGOVERNANCE

Kautilya clearly stated that the people's and therefore the State's prosperitydepended on the conduct of government servants, yet another example ofKautilya's concernwithgovernance and institutions.Kautilyawas also againstbig government machinery, "dispensing with (the service of too many)governmentservants...isconducivetofinancialprosperityoftheState."

Kautilyaidentified40differentmethodsofembezzlementofpublicmoney,andprescribed the harshest punishment for such an offence. "Under the abovecircumstances (embezzlement), the persons concerned, such as the treasurer(nidháyaka),theprescriber(nibandhaka),thereceiver(pratigráhaka),thepayer(dáyaka),thepersonwhocausedthepayment(dapaka),theministerialservantsoftheofficer(mantri-vaiyávrityakara)shalleachbeseparatelyexamined.Ifanyoneofthemtellsalie,heshallreceivethesamepunishmentasthechiefofficer(yukta)whocommittedtheoffence."

Kautilyaalsounderstood theneedfortransparencyduringtheinvestigationofpublicservantsandthepracticeofwhistleblowingoncorruptpractices."Aproclamation inpublic (prachára) shallbemade to theeffect thatwhoeverhassufferedat thehandsof thisoffendermaymaketheirgrievancesknowntotheKing.Thosewhorespond to thecall shall receivesuchcompensationas isequaltothelosstheysustained."

Kautilya recommends that public servants, "while engaged in work, shall bedaily examined; for men are naturally fickleminded and like horses at work,exhibitconstantchangeintheirtemper.Hencetheagencyandtools,whichtheymakeuseof,theplaceandtimeoftheworktheyareengagedin,aswellastheprecise form of the work, the outlay, and the results, shall always beascertained... hence the chief officer of each department (adhikarana) shallthoroughly scrutinise the real amount of the work done, the receipts realisedfrom,andtheexpenditureincurredinthatdepartmentalworkbothindetailandintheaggregate."

Kautilya admitted that some amount of corruption would always exist andcannotbescrutinisedperfectly, "It ispossible tomark themovementsofbirdsflying high up in the sky; but it is not possible to ascertain themovement ofgovernment servants with a hidden purpose." He therefore recommends thestrictestpunishment,bothmaterialandcorporal,asadisincentivetocheat.

Kautilya had given detailed instructions on check-and-balance accounting and

auditingfor the royal treasuryof thegreatMauryaEmpire.However,Kautilyaconcededthatitisjustasdifficulttodetectanappointedofficial'sdishonesty,asitistodetecthowmuchwateraswimmingfishdrinks.

CLASSIFICATIONOFFINANCIALFRAUDSIn the Arthashastra, fraud prevention as well as fraud detection has beenhighlighted.Kautilya had listed severalwaysofmisappropriatingpublic fundsbywayoffraudagainstwhichauditorsattheroyaltreasuryhadtoalwaysbeontheirguard.Someofthesefraudsrelevantintoday'scorporateenvironmentare:

(a)Falsification(ofdate)withamotiveofpersonalprofit:Showingalaterdatethantheoneonwhichincomewasreceivedorshowinganearlierdatethantheoneonwhichexpenditurewasincurredandusingtheproceedsinbothcasesforpersonalprofitforaperiod.

(b)Misrepresentation(ofincomereceivedorexpenseincurred)withamotiveofpersonalprofit:

(i)Revenuedueonagivendate isallowed tobecollectedata laterdateforaconsideration

(ii)Revenuenotduetilllateriscollectedearlierbyforceordeceitbutcreditedonduedate

(iii)Revenuepaidbyoneiscreditedinthenameofanotherforaconsideration

(iv) Revenue for treasury realised in the capacity of a collector ismisappropriatedbyanindividualbyforceordeceit

(c)Discrepancies(arisingoutofwillfulfraud)in:

(i)personallysupervisedwork

(ii)accountheads

(iii)labourandoverheadcharges

(iv)workmeasurement

(v)totalling

(vi)quantity

(vii)price

(viii)weights&measures

(ix)containersofgoods

Actualincomewascalculatedunderthethreemajoraccountheads:

(a)currentincome

(b)transferredincome

(c)miscellaneousrevenue

Thelastcategoryhadthreefurthersubdivisionswhichmainlyincludedrecoveryof previouslywritten-off debts, etc., realisable economiesmade in investmentagainst plannedbudgets and anydifferential (value-added) income. In accountbooks,everyentrywastoberecordedonthedateoftransaction,dulyclassifiedunder the different headsonboth sides – receipt anddebit.Notmaintaining asystematic and legible accounting recordwasapunishableoffenceas thiswasdeemedaprecursor to a fraud.Anelaborate checkandbalance systemwas inplace to ensure the timely submission of accounts and accounting for everytransactioninminutedetail.

Intheeventofadiscrepancyafteraudit,theofficialconcernedwasmadetopaya penalty at least equivalent to the discrepancy. With improvedtelecommunicationandelectronicfundtransfersnowavailable,thepossibilityoffraud and necessity of disciplined audit cannot be underestimated. If wesystematicallycategorisethevariousfinancialfraudsthatarebeingunearthedbypresent-day auditors and investigators across theworld,wewill probably findthat most of them can be roughly placed under one of the aforementionedKautilyanclassifications.

T

10PUBLICSECTOR

he basic philosophy of a feudalistic monarchy is that the King owns theentirekingdom, itsmanifestaswellasunmanifestedresources.Kautilya inArthashastraclearlydemarcatesthespheresofeconomicactivitiesbetween

theStateanditssubjects.Thus,theconceptofpublicsector,privatesectorandjointsectorwasdelineated.

OWNERSHIPOFLANDLand, themost importantresource,wasprimarily in thepublicsector,withtheStateholdingallvirginland,forestsandwaterresources.However,bothpublicandprivatesectorsheldarableland.State'slandswereeitherdirectlycultivatedby thechief superintendentofcrown lands,or leasedout to tenants.Landwasgranted toprivateparties either inperpetuityor for a limitedperiod,ona tax-paying or on a tax-exempt basis. A park, an embankment, a water tank or areservoir associated with arable land could be privately owned with atransferabletitle.

MINING,FISHING,ANDSALTPANSMiningandfishingwerebothinpublicandprivatesectors.Saltpanswereinthepublicsector,butsaltmakingwasdonebythelesseesofsaltpans.Thechiefsaltcommissionercollectedtherevenuebeforeitcouldbemarketed.

MANUFACTUREANDSALEOFLIQUORANDBETTINGManufactureandsaleofalcoholicliquorandbettingweretheState'smonopoly.Anyprivatepartiesengagedintheseactivitieswereseverelypunished.

PRECIOUSMETALSANDJEWELLERYANDPRECIOUSSTONES

STONESSince time immemorial and in ancient sacred texts, gold and silver werementionedasmostvaluablemetals.WhetherthesemetalswerelargelyminedorimportedisnotknownbutKautilyarecognisedtheimportanceofthesemetals,andemphasisedstrictcontrolonsale,purchaseandmanufactureofthesemetalsaswellaspreciousstones.

PROFITINPUBLICSECTORAccording toKautilya, profit was a 'must' and not anathema in operatingpublicsectorundertakings.Themainguidingprinciplesoftheadministrationof theeconomywere that theState should runadiversifiedeconomyactively,efficiently,prudentlyandprofitably.Afewreferencesareenoughtoshowhowmuch importance was given to profit making in Kautilya's public sectorundertakings.Anyofficialwhodidnotgenerateadequateprofitsinacrown'sundertaking was punished for 'swallowing the labour of workers'. Chiefcontrollers of state tradingwho looked after tradewith foreign countriesweretoldto'generateprofits,avoidlosses'.

Clear regulations were spelt out regarding buffer stocks and futures in whichprofitmakingwasemphasised.Whencrowncommoditiesweresoldbyprivatepartiesormerchants, theyhad topay a charge to compensate the state for theprofitwhichitwouldhaveotherwisegotbysellingthemdirect.

ANIMALHUSBANDRYTheStatealsowasengagedinmanydiversifiedactivities.Crownherdsweretheresponsibility of the chief superintendent who either employed cowherds,milkers,etc.onwagesorgavesomeherds toacontractor.PrivateherdscouldalsobeentrustedtotheStateforprotectiononpayment.Therealsoappeartobeveterinarydoctorsintheemploymentofthestate.

FORESTRYThe State's participation in protecting and developing forestry cannot beminimised.Factoriesweresetupin theforestsforproducingusefularticlesbythe superintendent of productive forests and the chief ordinance officer. Thewell-protected leisure forests, intended for theKing's pleasure, hadplantationsbearingfruits,thornlesstreesandpoolsofwater.Theywerestockedwithtameddeer,wildanimalsrenderedharmless,andtamedelephants.

MININGMining was in the public sector. Mines, the source of war material, wereimportant because, "mines are the source of wealth, from wealth comes thepowerofgovernment,becausewiththetreasuryandarmy,theearthisacquired."The followingmetalswerementioned byKautilya in his treatise: gold, silver,copper,lead,tinandiron,alloysofcoppersuchasbrass,bronzeandbellmetal.Diamonds, precious stones,mica, aswell asmarine productswere consideredpartoftheminingindustry.Anumberofofficials,underthechiefcontrollerofminingandmetallurgy,wereresponsiblefortheseindustries.

MANUFACTURETwo categories of manufacture were under the State's monopoly. They weremakingweapons and brewing liquor. State-controlled industries were textiles,salt and jewellery. State-regulated industries were small-scale industries ofcraftsmensuchasgoldsmiths,blacksmiths,weavers,anddyers.

LOCALANDFOREIGNTRADEBoth public and private sectors were engaged in local and foreign trade. TheControllerofStateTradingwasresponsiblefortheequitabledistributionoflocalandforeigngoods,bufferstocksandsaleofcrowncommodities.Hecouldalsoappoint private traders as agents for the sale of crown commodities at fixedprices, or sell those directly through state-owned retail outlets. The official incharge of exports, the Chief Controller of State Trading, was advised toundertake foreign trade only if there was a profit. Exporting weapons andvaluablematerialwasprohibited.

PUBLICSECTORUNITSThoughKautilyawrote in the context of amonarchy and the governance thatprevailedinhis time, therearecertainfundamentalpointsofrelevancethatwecan cull from his propositions about those activities that come within thepurviewofpresent-daypublicsectorunits.

1.TheArthashastraemphasisedthattheKingshouldbuildforts,canals,roads,andmoatsandasamatteroffactitdescribeswithconsiderabledetailthelayoutofeachoftheseinfrastructuralconstituents.Itisnotthepreciseapplicabilityofeachofthesespecifications,butthefactthatthisismeticulouslydescribedinthe

Arthashastra, which underscores that Kautilya recognised that efficientprovisionoftheseamenitiesentailedadherencetocertainparameters.

2. The second aspect isKautilya's exhaustive descriptionof the duties andresponsibilities of the entire gamut of functionaries within the monarchyrangingfromtheministers,councilors,andcommissionerstotheofficersatthelowest level of the hierarchy. Furthermore, the Arthashastra enumeratescorrective and preventive measures such as penalties and a system ofvigilance to ensure the efficient discharge of the responsibilities of those invarioustiersofgovernance.

Penaltieswerealsousedfortheenforcementofrevenuetargetsandexpenditurelimits. Evidently, Kautilya understood the importance of accountability andtransparency, the lack ofwhich in a number of public sector units has been aprimereasonfortheproliferationofloss-makingpublicsectorenterprises.

3. Interestingly, one can draw discernible similarities between some of theprovisions of the Arthashastra and the main principles of corporategovernance.For instanceaccording to theCadburyCommittee's report (1992)on financial aspectsof corporategovernance,propermanagerial accountabilitywasthekeytoanysystemofcorporategovernance.ItsviewwasthatcompaniesthatadheredtoitsCodeofBestPracticewouldexperienceimprovementontheeffectivenessandvalueofitsaudits.

The Arthashastra spoke of theKing appointing spies to ensurea system ofvigilancethatwouldbeabletomonitortheactivitiesofvariousdepartmentsandalthoughthismaynotbetermedasanaudit, itwouldhaveservedsomeof thepurposesthatanauditissupposedtofulfil.Therehasbeenextensiveresearchonthissubjectintoday'stimes.However,oneofthecentralobjectivesofcorporategovernance is to ensure accountability and transparency through certainmanagerialandlegalprovisions.

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11HEADHUNTING

WINNINGOVERSEDUCIBLEANDNON-SEDUCIBLEPARTIESINENEMYTERRITORY

autilya described the behaviour of those who could be won over whenneeded. There were four types of behaviour that he felt made a manseducible – anger, fear, greed, and pride. Why these four? Many of

Kautilya's teachings and policieswere influenced by theVedas,which tell usthatahumanbeingismadeupofmind,body,andintellect(brain).Ofthese,thebodyactseitheratthecommandofthemindorattheinsistenceoftheintellect.Intellectisdefinedasthecapacitytocontrolthemindandthiscomesfromstudyandreflection.Themindisacollectionofourfeelings,emotions,thoughts,etc.While intellect rationalises, theminddictates theemotion.Further, themind isinsatiable, itwanders (perhaps even faster than the speedof light), and it getsattached.Allthesethingsmakeonedependentontheworld.

Apersonfeelsstresswhenhismindrulesoverhisintellect.Thisisthestateofunfulfilled desires. Whereas when intellect rules over the mind, the desiresbecome aims and ambitions. Unfulfilled desires could lead one to anger (themind experiences this as anobstruction towhat onedesires); greed (when thecravingorthedesirebecomesverystrong);thisleadstoarrogance,whichwiththepassageoftimebecomesenvy.Envyleadstofear(losingwhatonehas).ThefourthstatethattheVedastalkaboutisMoha(delusion);butKautilyalaysstressonprideinamanthatrelatestoarroganceasthefourthseducibleelement.

Howdoweidentifythesepeople?

Thegroupof enraged:Anger is exhibitedwhen one's desires are obstructed.This group includes: – thosewho felt cheated or denied after being promisedcertainrewards(incrementinpay,status,etc).

–Oneof twoormorepersons,whobeingequallycompetent, feelshumiliatedbecausetheotherisassignedajob.

–Onewhofeelsslightedbecausehissuperiorfavouredanother.

– One who is unable to deliver results on account of being given a difficultassignment.

–Onewhofeelsdistressonbeingtransferredtoafar-flungarea,oranareaofhisdislike(Kautaliyaconsideredboththosewillingtobetransferredbutconsideredtheremunerationimproper,andthoseunwillingtobetransferred).

–Onewhoisonanassignmentnotofhischoice.

– One who cannot achieve his objective in the organisation even after tryinghard and giving his best, perhaps because of a fault in the culture of thatorganisation.

–Onewho is hindered from doing his duty, either due to paucity of time, orbecauseofnotbeinggivenrequisiteauthoritytodothetask.

–Onewhofeelsunderpaid.

–Onedeserving,butdeprivedofanofficeheaspiredto.

– One held back by his peers or superiors in an organisation for their owninterests.

– One who is reprimanded and/or punished, (whether suchreprimand/punishmentisjustifiedornot)afterservingtheorganisationloyally.

–Onewhofeelstheothergotcreditfortheworkdonebyhim.

Thegroupofthosewhoarefrightened:Thisfearisoneoflosingsomething.Thegroupincludes:–Onewhohasthwarted,orpulleddownsomeone

–Onewhohadcommittedaseriouswrong–adeliberateactdetrimentaltotheorganisation.

– One who has become known for a wrongful act perhaps in his personal

capacity.

–Onefrightenedbythepunishmentmetedouttoanotherforalikeoffence.

–Onewhohasseizedsomeoneelse'sworkorcredit.

–Onewhohasbeensubduedbyauthority.

– One who has suddenly amassed a lot of wealth at the expense of theorganisation–Onedislikedbyhissuperiors.

–Onewho has entertained hostility towards his superiors, or the organisationitself.

The group of those who are greedy (These people are in a state ofoverwhelming desires). This group includes: – One who is impoverished (formoney/respect/opportunities).

–Onewhohasfacedacalamity.

–Onewhohasindulgedinviceseitherinpersonalorprofessionalcapacity.

–Onewhohasindulgedinrashtransactions.Rashnessoftransactionsmayhaveinvolvedafinanciallossorexpectationofagreatgain.

–Apersonwhobelievedinpersonalgainbywithholdinginformation.

The group of those who are proud: This relates to arrogance that followsgreed.

Thisgroupincludes:

–Onewhowasfilledwithself-conceit(self-importance,pride,vanity,snobbery,arrogance).

–Onewhodesiresachievementofhonour.

–Oneresentfulofthehonourbestowedonacolleague.

–Oneplacedinalowerpositionthanhehadenvisagedforhimself.

–Onefieryintemper.

–Onegiventoviolence(physical,verbalornon-verbal).

–Onedissatisfiedwithhisemoluments

Afteridentifyingthesefourgroups,Kautilyaprescribedhowtoapproachthem.

Toluretheenraged

Reinforcing perceptions such people hold about their organisation by tellingthemhowtheirorganisationandmanagerslackedtheknowledge,commonsenseandalsotheexperiencetoseewhattheywereworth;Alsotoexplaintothemthe'detrimental effects' that such behaviour of their organisation and managerscould have on the organisation; By inviting them then to join anotherorganisationtorealisetheirpotential.

Tolurethefrightened

Reinforcing theirsenseof insecuritybywarning themofapossible 'harm' thattheyriskgettingfromtheirorganisationduetoitsown(incorrect)apprehensionofbeingharmedbythem,showingthemasaferhavenwheretheycouldgrow.

Tolurethegreedy

Reinforcingtheirdesirebyamplifyingthefact that theirorganisationrewardedthose who were devoid of spirit, intelligence, and eloquence, but not thoseendowedwiththeirqualities.Presentinganalternativeorganisationwhichhasacultureofacknowledgingandrewardingpersonsofdistinctionandaskingthemtojoin.

Toluretheproud

Proudpeopleneed toget their egomassaged.Theapproachused shouldbe toimpress upon them that their organisation is fit for and is of benefit to onlypeoplewithlowerqualitiesand,littleornointelligence,convictionorabilities,not for people of their standing. Inviting them to join an organisation that'knows'howtohonourpersonsofdistinction.

SELECTIONOFPEOPLE

Though the kingdom was a feudal monarchy, it had a well-structuredadministrativemachinery,containingvariousdepartmentsandtheheadsofthesedepartments were charged with well-specified responsibilities; they wereexpected to run the team actively, efficiently prudently and profitably. Thehighest authority was the King himself who was advised by a group ofcouncilors,ministersandotherhighofficials,whowerecarefullyselectedbytheKing himself after a careful scrutiny of their character, background, andleadershipqualities.

QUALITIESFORAPPOINTMENTKautilyabelievedintheadage"YathaRajaThathaPrajah,"(astheKingis,sowillbethepeople").Therefore,helaiddowntheconditionthat'anidealKingisonewho has the highest qualities of leadership, intellect, energy and personalattributes'.NepotismhadnoplaceinKautilya'sschemeforholdinghighoffices.FortheKing(orinmoderntimes,thePrimeMinister),theseimportantqualitieswereemphasised.

QUALITIESOFLEADERSHIPWehave toview thesequalities in thecontextof thepolitical-socialmilieuofKautilya'stimes.Qualitiesthatwerethendesirablewerebirthinanoblefamily,goodfortune,intellectandcultivatingassociationswithelders,beingrighteous,truthful,resolute,enthusiasticanddisciplined,notbreakingapromise,showinggratitudetothosewhohelp,beingholy,andnotbeingdilatory.

QUALITIESOFINTELLECTThis included the desire to learn, listening to others, grasping, retaining andunderstanding thoroughly and respecting knowledge, rejecting false views andadhering to the true ones. An energetic King is one who was determined,valorous,quickandskilful.

PERSONALACTIVITIESAn idealKinghad tobeeloquent,bold, andendowedwitha sharp intellect, astrongmemoryandkeenmind.Heshouldbeamenableforguidance.Hehadtobewell-trained inallmartialartsandhave theability to leadadisciplinedandtrained army. He had to have the ability to govern in normal times and thecapacitytofacecrises.Hehadtoconducthimselfinaccordancewiththeadvice

ofelders.TheKinghimselfscrutinisedpersonswhomheappointedtohighpostsascouncilors,ministers,commander-in-chiefof thearmyandheadsofvariousdepartmentsinhiskingdom.

CONCLUSIONThe King appointed councilors and ministers after carefully scrutinising theirbirth, abilities, characterandsuitability for takingup thehighposts.TheKinghad to personally supervise thework of thoseministers near him.With thosefurtheraway,writtencommunicationwasused.AccordingtoKautilya,theKinghad to thoroughly test the integrityof thosewhomhehadappointed.KautilyaalsocautionedthedangersinherentinKing'sservice."ServiceunderaKinghasbeencomparedtolivinginafire(butis,infact,work).Afiremayburnapartofone's body and, at its worst, all of it, but a King (goes from one extreme toanother). He may either confer prosperity or may have the whole family,including wives and children, killed. Therefore, a wise man makes self-protectionhisfirstandconstantconcern."

Specific qualificationswere laid down in Arthashastra for the appointment oftheheadsofthedepartments.34headsofdepartmentswerelistedbyKautilya.Only thosewho had the specified qualificationswere appointed to these highposts. Except in the case of Raj Purohita, the scribe (Brahmin) and army(Kshatriyas), there was no caste reservation for the high-level posts. Thus,upwardmobility in the hierarchywas basedonmerit, suitability and fulfillingotherqualificationslaiddownfortheseposts.

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12WATERMANAGEMENT

autilya's views onwater issues speak volumes o f his foresight and clearthinking,themoststrikingbeingtheconceptof'usercharges'practisedinhis time. Today, even after consensus on user charges, there are still

practical obstacles in the way of implementing these. The tax holiday, so farthought to be a product ofmodern times,wasprevalent inKautilya's times aswell. For example, for the purpose of the creation of irrigation facilities,exemption from payment of taxes was provided for a terminal period ofthreetofiveyearsincaseofnewtanks,renovationandcleaning.

SinceallwaterresourcesbelongedtotheKing,thelevyofuserchargeshelpedtheKing replenishhis treasury.Due to risks involved in transporting goodsvia waterways, the land route was preferred. Among various water routes,coastalandriverrouteswerepreferred.

KING'SDICTUMWATERFORIRRIGATION&CULTIVATION•AllwaterreservesbelongedtotheKinganduserspaidawaterratefortakingwaterfromirrigationworksbuiltbytheKing.

• Irrespective of whether the cost of building a dam or an embankment wasborne entirely or only partly by the state, all the fish, ducks, and greenvegetablesproducedinornearthereservoirsaretheKing'sproperty.

IRRIGATION•Forbuildingorimprovingirrigationfacilities, thefollowingexemptionsfrompaymentofwaterrateswerestipulatedtobegranted:

Newtanksandembankments–fiveyears

Renovatingruinedorabandonedwaterworks–fouryears

Clearingwaterworksovergrownwithweeds–threeyears

• Waterworks such as reservoirs, embankments and tanks could be privatelyownedandtheownerwasfreetosellormortgagethem.

•Theownershipoftankswouldlapse,ifthesehadnotbeeninuseforaperiodoffiveyears,exceptincasesofdistress.

•Anyonewholeased,hired,shared,oracceptedawaterworkasapledge,withtherighttouseit,wasobligedtokeepitingoodcondition.

•Ownerscouldgivewatertoothers(bydredgingchannelsorbuildingsuitablestructures) in return for a share of the produce grown in the fields, parks orgardens.

• In the absenceof theowner, either charitable individuals, or thepeopleof avillageactingtogetherhadtomaintainwaterworks.

WATER:VARIOUSOTHERUSES• Dams built to store water from a flowing source (such as a river) arepreferable to those built to store water brought by canals (dug for thatpurpose).

• Among reservoirs built by constructing dams on rivers, the ones whichirrigatedalargerareawereconsideredbetter.

Kautilyagave importance toproductiveuseofwaterandwater routes.Despitethe fact thatwater routescanbeused to transport a largequantityofgoodsatless expense and exertion as compared to land, Kautilya preferred the latter.AccordingtoKautilya,thewaterrouteisnotusableatalltimes,isaccessibleatonly a few places, is full of dangers and is indefensible, in contrast to landroutes.

Further,amongwaterroutes,acoastalrouteisbetterthanthehighseabecausethere are a large number of ports along any coast. A river route is also goodbecause it poses less serious danger and is more constantly in use. Safety ofwaterrouteswasemphasised(thishasbeendealtwithelsewhere).Thedirector

of trade had to be conversantwith the differences in prices, the popularity orunpopularityofvariousgoodsandknowwhethertheywereproducedonlandorwaterandwhethertheyhadbeentransportedbylandorwaterroutes.

Thestatewasresponsibleformakingsurethatonlyaseaworthyboat,properlymanned and equipped,was allowed to set sail uponpayingof penalty for anylosssufferedforwantofseaworthiness.ShipssailingontheseahadtopaydutywheneverthesecamewithintheKing'sdomain.Boatsthatwereshowntocauseharm,thosecomingfromenemyterritoryandthoseviolatingtheregulationsoftheportweretobedestroyed.

ContrasttheemphasisplacedbyKautilyaonefficientwatermanagementandthedetailedinstructionsonhowtodoit,withthecurrentneglectofthisGod-givenresource. India is blessed with several large rivers, flowing from the meltingsnows of the Himalayas and also fed by the southwesterly rains. Yet, forthousandsofpeoplelivinginvillages,especiallywomenandchildren,obtainingthisbasicrequirementinvolvestrudgingformilesandcarryingitontheirhead.The last twoBudgets, emphasising themaintenanceofwaterbodies,pointoutthe gross neglect of maintenance of this vital natural resource and itscontamination. The Arthashastra would be very instructive to those chargedwiththeresponsibilityofconservingourwaterresources.

It isunfortunate that in India,despitesixdecadesofplanning,anefficientandequitable water management programme is still a pipedream. In this respect,Kautilyaasavisionaryhasmanypracticalsuggestionstooffer.

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13EDUCATION

ducationineverysenseisoneofthefundamentalfactorsofdevelopment.Nocountry can achieve sustainable economic developmentwithout substantialinvestmentinhumancapital.Itisundeniablethateducationenrichespeople's

understandingof themselves andof theworld. It improves thequality of theirlives and leads to benefits both to individuals and to societies. Prior to thenineteenth century, systematic investment in human capitalwas not of specialimportanceforanycountry.Expendituresonschooling,on-the-jobtrainingandothersimilarformsof investment indevelopmentofhumancapital,werequitesmall. This began to change radically during the 19th century with theapplication of science to the development of new goods and more efficientmethods of production. In agriculture, evidence suggests positive effects ofeducation on productivity among farmers usingmodern technologies, but lessimpact,asmightbeexpected,amongthoseusingtraditionalmethods.

Interestingly, Kautilya's Arthashastra clearly demarcated the significance ofeducationandtheroleofintellectualsinensuringawelfarestate.DuringtheeraitwasthepoliticaltheoristoftheearlyMauryaperiodwhowasacquaintedwiththeprinciplesofArthashastrawhoformulated these ina text.ThismighthavebeendoneshortlyafterthedeathofKautilya,inordertofillthegapleftbythefactthatKautilyadidnotwritehisowntextorfoundhisownschool.

Kautilya's Arthashastra identified the significance of training and learning. Itclearly stated that training imparted discipline. Thus, the lessons of disciplinecould be imparted to thosewhose intellect had the desire to learn, capacity tolisten attentively, power to grasp what was taught, to retain it in memory,discriminate between the important and the unimportant, draw inferences,deliberateandimbibethetruthandnottoothers.

A young intellect was apt to consider whatever was told as the teaching of

scientificknowledge, justasafresh,rawobjectabsorbswhatevermaterial it isbrought in contact with.Arthashastra clearly points out that 'teaching wrong'thingswasagreatcrime.Iturgedthatdisciplineandself-controlwereacquiredby learning the various sciences under the authoritative control of concernedteachers.Kautilyabelievedthatonlylearningwhichresultsinrighteousnessandwealthwas true learning.Personswhodistinguished themselvesonaccountoftheirlearning,intellect,valour,andgooddeedswereacclaimed.Thus,Kautilyaestablished the fact that education helped and preserved righteousness,wealthand physical pleasures. Arthashastra preached that training and learningdestroyedunrighteousness,povertyandhatred.

Itisfromlearningthattheintellectisformed,throughtheintellectskillinaction(yoga)andfromyoga,self-controlfollows.Muchofourknowledgeaboutstatepolicy under the Maurya rule comes from the Arthashastra. Though it waswritten during the third century BC, it is still relevant. The book, written inSanskrit,discussestheoriesandprinciplesofgoverninganidealstateandisnotnecessarilyanaccountofMauryaadministration.

Itcategoriseddisciplineintotwokinds:artificialandnatural.Instruction(kriya)canberenderedonlybyadocilebeingtiedtotherulesofdiscipline.Thestudyofsciencecantameonlythosepossessedofsuchmentalabilitiesasobedience,hearing,grasping,retentivememory,discrimination,inference,anddeliberation,butnotthosedevoidofsuchabilities.Arthashastrawarnedthatsciencesshouldbe studied and their precepts strictly observed only under the authority ofspecialistteachers.Inviewofmaintainingefficientdiscipline,thestudentshouldinvariably seek the companyof aged professors of sciences fromwhomalonethediscipline'srootscouldbeunderstood.

Students were to spend the forenoon in receiving lessons in military artsconcerning elephants, horses, chariots, and weapons, and the afternoon inhearing the Itihasa. Purana, Itivritta (history), Akhyayika (tales), Udaharana(illustrative stories) Dharmasastra, and Arthasastra are known by the nameItihasa.Duringtherestof thedayandnight, theyshouldnotonlyreceivenewlessonsandreviseold lessons,butalsohearoverandoveragainwhathadnotbeen clearly understood. From hearing (sruti) ensues knowledge; fromknowledge,application(yoga)ispossible;andfromapplication,self-possession(atmavatta) is possible. This is what is meant by efficiency of learning(vidhyasamarthyam). Kautilya stated that a well-educatedKing, disciplined inthe sciences and devoted to a good government, would enjoy the earth

unopposed.

India,atthetimeofKautilya,continuedtobefamousforitsmedicalknowledgethroughouttheancientperiod.Thedoctorscouldperformsurgicaloperationsforcataract, hydrocele, abscesses, extraction of dead embryos, etc. Education andtrainingweredividedintospecificareas.

VETERINARYEDUCATIONThisfieldofmedicinehaddevelopedfairlyearly.Sinceanimalswereregardedaspartof thesamecosmosashumans, it isnotsurprising thatanimal lifewaskeenlyprotectedandveterinarymedicinewasadistinctbranchofsciencewithitsownscholars.

MILITARYEDUCATIONInmoderntimes,militarytrainingisusuallygivenonlybythestateauthoritieswhenrecruitsjointhearmy.Suchwasnotthecaseearlier.Theaveragecitizenandvillagerwasexpected tobe able todefendhisownhearth andhome.TheArthasastra expressly lays down that every village ought to be able to defenditself.That suchwas actually the case in several parts of Indiawouldbecomequite clear from the accounts ofAlexander's invasions, as given by theGreekhistorians.

Inseveralplaces,theMacedonianwasopposednotsomuchbystateforcesasbythewhole population up in arms. There can be no doubt that inmany of therepublicanstatesofPunjab,theKathas,theMalavas,theSibis,etc.,everyadultusedtoreceivemilitarytrainingofafairlyhighorder.

MILITARYTRAININGThere were also some cities in the country, famous as centers of militarytraining.Takshasila,situatedinthenorth-west,hadbecomeacenterofmilitarytraining.

COMMERCIALEDUCATIONTherewas considerable inter-provincial and foreign trade in the ancient times.Maritimeactivitywasconsiderable,andthetradewithothercountrieswasveryprofitable.ThereisevidencetoshowthatStatisticswouldhavebeentaughthere.

Kautilya's Arthashastra,while describing the duties of different officials, saysthattherehadtobeapersontomarktheanimalsthatwereamonthortwooldorthathadstayedintheherdforamonthortwo—thebrandedmark,thenaturalmark, the colour, the peculiarity of the horns — and along with thesecharacteristics, the recording of additions to the herd. Another person shouldlookafter100animals,i.e.,anequalnumberofagedcows,milkcows,andcowswithyoung,cowswithcalvesforthefirsttime,andheifers.Thus,weunderstandthatpeopleofancientIndiawereconversantwiththetopic.

ASSOCIATIONOFATTRIBUTESIn the same chapter, Kautilya has written that statistics and records about allagriculturalandotherpropertiesinthevillageweretobemaintainedbyofficials,knownasgopasandsthanikas.Hence,wecanconcludethatStatisticshadbeentaught even in those times. Despite scientific, commercial and a practicaleducational system, the ancient Indian educational institutions werecharacterisedbyspiritualendeavors to realiseahigher truth.Moraleducationand character building, in addition to intellectual learning, formed theessentialfeaturesofsuchsystems.

PATRONISEDCENTERSKings were encouraged to set up centers for higher education in variousbranchesoflearningbyutilisingstateincome.PatronisedcentreslikeNalandaUniversity,inRajgriha,Bihar,TakshasilaUniversityinpresentRawalpindi(Pakistan),VikramshilaUniversityinDharamPala,Biharwerefewoftheleading educational centres during that era. Historians have found thatNalandaUniversity had about 1500professors and10, 000 students.All theseuniversities followed the Gurukul system of teaching where students and thefaculty stayed together. The universities were well-known over the world asmajor hubs of learning (akin to Oxford and Harvard Universities today) thatattractedalargeforeignstudentpopulation.

TAKSHASILA–THEMOSTANCIENTUNIVERSITYTakshasilawasthemostfamousseatoflearning.Thiswaswherestudentswentto complete, not begin, their education.Theywere invariably sent there at theageofsixteenorwhenthey"cameofage".HereitwouldbeessentialtomentionbrieflytherangeofsubjectstaughtinTakshasila:

(l) Science, (2) Philosophy, (3)Ayurveda, (4)Grammar of various languages,(5)Mathematics,(6)Economics,(7)Astrology,(8)Geography,(9)Astronomy,(10)Surgicalscience,(11)Agriculturalsciences,(12)Archeryand(13)AncientandModernSciences.

Takshasila was also the capital of Gandhara and its history goes back intoantiquity.ItwasfoundedbyBharataandnamedafterhissonTaksha,whowastherulerthere.Asacenterforlearning,thefameofthiscitywasunrivalled.ThephilosophyandlayoutoftheuniversityadheredtotheancientHindubeliefsofthe value of natural beauty around a university. The valley is "a singularlypleasantone,well-wateredbyagirdleofhills."

Numerous references show how students from far off Benares, Rajagaha,Mithila, Ujjain, from the Central region, Kosala, and Kuru kingdoms in theNorthcountryflockedthere.ThefameofTakshasilaasaseatoflearningwasofcoursedue to thewisdomof its teachers.Sending their sons a thousandmilesaway from home also proves the great concern felt by parents about goodeducation, even in those days. As shown in the case of the medical student,Jivaka, the course of study atTakshasila extended to asmany as seven years.HistoricalrecordsrevealhowparentsfeltonseeingtheirsonsreturnhomeaftergraduationatTakshasila.AnarcheryschoolatTakshasilahadonitsrollcall103princesfromdifferentpartsof thecountry.ThestudentscametoTakshasila tocomplete their education in the three Vedas and the 18 Sippas or Arts.SometimesthestudentswereknowntoselecttostudyonlytheVedas,orjusttheArts. TheBoddisatta (Buddha) is frequently referred to as having learned thethreeVedasbyheart.

NALANDANalanda was the name of the ancient village now identified with modernBaragaon,sevenmilesnorthofRajgirinBihar.TheearliestmentionofNalandais in the Buddhist scriptures, which refer to a Nalanda village near RajagrihawithaPavarikaMangoParkinBuddha'stime.EvenKautilyawasonceastudentof this university. This university was the seat of knowledge for the world.Nalanda University offered many subjects for study, though it specialised inMahayanaBuddhism.Instructionswereimpartedinlogic,grammar,philosophy,astronomy, literature,Buddhism, andHinduism.Discussions in the classroomsweretheusualmethodofteaching.

VIKRAMASILA

VIKRAMASILALike Nalanda, the University of Vikramsila was also possible due to royalbenefactors.Thesyllabusandmethodofteachingwerecontrolledbyaboardofeminentteachers.Thewallsoftheuniversityprominentlydisplayedportraitsofpanditseminentfortheirlearningandcharacter.

Grammar,logic,metaphysics,ritualismwerethemainsubjectshere.Theimagethis university conjures up is one of a typical Brahmin with a high chignon,beard,shortgarments,seatedonamatinaroundleafyhut;fourfellowdenizensofhishermitage,acow,acrow,akneelingdoe,andacoiledsnake,alllivingatpeaceasfriendsintheatmosphereofnon-violence.

CONCLUSIONKautilya's Arthashastra identified the significance of training and learning. Itclearlystatedthattrainingimparteddiscipline.Kautilyaestablishedthefactthateducation helped and preserved righteousness, wealth, and physical pleasures.Even though the concept of human resource development had not beenspecificallymentionedinKautilya'sArthashastra,alltheprescribedguidlelinesgivetheimpressionthathewaspropounding'humanresourcedevelopment'inadetailedmanner,whereeducationplayedavitalrole.

Todaythecommonperception,evenamongeducationists,isthatinstitutionsoflearninghavelittleconnectionwithlearningandhavemoretodowithbusinessor training recruits for employment as serfs in corporate life. Nevertheless,education raises people's productivity and creativity and promotesentrepreneurshipandtechnologicaladvances.Inaddition,itplaysaverycrucialrole in securing economic and social progress and improving incomedistribution.Thehighest priority and importance should be given to educationand training. Many countries are now on the brink of increasing access tosecondaryandhighereducationandineffectingspectacularimprovementsinthequalityofeducationofferedatalllevels.

Morestudentscompletetheirbasiceducationandtheirdemandforeducationathigher levels is similarly increasing. Previous studies have shown handsomereturns to various forms of human capital accumulation – basic education,research, training, learning by doing and aptitude building.Unequal educationtends to have a negative impact on the per capita income in most countries.Undeniably,asstatedbyKautilya, investmentinhumancapitalespeciallyin

higher education would have a greater impact on the growth anddevelopmentoftheeconomy.

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14ISSUESOFRELEVANCETOCONTEMPORARYINDIA

TOWARDSHIGHERSUSTAINABLEECONOMICGROWTHWITHPEOPLEWELFARE

autilya's Arthashastra, a great revelation, is primarily a guidebook for thebenefitofthetopmanagementofthecountry.Itoutlinesbothpoliticalandeconomic governance norms working simultaneously as means and ends.

Without political will and good governance, no economic goals can beachieved. Without economic and administrative governance, populistambitionscannotberealisedintheirtruespirit.

The Arthashastra, a treatise on polity, economic activity, and administration,both public and private, written from the perspective of ideal, but pragmaticgovernancenormsandinaholisticframework,waslosttousforcenturies.Thiswonderfulbodyofknowledgeneedstobebroughttotheattentionofthepeople.

TheworkbringsoutclearlytherelevanceofKautilya'sthoughtsandteachingstocontemporary timesnotonly inIndia,but throughout theworld.TherelevancebecomesmorepertinentasKautilya'sinterdisciplinaryworkbasicallymeetstheneed of creating a strong and centralised administration, which is trulybenevolent to the people.Goodgovernance inKautilya's literature is aimed atfulfillingthewelfareofthepeople."InthehappinessoftheKing'ssubjectslieshishappiness,intheirwelfare,hiswelfare.Whateverpleaseshimpersonally,heshall not consider as good, but whatever makes his subjects happy, he shallconsidergood."

ThejargonrelatedtoHumanResourceManagementwasnotprevalentthen,butitsessencewaswidelypractisedinKautilya'stimes."TheKingshouldlooktothe bodily comforts of his servants by providing such emoluments as caninfuse in them the spiritof enthusiasm towork.Heshouldnotviolate the

course of righteousness and wealth.Thus, he shall not only maintain hisservants,butalso increase their subsistenceandwages inconsiderationoftheirlearningandwork."

Kautilya believed in a welfare state, flexible labour policy, and constructiveadministrativeprocedures.Efficientadministrationisbasicforgoodgovernance.Goodgovernanceshouldavoidextremedecisionsandextremeactions.Kautilyarecommendsastrictcodeofconductforhimselfandfortheadministrators.Thiscodeofconductisusefulandapplicabletomodernexecutives.

TheconceptoftrusteeshipwasnotinfashioninthetimesofKautilya.ButwhatKautilyapreachedwasthehighestformoftrusteeshipasadvocatedbyGandhiji–"Forgoodgovernance,alladministrators, includingtheKing,shouldbeconsidered the servants of thepeople." Theywere paid for the service theyrendered,andnotfortheirownershipofanything.

Themainroleofa leader is to leadbyexample.All theattributesspeltoutbyKautilya are expected even from the present day leaders. In fact, theworkingandmotivationoftheleadersfromvarioussegmentsoftheeconomydeterminethewell-beingoftheinhabitantsoftheeconomy.

The detailed emphasis on efficient law and order, effective administration,taxation, and other key functions is extremely relevant today. According toKautilya, for an efficient government, the personnel holding variousadministrative postswere to be selectedwith great care according to the job'srequirements. Kautilya was of the opinion that their abilities and sinceritiesshould be tested from time to time. This is relevant for civil servants in thepresentadministrationaswell.Kautilyasaidthatgoodgovernanceandstabilitygo hand in hand. According to him, there is stability if rulers are responsive,responsible, accountable, removable, and recallable, otherwise there would beinstability. Kautilya emphasised accountability even in a monarchy. In thepresentdemocraticsetup,thesequalitiesareveryessential.

Kautilyadealtseriouslywiththeproblemofcorruption.Helistedabout40waysbywhichgovernmentfundscouldbeembezzledbycorruptofficials.However,hewas very practical about the prevalence of corruption.He pointed out howdifficultitwastobesureaboutthehonestyofanofficer.Accordingtohim,forgoodgovernance,preventiveandpunitivemeasuresmustbeadoptedtodeterthegreed of civil servants. This deserves the serious attention of relevant policy

makersinthegovernmentsothatacleanerpubliclifeisusheredin.Judgingbythefact thatnotasinglepersonholdingahighofficehaseverbeenconvicted,thoughseveralhavebeenchargedofcorruptpractices,therelevanceofpunitivemeasuresandenforcementnormsasadvocatedbyKautilyabecomesevenmoreimportant.ItisunfortunatethatinIndia,despiteoversixdecadesofplanning,anefficient and equitablewatermanagement is still a pipedream. In this respect,Kautilyawasavisionary,andhadmanypracticalsuggestionstooffer.

In 1985, the TechnologyMission on safe drinking water was set up, but thedreamofthevastmajorityofpeopleinthenon-metroareasisyettoberealised.ThereisanurgentneedtolookintoandimplementKautilyanprinciplesofusercharges.

It is indeed amazing that Kautilya, about two millennia ago, described theworkingsofamixedeconomy.ItisinterestingtonotethatthemixedeconomyconceptwasfavouredbylateJRDTatainthemid1950s,asaviamediabetweenprivate enterprise and state ownership. "The State should run a diversifiedeconomyactively,efficiently,prudentlyandprofitably."

Tillnow, theauthoritieshavehadageneraldislikefor theword 'profit',whichdid not allow entrepreneurship to flower in the country. Kautilya eulogisedprofit-makingandwealthcreation.Hedidnotseeprofit-makingbyanenterpriseasanti-labour,but,infact,quitetheopposite.Anyofficial,whodidnotgenerateadequate profits in crown undertakings, was punished for 'swallowing thelabourofwork'.AccordingtoKautilya,thetreatmenttowardsthelabourforcehad tobe fair, yet strict.Kautilya realised thatwealth creationwas crucial forestablishingawelfarestate.Heoutlinedandadvocatedappropriatestrategiesforcreation,protectionandconservationofanation'swealth.

Kautilya laid stress on employment generation with due emphasis on relatingwagestoproductivity.Inthisageofglobalisation,linkingwagestoproductivityhasbecomeextremelyrelevant.

Onpublicfinance,ifthepresentgovernmentfollowstheprinciplesaslaiddownby Kautilya, there would be no need to enact and implement the "FiscalResponsibilityandBudgetManagementAct"bytheCentreandStates.Therulesfor a healthy treasurymanagement as laid down byKautilya are not only forIndiabuttheentireworld.

Kautilya's major contribution to economic thought can be seen in the area ofpublicfinance.Heattachedconsiderableimportancetofinancialmanagementbythe State recognising that the financial strength of the State is critical innormaltimesasalsointimesofwar,famineandothercalamities.Kautilyareferred to seven different sources of revenue, classifying them as routinesources(like taxeson landandcommerce)andadditionalsources(interestandprofits). At the same time, he enumerated 15 heads of expenditure. Whilelevying taxes,headvocatedfairnessandequityas thebasisof taxation.Healsomadeastrongpleaforavoidingdiscontentamongthetaxpayers,asthewelfareofcitizenswasuppermostinhismind.

Kautilya provided an elaborate description of how public funds getmisappropriated and how such practices could be contained and controlled.TheconceptofsubsidiesandexemptionsseemstohaveprevailedinKautilya'stimestoo.Heindicatedthattheseexemptionsshouldbejudiciouslyplannedandprovidedtowomen,minors,students,disabledandothers.

Whilewritingaboutpublic finance,Kautilya showed remarkable foresight andsuggestedways for investments invirgin land,dams, tanks, irrigationandmining. How relevant this is even today can be seen from thementionmadeabouttheconservationofwaterresourcesinthelasttwoUnionBudgets.TheseassetsundoubtedlyhadcriticalimportanceinKautilya'stimes,fromthepointofviewofeconomicplanning. It isnecessary toextend this logicandprepareanexhaustivelistofproductiveassetsinthecontextofamodernIndianeconomy.

Kautilya's suggestions as regards investments are admirably suited to India.Kautilyatreatedlandasaveryimportantasset.Giventhefactthatthiswasdone2400yearsago,itisremarkablethatheadvocatedascientificapproachtofarm operations and management. Kautilya classified land into arable andnon-cultivableland.Thearablelandwasgiventothefarmersforlifeonly,andit was made sure that taxes were paid by the farmers. India, at present, isengaged in a debate about taxing agricultural income, which is stillinconclusive.Kautilyahasnotonlyprovidedtherationaletotaxagriculture,buthas also advocated that rich farmers should be taxed at higher rates. Inrespect to taxes on agriculture, he said that extremes of either completeabsenceoftaxesorexorbitanttaxationshouldbeavoided.

Kautilyaarguedformaintainingdataonagriculture,as thiswouldprovideabasis for revenue assessment and collection. He had suggestions about land

records too. This is yet another subject which needs to be emphasised in thepresentcontext,asmanyIndianStatesdonothaveproperlandrecords,whichisaninhibitingfactorwhenitcomestocarryingoutlandreforms.

Kautilyamadesuggestionsforirrigationmanagementandforprovisionofbufferstocks. He also realised the need to give relief to needy citizens and hencesuggested that tax-free land shouldbe allocated topeoplebelonging to certainspecifiedcategories.ItisinterestingthatgoldandsilverheldgreatappealinKautilya'stimestoo.InthewakeofthefamousBrazil,Russia,IndiaandChina(BRIC)reportofGoldmanSachs,goldhasbecomeextremelysignificanttoday,mainlyduetoitsintrinsicvalue,whichnocurrencyhas.

EnvironmentprotectionwasanintegralpartofKautilyaneconomics.Emphasiswas laid on water management, forest protection, land management, etc.Kautilya advocated the concept of 'just price.' Currently, this is a matter ofintensedebate,notonlyinIndiabutintheentireworld.Thedeterminationoftherightpriceofoilhasbecomeaburningissue.

OnPublicSectorUndertakings,Kautilyawroteinthecontextofamonarchyandthegovernance thatwould emanate therein.But, these are relevant yet,withinthe purview of conventional public sector units. Arthashastra emphasised thatthe King should build forts, canals, roads and moats and, described inconsiderable detail the layout of each of these infrastructural constituents. Hedescribed the duties and responsibilities of all the functionaries within themonarchy. Arthashastra also lays down the penalties to ensure the efficientdischargeofresponsibilitiesatvarioustiersofgovernance.Kautilyaunderstoodtheimportanceofaccountabilityandtransparency,thelackofwhichinanumberof public sector units has been a primeval reason for the proliferation of lossmakingpublicsectorenterprises.

Arthashastra allowed the King to appoint spies to monitor the activities ofvariousdepartments.Thiswouldhaveservedsomeofthepurposesofanaudit.Oneofthecentralobjectivesofcorporategovernancetodayistoensurecertainmanagerialandlegalprovisionsleadingtoaccountabilityandtransparency.

Indiaispoisedtobecomeasuperpower,andtoensurethatthishappenssoonerrather than later, it is imperative to surmount deterrents. One of the mostrecurrentobstaclesthatthecountryhashadtoencounter,stemsfromthemannerof governance and it is in this context that Kautilya's Arthashastra bears

considerablerelevancetocontemporarytimes.

Asubstantiatedenumerationofthisfollows:

Kautilya states, "An ideal King is one who has the highest qualities ofleadership, intellect, energy and personal attributes and behaves like a sagemonarchorRajarishi."Amongotherthings,"arajarishiisonewhoiseveractivein promoting the yogakshema of the people and who endears himself to hispeople by enriching them and doing good to them." Yoga is explained as thesuccessfulaccomplishmentofanobjectiveandKshemaispeacefulenjoymentofprosperity.Topossessgreatintellect,aKing(leader)shouldhave:

•Thedesiretolearn

•Retention

•Thoroughunderstandingwhichreflectspursuitoftruth

As regards aKing's (leader's) personal attributes,Kautilya states that an idealKingshouldbeeloquent,endowedwithasharpintellect,astrongmemoryandakeenmind.Heshouldbeamenabletoguidance.Heshouldbejustinrewardingandpunishing.Heshouldhavetheforesighttoavailhimselfofopportunitiesbychoosingtherighttime,placeandtypeofaction.Heshouldknowhowtogoverninnormaltimesandintimesofcrisis.Heshouldknowwhentofightandwhentomakepeace,whentolieinwaitwhentoobservetreatiesandwhentostrikeatanenemy'sweakness.Heshouldpreservehisdignityatalltimesandnotlaughinanundignifiedmanner.Heshouldbesweetinspeech,lookstraightatpeopleandavoidfrowning.Heshouldconducthimselfinaccordancewiththeadviceofelders.

Economicgrowthisameanstoanendandtheprimevalgoalofcountriesisoratleast should be sustainable development. The Arthashastra was a treatise thatexplored the embodiments, features, and principles of an efficient politicaleconomy.Itisnotunusualforpovertyandunderdevelopmenttopersistdespiteanincreaseintheeconomy'sgrowthrates.Inessence,thereasonsforthisstemfrom the structures or rather the lack of those that have the mechanisms totransmit the benefits of prosperity in a manner that will eliminate or at leastmitigatethetrappingsofdepravationandabjectpoverty.Theroleplayedbythelackofapropermechanismwith transparencyandaccountabilityhasplayedamajor part in stalling the transmission effects taking place from growth to

development.

Centuries ago, the prescription for sustainable developmentwaswritten in theArthashastra.Someofthemostimportantmeasuresare:

(i)Theemphasisoninfrastructurebuilding

(ii) The meticulous manner in which councilors, commissioners, and allgovernmentfunctionariesareselected;thestandardstheyhavetoadhereto;andthesystemwhereintheseareenforced,havebeencomprehensivelyspecified.

Bydoingso,Kautilyademonstratedthathewascognizantthattransparencyandaccountability cannot be ascribed to chance or the presumption that theindividualsconcernedwouldalwaysactaccordingtothedictatesofintegrity.

(iii)TheKinghimselfhadtopossesscertainattributesandwasnotexemptfromadhering to codesofdiscipline.Thus, leadershipwasnotmerely abouthavingpower and position, but it meant the discharge of duties, responsibilities andobligationseffectively.

Kautilya may not have lived in an era of globalisation, however, hisclassificationof thevariousalliancesorallies thatacountrycanhaveandconverselytheenemiesorhostilitiesthatitmaybethreatenedby,areuseful.Arthashastrahasveryessentiallessonsforuswhenwearedesparatelyseekinggoodgovernanceinallwalksoflife.Thestresson'goodandjustadministration','service', 'integrity', and 'accountability', etc., is immediately desired in today'sturbulenttimes.

T

15CONCLUDINGOBSERVATIONS

he more one delves into the seminal work, Arthashastra, the more onemarvels at howcurrent and topicalKautilya is to thepresent dynamic anduncertaineconomicandsocialmilieu.Infact,Kautilya'sworkhasrelevance

notonly incontemporary India,but in theentire contemporaryworld.Thoughwritten in Sanskrit, which was the predominant language at that time,Arthashastra isstillunique in theentirecanonofIndianLiterature,becauseofitsunabashedadvocacyofrealpoliticanddisciplinedeconomicmanagement.

Though the general impression is that Kautilya had not written much abouteconomics,thefactisthatKautilyabytakingaholisticandintegratedapproachtogovernance,hadprovidedanewdimensiontothefieldofeconomics,whichunfortunatelyhasremainedneglectedall this time.Economicsworkswellwithresource management, efficient administration, a fair judicial system,knowledgeablepeoplewithintegrity,capableoftakinguphighpositions.

Anotherimportantdimension–economicgrowthwithequityandsocialwelfare– as suggested by Kautilya, would render sustainability to the economy'smanagement system. His most important contribution pertains to treasurymanagement which, asmentioned in earlier pages, was designed in a holisticway.Thisincludedtherulerbeinghonest,committed,andtrulydeservingofhisposition,therequiredsystemsandproceduresandnormsthataretobeobservedbeinginplace,andclearlyspeltout.Thereshouldbeseveralroutesoftreasuryreplenishment, which have to be transparently laid down. The strength of thetreasury depended upon the accumulation of wealth by the State which wasmadepossiblebythefactthattheKingwastheprincipalandresidualownerofall the property. For example, land which was not specifically owned byindividualwasassumedtobetheKing'sproperty.AllwaterresourcesbelongedtotheKinganduserswererequiredtopaytheKingforitsuse.

What is most striking is Kautilya's penchant for pragmatic and realisticperspectivesoncrucialdeterminantsofgovernance.Itisstrangethateventodaywe continue to grapple with problems to which Kautilya had pointedstraightforward solutions 2400 years ago. This implies that at some stage,something went wrong with our approach. What Kautilya propagated wastackling fundamental problems relating not just to the economy but also tohuman resource management, which is not practised in its true spirit today.Hence,thereisanurgentneedtorevisitKautilyaneconomics.

The relevance of Kautilyan thoughts in the Indian economy gains anotherdimensionwhenjudgedinthecontextofthegeneralperceptionthatIndiaalongwithChinaislikelytodriveglobaleconomyinthe21stcentury.TherelevanceofKautilyan economics could enable India to pursue a holistic and integrateddevelopmentplan.Therealisationofthisdreamrequiresthatallareasofpublicpolicy and governance are streamlined to create an enabling and supportiveenvironment.Here,Kautilya'sworkwouldprovemostuseful.

ANNEXURE:MAXIMSANDLESSONSFROMTHEARTHASHASTRA

(I)RULERS:DUTIESANDQUALITIES• In thehappinessof thepeople lies the ruler's happiness.Theirwelfare is hiswelfare.Therulershallnotconsiderwhatpleasesandbenefitshimpersonally,butwhatispleasingandbeneficialtothepeople.

•Exerciseofpowerandachievementof results shouldbeproperlyplannedbytheruler,inordertowinoverthepeople.

•Manyrulershavebeendestroyedbybeingunderthecontrolofthegroupofsixenemies(lust,anger,greed,infatuation,arrogance,envy).Oneshouldnotfollowtheirpath,butpreserverighteousnessandwealth.

•Whenunderattackoraffectedbyaseriouscalamity,thepeoplewillhelptherulerwhoisjustinhisactions.

• Thewhole of this science is intended to create a control over the senses.Aruler acting contrary to it and hence not having his senses under control,immediatelygetsdestroyed,evenifheisthelordofthefourcornersoftheearth.

• Generally rulers swayed by anger have been killed by people's fury. Thoseaddictedtocarnalpleasureshavebeendestroyedbyenemiesanddiseasescausedbydecadenceandvice.

•Amadelephant,mountedbyanintoxicatedmahouttrampleseverythingthatitcomesacross.Likewise, is theplightofa rulerdevoidof the lightof learning,

advisedbyanunwiseminister.

•Aruler,disciplinedbylearning,will'beinterestedindisciplininghissubjects.Hewillenjoytheearthunopposed,devotedtothewelfareofallbeings

•Onewhodoesnotkeepone'swordandonewhosebehaviouriscontrarytothatofthepeoplebecomesuntrustworthytoone'sownpeopleandtoothers.Hence(aruler)shouldadoptthesamemodeoflife,samedress,samelanguage,andsamecustomsasthoseofthepeople.

•Arulerwithloyalpeopleaccomplisheshistaskevenwithalittlehelpbecauseoftheircooperation.

• A ruler with character can render even unrenowned people happy. Acharacterlessrulerdestroysloyalandprosperouspeople.

• An evil-natured and characterless ruler will be destroyed by the people orovercomebyenemies.

• A ruler with good qualities, who knows statecraft and is endowed with thewealthofloyalpeople,evenifherulesasmallcountry,enjoystheentireearth,everwinsandneverloses.

•(Aruler)shouldestablishrightcodeofconductandalsoappointpreceptorsandministerswhowillkeephimoffdangerousspots.

•(Aruler)shouldnotharasstherootsofrighteousnessandwealth.

•Whatcharactertherulerhimselfhas,thepeopleattendantonhimhave.

•Therulerblindedbynotlearningthevarioussciences,actsindiscriminately,isobstinateindecisionsandisledbyothers.

• Absence of learning and discipline causes vices in men. The untrained,undisciplinedilliteratedoesnotseetheevilinvices.

• Thewhole aim of learning sciences and scriptures is this – control over thesenses.

• A ruler who performs his duty righteously and protects his people properly

goes to heaven.Quite contrary is the casewith onewho does not protect hispeopleormetesoutunjustpunishment.

•Byenforcingtheadherenceofthepeopletotheobservanceofdutiesprescribedforthefourcastesandthefourstagesoflifeandrootingoutallunrighteousness,therulerfunctionsasthedispenserofjustice.

•Arulerwhoadministersjusticeonthebasisoffourprinciples:righteousness,evidence,historyofthecase,andtheprevalentlaw,shallconquertheearth.

•Righteousness,overcomebyunrighteousness,destroys the ruler, ifneglect isshown.

•After conquering the earth consisting of diverse groups of people in variousstagesoflife,therulershouldenjoyit,governingaccordingtoprescribedduties.

• (A ruler) should introduce righteouscustoms,practisedbyothersbutnotyetcurrent in the country.He shall not introduceunrighteous customs and shouldstopthese,ifpracticedbyothers.

•His (the ruler's) secret others should not get; but he should ascertain others'weakspots.Asthetortoisewithdrawsitslimbs,heshouldtrytohideanypartofhiswhichmightbethrownopen.

•Justasahiddensnakeemitspoisononwhateverisseenasathreatbyit,sotheruleremitsthepoisonofangeronthosefromwhomdangerisapprehended.

•Justasthecowkeptbydog-keepersgivesmilktodogsandnottoBrahmins,sothe(depraved)rulergivessuccortothosedevoidofvalour,wisdom,eloquenceandstrengthandnottothoseofnoblecharacter.

•Justasthewellbelongingto(outcaste)huntsmenisofuseonlytothemandnottoothers,sothis(depraved)rulerisofuseonlytolowtypeofpeopleandnottomenofnoblecharacter.

•Envoysarethemouthpiecesofrulers.Henceevenifweaponsareraisedtheyspeakastheyhavebeentoldtospeak,oftheseeventhelowbornareimmunetokilling.WhattospeakofBrahmins?

• The ruler should condone minor offences and be satisfied even when the

revenueissmall.

•Aruler'sactionsarebasedonwhatispatentlyseen,whatisnotdirectlyseenandwhathastobeinferred.

•Aninaccessiblerulerismadetodotheoppositeofwhatoughtoroughtnottobedonebythosesurroundinghim.

•(Aruler)shouldattendtoallurgentmatterspromptlyandneverpostponethem.Onceamatter isdeferred,considerationanddecisionbecomemoredifficultorimpossibletotackle.

(II)COUNSELORS,AIDES,ALLIES•Governance is possible onlywith assistance.A singlewheel doesnotmove.Henceministersshouldbeappointedandtheircounsellistenedto.

• (The ruler) devoid of the power of counsel, should gather around him acollection of wise men or consult learned elders. Thus, he would attainimmediateprosperity.

•India'scouncilofministersconsistsof1000sages.Thatishiseye.Henceitisthattheycallhim"thethousandeyedone",thoughhehasonlytwoeyes.

•Withwhomshallanalliancebemade?Onetowhomheisdear,oronewhoisdear to him?He shall go tohim, towhomhe is dear.This is thebestwayofforminganalliance.

• An ally with increased power is untrustworthy, for prosperity changes themind.

•Difficultiesstabilisefriendships.

•Renderinghelpisthesignofafriend.

•Thosewithanestablishedrelationshipdonotdesert,evenifoffended.

• Such loyalty is seen even among animals. For example, cows pass byunaccustomedherdsandstayalwaysinthecompanyofknownherds.

•Thosewhose relationshipwith the ruler isestablishedovera longperiodare

however likely to completely take over everything from the ruler and pose asrulersthemselves.

•Classmates,thoughtheyaretrustworthy,willnotrespecttheruler,havingbeenplaymates(Hencetheyshouldnotbeappointedasministers).

•Thosewhohaveasimilarnatureinsecretmattersandwhohavecommonvicesand habits (in common with the ruler) do not offend him out of fear that heknowstheirsecrets.

•Justasthosenotwell-versedinthescripturesareunfittoeatthefeastofferingsto thedeadgivenbygoodpeople, so too rulersnotwell-versed in thevarioussciencesofstatearenotfittohearministerialcounsel.

•(Aweakally)evenifhegetsonlyasmallshareofthespoilsofvictoryfromthesuperiorallyshouldappearcontented.

•Intheabsenceofsupport,thesupporteddonotexist.

(III)POLICYTOWARDSENEMIES• As a bird is captured by a bait in the form of a bird, enemies should bedestroyedbycreatingtrustandofferingabait.

•Oneshouldnotallowenemiesposingasfriendstogrowatone'sexpense.

•Oneshouldoffer(toone'senemy)thatwhichislikelytobetakenbyforcebyanotherenemy.

•Destructionoftheenemy'sarmyisprimarilythedestructionoftheirelephants.

•Justasapigeonwhichhas livedon theholyfig tree(plaksha) isasourceofconstantdangertothesilkcottontree(salmali),soapersonwhohascomebackafterlivingwithanenemyisasourceofconstantdanger.

(IV)MILITARYPOLICY•Armedforcesunderseveralcommandsdonot,duetomutualfear,goovertotheenemy.

•(Groupsofpeople)ifstationedatoneplacearecapableofacquiringarms.

•Victoryofrulersinbattledependsmainlyonelephants.

• A fight between equals, like the collision of one unbaked pot with another,destroysboth.

•Inafightwithaninferior,oneattainsabsolutevictory,likethestonehittinganearthenpot.

• Power is the cause for the forging of treaties.Unheatedmetal does not joinwithmetal.

• The force of (an army)which returns to fight,without any desire to live, isirresistible.Henceabrokenarmyshouldnotbeharassed.

•Indaytime,thecrowkillstheowl.Atnighttheowlkillsthecrow(Thetimeoffightisimportant).

• In the fight between the dog and the pig, the ultimate victory is that of thepariah(whogetsthemeattoeat).

•Adogonlanddragsacrocodile.Acrocodileinwaterdragsadog(theplaceoffightisimportant).

•Oneshouldsignatreatyofpeacewithone'sequalandsuperiorandfightwiththeinferior.

•Fightingasuperiorislikeaninfantrysoldierfightinganelephant.

•(Aweakruler)surrenderingtoeveryoneliveswithouthopeinlife,likethecrabon theriverbank(always indangerofbeingcaptured).Onewhofightswithasmallarmyperishesliketheonewhotriestocrosstheseawithoutaboat.Henceheshouldseekrefugewithapowerfulrulerorremaininanimpregnablefort.

•Anarmynotunder control canbebroughtunder controlbyconciliationandothermeans.

(V)FINANCIALPOLICY•Thetreasuryhasitssourceinthemines.

•From(thestrengthof)thetreasurythearmyisborn.

•Throughthetreasuryandthearmy,theearth,whoseadornmentisthetreasury,isobtained.

•Materialwealthaloneisimportant,saysKautilya,for,bothrighteousnessandpleasurearebasedonmaterialwealth.

•Evenafterwinning(abattle)arulerwithaweakarmyandtreasuryisaloser.

•Ininactivitythereiscertaindestruction(sureloss)ofwhathasbeenachievedandofwhatistocome.

•Byactivity,objectivesareachievedandabundanceofwealthacquired.

• Riches, righteousness, and physical pleasures – these are the three kinds ofwealth.Itispreferabletofirstattaintheearliermentionedonesthanthelatter.

•Absenceofriches,absenceofrighteousnessandabsenceofenjoymentarethethreekindsofpoverty.It ispreferable tocounteract theonesmentionedearlierfirstthanthelatter.

•Thelaunchingofallprogrammersdependsfirstandforemostonthe(resourcesofthe)treasury.

•Sincerighteousnessistherootofwealthandenjoymentitsfruit,attainmentofwealthlinkedtorighteousnessandenjoymentisattainmentofallriches.

•Arulerwithadepletedtreasurywilldevourthecitizensofcitiesandthepeopleofvillages.

•Menwithoutwealthdonotattaintheirobjectivesevenafterhundredsoftrials.Onlythroughwealthcanmaterialgainsbeacquired,aselephants(wild)canbecapturedonlybyelephants(tamed).

•Astatewithdepletedresources,evenifacquired,becomesonlyaliability.

•Justasonlyripefruitsarecollectedfromagarden,sotoothefruitsofthestate(revenue) should be collected only when due. Collection of unripe fruits(premature collection of revenue) should be avoided as this will generate thewrathofthepeopleandresultinself-destruction.

(VI)CORRUPTION• Just as it is difficult not to taste honey or poison placed on the tongue,similarly,itisdifficultforonehandlingtheruler'smoneytorefrainfromtastingitinatleastsmallquantities.

•Justasitisnotpossibletoknow,whenthefishmovinginwaterdrinkwater,similarly, it isdifficult to findoutwhenofficersemployed in theexecutionofworksmisappropriatemoney.

•Eventhepathofbirdsflyingintheskycanbefoundout,butnotthewaysofofficerswhohidetheirintentions.

•Even onewho is not a thief is likely to be captured as a thief, if he is seenaccidentallyonthesceneoftheft,orif thereisresemblancebetweenthedress,weaponsandotherarticlesof the thiefandhis,or ifhe is seennear thestolenarticles,

• (The cowherds) if given wages in the form of milk and ghee act to thedetrimentofcalves.

•Hewho is responsible for lossof revenueshallbedeemed tohaveeaten theruler'sproperty.

•Hewhodoublestherevenueeatsupthepeople'sproperty.

• He who causes expenditure equal to the revenue eats up the labour ofworkmen.

•Thepureshallnotbecorrupted,aswaterbypoison.Sometimesitmaynotbepossibletofindacureforthecorrupted.

•Theintellectofthebrave,trainedtobesteadfast,oncecorruptedmaynotreturnwithoutreachingtheend(thesummitofcorruption).

• In a case of misappropriation involving a large amount of money, if agovernmentservantisprovedtobeguiltyofevenasmallpart,heshallbeheldliableforthewholeamount.

(VII)GUARDINGOFSECRETS

•Toasmanymenarulerdivulgesasecret,onsomanyhebecomesdependent,renderedhelplessbythatact.

•Thetasksofonewhosesecretsarenotkept,evenifaccomplishedwithspecialsuccess,willundoubtedlygetruinedlikethebrokenvesselonthesea.

•Apersonunder the influenceof carelessness, intoxication, or prattlingwhileasleeporenjoyingcarnalpleasures,oronehiddenordishonored,disclosessecretcounsel.

•Thedisclosureofsecretcounselisinjurioustothewelfareoftherulerandhisstaff.

•Wisemenexhibitintheirgesturesandexpressionstheoppositeoftheirfeelinginthepairs:loveandhatred,pleasureandsorrow,determinationandfear,etc.,inordertohidetheirsecrets.

(VIII)LAW,JUSTICE,PUNISHMENT• In all cases an offence concerning women or relatives, professional rivalry,hatred of opposition, market association, or trade guilds, any of the legaldisputes,theoriginisanger.Angerresultsinmurder.

•Acaseindisputeisfour-legged.Itdependson:

(1)whatisrightaccordingtoethicalprinciples

(2)evidence

(3)custom

(4)theruler'sorder

Thelastoneoverrulesalltheearlierones.

•What is right is based on truth, evidence onwitnesses, custom on availabletraditionofthepeopleandthelawistheruler'scommand.

•Whenthereisaconflictbetweenestablishedtraditionandethicalprinciples,orbetween evidence and what is right (according to ethical principles) the caseshallbedecidedonthebasisofethicalprinciples.

•Where scriptural laws conflict with what is righteous and just, there justiceshallbethevalidcriterion,thewrittentextlosesitsrelevance.

• Only that should be taught which conduces to righteousness and materialprosperityandnotwhatleadstounrighteousnessandmaterialdisaster.

•Hewhopunishes severely ishatedby thepeople,hewhopunishesmildly isdespised,onewhometesoutdeservingpunishment,isrespected.

• Punishment meted out after due consideration keeps the people attached torighteousnessandtotasksconducivetomaterialwealthandenjoyment

•Wrongpunishmentmetedoutinanger,lustorignoranceangersevensagesoftheforest.Whattospeakofhouseholders?

•Ifnopunishmentisgiven,thelawofthefishes(strongswallowingtheweak)iscreated.

•Intheabsenceofpunishment,thestrongswallowstheweak.

• The people of the four genres and the four stages of life function in theirrespectivespheres,whenruledbyarulerwhometesoutappropriatepunishment.

•Punishment,therootofdiscipline,isthesourceofprosperityforthepeople.

• Men deeming the dispenser of punishment to be 'Yama incarnate' do notcommitcrimes.

•Rulersarmedwiththestaffofpunishmentremovepeople'smiseriesandbringabouttheirsecurityandwelfare.

•Whenguiltisremovedtherearenoguiltymen.

•Whenguiltymenareremoved,theguiltwillagaincontaminateothers.Judgesshouldbeimpartialtoallbeings,trustworthy,andlikedbypeople.

• Punishment meted out by the ruler equally, according to offence (withoutdiscrimination) to sons and enemies alike, alone protects this world and theother.

•Whateverbethecrime,thelearnedoneshouldnotbetortured.

•Againstanaccusedtherecanbenoothersuit.

•Itistheprosecutorwhodecideswhatistobedone,nottheaccused.

•Truthhastobespokenbywitnesses.

•Theguaranteeofaminorhasnovalue.

•Sonshavingfathers(alive)havenorighttoproperty.

•Marriageprecedesdisputes.

•Righteousmarriagesareindissoluble.

• Denial of sexual pleasure to a wife, after her monthly ablution is atransgressionof(thehusband's)duty.

•Itistomeetunforeseendifficultiesthatawomanisgivenproperty(dowry)(atthetimeofmarriage).

(IX)CAUSESOFPEOPLE'SDISCONTENT• By not giving donations which ought to be given and accepting donationswhichshouldnotbetaken.

•Bynotpunishingtheguiltyandseverelypunishingtheinnocent.

•Byarrestingthosewhoshouldnotbearrestedandnotarrestingthosedeservingtobearrested.

•Bythestoppageofrighteousandappropriatecustoms.

• By the encouragement of unrighteousness and the discouragement ofrighteousness.

•Bydoingwhatoughtnottobedoneandpreventingwhatoughttobedone.

•Byharmingimportantleadersofthepeopleanddishonouringrespectableones.

•Byestrangementofelders,bynepotism,andfalsehood.

•Bynotrepayingforwhatwasdone(inhelp)andnotdoingwhatwasagreedtobedone.

•Byundertakingschemeswhichresultinlossandstoppingthosewhichwouldresultingain.

•Bynotprotectingthepeoplefromthievesandrobbersandenrichinghimselfatthepeople'scost.

•Bypreventingmanlyendeavourandcriticisinggoodwork.

•Bydisrespectshowntogoodpeopleandtheencouragementoftheunrighteous.

•Byactsofunprecedentedandunrighteousviolence.

• By stopping righteous and appropriate customs, by the encouragement ofunrighteousness and disregard of righteousness, decadence, avarice, anddisaffectionaregeneratedinthepeople.

• By the destruction of the security and welfare of the people due to thenegligenceandlazinessoftheruler.impoverishment,avariceanddiscontentareproducedinthepeople.

• Impoverished people become avaricious and avaricious people becomediscontented.

•Discontentedpeoplegoovertotheenemyordestroytherulersthemselves.

(X)RULINGFAMILY,RULINGCLASS•Thepoweroftherulingclass,augmentedbythelearnedpreceptor,buttressedby thecounselofgoodministers,armedwith thecomplianceofscripturesandsciencestriumphsandeverremainsunvanquished.

• Corporations (or groups of exclusive ruling class) being close-knit are noteasilyassailablebyenemies.

•A ruling family composedof indiscipline anddissolutemembers breaks likemoth-eatenwood.

(XI)DUTIESOFOFFICIALS•Aworldlywiseperson should seek, through theagencyof adear friend, theserviceofarulerendowedwithpersonalqualities,wealthandloyalsubjects.

•Onemayseektoservearulerdevoidofwealthorloyalsubjects,butneverarulerwithoutcharacter,foracharacterlessrulerdisregardsthetenetsofpoliticalscience, associates himself with evil company and comes to ruin even afterinheritingalargeandprosperouskingdom.

•Firemayburnapartorwholeofthebody.Butarulercandestroyonealongwithhiswifeandchildren.Hecanalsocausetheiradvancement.

•Absenceofacontradictingtendencymakesone'spositionsecure.

•(Acourtier)shouldspeakouttheruler'sinterestwithoutlossoftime,hisowninterestwithhisdearfriends,others'interestsattheappropriatetimeandplace,keepinginviewtherequirementsofrighteousnessandmaterialwell-being.

• (A courtier) when questioned by a ruler on important matters requiringintellectualanalysis,shouldlikeanexpertandunafraidoftheassembly,mentionhis views on what is practicable, consistent with righteousness and materialbenefit.

• Those who goad one into rash acts, unrighteousness, and extravagance arereallyenemiesunderthemaskoffriends.

•Oneshouldavoidhearingevilaspersionsspokenaboutothersnorspeaksuchthingsoneself.

•Oneshouldforgiveevilwordsspokentooneselfandhaveforbearancelikethatoftheearth.

• Even competent persons speaking unpleasant things have been banished byrulers.

•Undesirablepersonsbecomefavouritesbyactingaccording to the readingoftheruler'smind.

•Onemaylaughatjokes,butneverlaughloudly.

•Thewiseonesshouldalwaysfirstlooktotheirownselfprotection.Thosewhoserverulersaresaidtofunctioninfire.

•Whenasked,oneshouldspeakwhatispleasingandbeneficial.Oneshouldnotspeakpleasingthingswhicharenotbeneficial.

•Whatisgood,thoughunpleasant,shallbespokeninprivate,if(thelistener)iswillingtolisten.

•Onemayevenbesilentinreply,butnevermentionanythingdispleasing.

•Theoccasionswhenoneshouldleaveone'spostare:

(a)whenone'sworkgetsdestroyedwithoutfruition,

(b)one'spowergetsreduced,

(c)whenone'slearningistreatedlikeatradablecommodity,

(d)one'shopesarefrustrated,

(e)oneiseagertobeinnewcountries,

(f)whenonelosestheconfidenceofthemaster,whenonecomesintoconflictwithpowerfulpeople.

(XII)TRAININGANDLEARNING•Trainingcanimpartdisciplinetothosewhoaresuitablematerial,nottothosewhoarenot.

•Learningdisciplinesthose,whoseintellectshavethedesiretolearn,capacitytolisten attentively, power to grasp what is taught, to retain it in memory,discriminate between the important and the unimportant, draw inferences,deliberateandimbibethetruth,andnotothers.

•Ayoungintellectisapttoconsiderwhateveristoldastheteachingofscientificknowledge,justasafreshrawobjectabsorbswhatevermaterialitisbroughtincontactwith.

•Teachingwrongthingsisagreatcrime.

•Disciplineandself-controlareacquiredbylearningthevarioussciencesundertheauthoritativecontrolofconcernedteachers.

•Thatlearningiscalledlearning,fromwhichresultsrighteousnessandwealth.

• Persons standing out on account of their learning, intellect, valour, noblelineage,andgooddeedsarevenerated.

•Thus, thissciencehasbeenpropoundedcitingstratagemsanddevicesfor theacquisitionandprotectionofthisworldandtheother.

• (This science) creates and preserves righteousness, wealth and physicalpleasures.

•Itdestroysunrighteousness,povertyandhatred.

• It is from learning that the intellect is formed, through the intellect skill inaction(yoga)andfromyogaself-controlfollows.

(XIII)PHILOSOPHY•ThethreeVedasdealwithrighteousnessandunrighteousness,economicsdealswith wealth and poverty, politics deals with good and bad state policies.Philosophy, which sifts with reason the relative importance of these sciences,benefits the world, keeps the intellect steady in adversity and prosperity andcreatesexcellenceinthought,wordanddeed.

• Philosophy is considered the light of all learning, the means for theaccomplishment of all tasks, and the refuge of all righteous beliefs (of allreligions).

(XIV)MISCELLANEOUSDICTA•Astateisthatwhichhaspeople.Withoutpeoplewhatwillityield,likeabarrencow?Nothing.

•Anunpeeledterritoryisnocountryandwithoutacountrythereisnostate.

•Onewhoembarksupononlywhatispossibleundertakesworkswhichareeasy

to accomplish, one who embarks upon only auspicious works undertakesfaultlessworks,onewhoembarksupononlyproductiveundertakings takesupworkswhichleadto(people's)welfare.

•Time (opportunity) approaches amandesirousof it onlyonce.Andwill notcomeasecondtimewhenhewantstodohiswork.

•Generallygamblersarecrooks.

•Byprostration,anarmyofthelearnedclass(Brahmins)canbewonover.

•Evenforthesakeofimmensewealth,noonedesirestodie.

•Successandfailurearecommononallpaths.

•Poweraltersthemind,

•Personsofaparticulartypecanbefoundoutonlybythoseofthesametype.

•Sonskeptengagedinpleasuresdonotriseagainstthefather.

•Onlythedisplayofvalourcantackletrouble.

•Thatcourseofactionshouldbefollowedwhichwillusherinprosperity.

•Amongthousandsthereishardlyoneornotevenone(fittobea)leader.

•Invasttracts,medicinalherbsarefoundtogrowinwaterorlandveryrarely.

•ItisthecombinedactsofGodandmanthatmaketheworldfunction.

•FireisnotreliableandisaninflictionofGod.

•Awritershouldknowallconventions,heshouldbefastincomposing,haveabeautifulhandwritingandbeabletoreaddocuments.

•Womenarenecessarytoproducechildren.

•Howcanchastewomendeceive?

•Activityisthatwhichbringstofruitiontasksundertaken.

• Peace is that which allows the enjoyment of results achieved withoutdisturbance.

•Land,wateredbyariver,isameanstoliving,duringdifficultiesitbecomesasupport.

•Men'smindsarenotsteady.

•Havinganaturesimilartohorses,menwhenengagedinworkexhibitchangeofbehaviour.

•Artisansaregenerallydishonest.

•Eveninmattersofexcessivevalour,thewiseoneoverreachesthebraveone,asthehunterdoestheelephant.

• The arrow shot by the archer may or may not kill a single person. Butstratagemdevisedbyawisemancankillevenbabesinthewomb.

•Inorder todevelopdiscipline,oneshoulddailyhavethecompanyof learnedelders,whoarefirmlyrootedindiscipline.

•Thegamblercontinuouslyplayson,evenatnight,bylamplightandevenwhenthemotherisdead.Andgetsangry,ifquestionedindifficulties.

•Onewithcharactershouldgiveupangerandlust,fromwhichallevilsstartandwhich destroy the root of life, andmust attain control over senses by servingelders.

• When factors contributing to trouble for loyal elements arise, immediatelytheseshouldbecounteredbysuitablemeasures.

•Onaccountofkingdomsfatherfightssonsandsonsgoagainstthefather.Whatthentosayaboutministerfolk?

•Evenasmalltroublebecomesverytroublesometooneunderattack.

•Likeforestfire,thepowerbornoutofsorrowandresentmentbestowsbravery.

•Noone should be disrespected,Everyone's opinion shall be heard.Thewise

oneshouldutiliseevenachild'ssensiblewords.

• Performance of one's duty leads to heaven and eternal bliss.By violation ofdutyandconsequentconfusionpeoplecometoruin.

•ThethreeVedasareusefulinthattheylaydownthedutiesofthefourcastesandthefourstagesoflife.

•Onewhoupholdsone'sdutyishappyinthislifeandthelifehereafter.

•One should enjoy physical pleasureswithout harming righteous conduct andmaterialwealth.Thusshallhebehappy.Equalattentionshouldbegiventothethree kinds of wealth which are interconnected. Any one of the three:righteousness, material wealth, physical pleasures, if excessively indulged inharmsitselfandtheothertwo.

•Thereisnomanwithoutdesire.

•Wealthwilldesert thechildishmanwhoalwaysconsults thestars.Wealth isthe(auspicious)starforwealth.Whatcanstars(inthesky)do?

•Apersonwith(theoretical)knowledge,butwithoutpracticalexperience,comestogriefintheaccomplishmentoftasks.

•Fromtheskillexhibitedinperformanceisaman'scapacityassessed.

•Asteadfastworkerdoesnotgiveuphistaskwithoutcompletion.

•Firelurksinwood.

•Whathascomeofitsownshallnotbediscarded.Awomanwhomakesloveonherown,ifrejected,showerscurses.Sogoesthesayingamongthepeople.

•Theself-controlledoneshouldprotecthimself.

• The farsighted one should protect himself from both his own people andoutsiders.

• People rooted in established noble conducts of life, firmly following theprescribeddivisionofdutiesandthevariousstagesoflife,protectedbythethree

Vedas,progressanddonotdecay.

•Peaceandactivity(industry)arethesourceofsecurityandwelfare.

•Power,place,andtimemutuallyhelp.

•Theleaderofagroupshouldbeimpartialanddogoodtoallmembersofthegroup,heshouldbepopular,self-controlled,haveloyalmenandactaccordingtothewishesofall.

•Anobleoneshallnotbeenslaved.

• The rain god (Varuna) is the chastiser of sinners among men. One's bodyshouldbeprotected,notwealth.Whyfeelfortransientriches?

LESSONSFROMTHEARTHASHASTRAKautilya's Arthashastra contains a number of extremely well-analysedperceptions and wise suggestions, particularly relating to governance andadministration,publicfinance,agriculture,etc.Theimportantonesamongthemare:

I.POLITICALALLIANCES,GOVERNANCEANDADMINISTRATION•YathaRajaThathaPrajah(AstheKingis,soarethepeople).ThesacredtaskoftheKingistocontinuouslystriveforthehappinessandwelfareofhispeople.Hisgreatestgifttothemwouldbetotreatallasequals.

• The three constituents of power are: intellectual power, military might, andenthusiasmandmorale.

•TheStateissustainedbytherevenueitcollectsfromitssubjects.Theyfollowdifferentvocationsfromwhichtheymakealivingandpaytaxestothestate.

•Therecanbenokingdomwithoutacountryorterritory.

Theidealcountry(Janapada)isdescribedasselfsufficientvillages.ThepictureoftheidealKautilyanstatethatemergesisoneofawell-runstate,prosperousand bustling. There were shops with textiles, gold and jewellery and eating

houses serving vegetarian and non-vegetarian food. Musicians, dancers,storytellersandreciters,clowns,acrobats,andjugglersentertainedthepeople.Menwenttogamblingplacesanddrinkinghallsorvisitedbrothels.Monksandnunswandered freely.Amongother things, thestateshouldbeeasy todefend,should provide easy means of livelihood, such as agricultural land, mines,forests, pastures, trade-routes, and so on, and should be inhabited by hard-workingagriculturistsandmenmostlyofthelowervarnas.

• It is prescribed that dharma, that is the law of inheritance, which may bepeculiar to any region or community or SANGHA or village should berecognised,andupheld.

•Again,oneofthequalitiesessentialinanamatya(minister)isthatheshouldbeanativeoftheland(janapada),implyingtheexpectationthatthereforehewouldnaturallycareabout the interestsof thecountry.Similarly, it is laiddown thatonlysuchpersonsshouldbeallowedtobeinattendanceontheKingasarenotnativesofotherlands(naanyatodesiyam).

•BetweenjoiningforceswitharulerwhoisstrongerthantheKing,orwithtworulersofequalstrength,itisbetterthattwoequalKingsjointogether.

•AKingshallenterintoatreatyandundertakeajointcampaignalwayskeepinginmindhisownobjectivesandafteranalysingtheclearanddefinitebenefitorpartbenefitthatwillaccruetohim.

• In the happiness of the subject, lies the King's own happiness and what isbeneficialtothesubjectbenefitstheKing.

•WhatisdeartotheKingisnotbeneficialtohim,butwhatisdeartothesubjectisbeneficialtotheKing.

•Powercomesfromthecountryside,whichisthesourceofallactivity.

•TheKingshall thoroughly investigateallqualitiesofanypersonwhomhe isconsideringforappointmentasaminister.

•TheKingshouldnotmakepetitionerswaitatthedoorofthecourt.Heshouldbeaccessibletohispeopleeveryday.

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

energy,andpersonalattributesandbehaveslikeaRajarshri.ARajarshriisonewhoiseveractiveinpromotingtheyogkshamaof thepeopleandwhoendearshimselftohispeoplebyenrichingthemanddoingwelluntothem.

•Awiseadministratorwouldstriveforanincreaseofincomeandadecreaseinexpenditure.

IIPUBLICFINANCE•Wealthcreationiscrucialforestablishingawelfarestate.

•Therootofwealthiseconomicactivityandintheabsenceoffruitfuleconomicactivity,bothcurrentprosperityandfuturegrowthareindangerofdestruction.

•Ideally,thegovernmentshouldcollecttaxeslikeahoneybeethatsucksjusttherightamountofhoneyfromtheflowersothatbothcansurvive.

•Thatwhich remainsafterdeductingall theexpendituresalready incurredandexcludingallrevenuestoberealisedisnetbalance(nivi),whichmayhavebeeneitherjustrealisedorbroughtforward.

•Taxationby the state should take intoconsideration theconditionsnecessaryforensuringthestabilityandwelfareofthetaxpayer.

•TheChiefControllerofTradingshouldgenerateprofitandavoidlosses.

•Totalsalarybillofthestateshouldnotbemorethanone-fourth(25%)oftherevenueoftheState.

•AKingwithadepletedtreasuryeatsintotheveryvitalityofthecountry.

• The wealth of the State is the totality of the surplus stored in the King'streasury,thecommoditywarehouse,thegranary,thestoreforforestproduceandthe ordnance depots.Of these, the treasury is themost important; theKing isadvised to devote his best attention to it, because all the activities of the statedependonit.

• The treasury is ranked above the army because the army is dependent onfinance;intheabsenceofresources,a(disaffected)armygoesovertotheenemyorevenkillstheKing.

•Thebesttreasuryisonethathasgold,silver,preciousstones,andgoldcoins.Itshouldbelargeenoughtoenablethecountrytowithstandevenalongperiodofcalamitieswhentherecanbenoincome.

• A King who found himself in financial difficulties could collect additionalrevenuebyspecialmethods.

•Theaimofanelaboratestructureofpunishmentswasnotmerelytomaintainorderbutalsotocollectrevenue.

III.AGRICULTURE•Agricultureisthemostimportantconstituentoftheeconomy.

•Threeprincipalvocationsarerecognisedasprovidingmenwiththemeansoflivelihood namely, krsi (agriculture), pasupalya (cattle rearing) and vanijya(trade).Thethreetogetherconstitutevarita(derivedvritti,-livelihood).

•Whererain,freefromwindandunmingledwithsunshine,fallssoastorenderturnsofploughingpossible,therethereapingofgoodharvestiscertain.

•Withrespecttotaxesonagriculture,avoidextremesofeithercompleteabsenceoftaxesorexorbitanttaxation.

IV.MISCELLANEOUS•Spiritualdevelopment isparamount for internal strengthandcharacterof theindividual.Materialpleasuresandachievementscomesecond.

• Society undergoes constant change, leaving behind those who say 'no' tochange.

BIBLIOGRAPHY

Dr.R.P.KangleKautilyaArthashastra

Sukanto Bhattacharya From Kautilya to Benford – Trends in Forensic andInvestigativeAccountingL.N.RangarajanKautilya:TheArthashastra (PenguinIndia,1992).

UshaMehta&UshaThakkar,1980:KautilyaandhisArthashastra

R.Syamasastri (Trans.)Kautilya:Arthashastra (Bangalore:GovernmentPress,1915, 51-185) Roger Boesche, Rownan The First Great Political Realist:Kautilya and His Arthashastra (Littlefield Publishing Inc) Charles WaldarenKautilya'sArthashastra:ANeglectedPrecursortoClassicalEconomics,JournalIndianEconomicReview,Vol31,1996

Sam Sankar Kautilyan Economics: An analysis and Interpretation (SaginawValleyUniversity, IndianEconomic Journal,Vol 47,No 4)Nene,Y.L. 2002.ModernAgronomicConceptsAndPracticesEvidentInKautilya'sArthashastra(c.300BC).AsianAgri-History6(3):231-242.PostgraduateFellow,SchoolofBusiness,BondUniversity,Queensland4229,AustraliaGautamindia.com

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