kautilya on the scope and methodology of accounting

24 Pages·2011·1.82 MB·English

AccountinHg istorianJs ournal
Vol. 31, No. 2
December2 004
Balbir S. Sihag
UNIVERSITY OF MASSACHUSETTSL OWELL
KAUTILYA ON THE SCOPE AND
METHODOLOGY OF ACCOUNTING,
ORGANIZATIONAL DESIGN AND THE
ROLE OF ETHICS IN ANCIENT INDIA
AbstractK: autilya,a 4th centuryB .C.E. economist,r ecognizedt he
importanceo f accountingm ethodsi n economice nterprisesH. e real-
ized thata properm easuremenotf economicp erformancwe as abso-
lutelye ssentialf ore fficienatl locationo fr esourcesw, hichw as consid-
ered an importants ource of economic development.H e viewed
philosophya nd politicals cience as separate disciplinesb ut consid-
ered accountinga n integralp art of economics.H e specifieda very
broad scope fora ccountinga nd considerede xplanationa nd predic-
tiona s its propero bjectivesK. autilyad evelopedb ookkeepingr ulest o
recorda nd classifye conomic data, emphasizedt he criticalr ole of
independentp eriodica udits and proposedt he establishmenotf two
importanbt ut separateo ffices- the Treasurera nd Comptroller-Audi-
tor,t o increasea ccountabilitys,p ecializationa, nd above all to reduce
the scope forc onflictso f interestH. e also linkedt he successfule n-
forcemenotf rules and regulationst o theirc larityc, onsistencya nd
completenessK. autilyab elievedt hat such measuresw ere necessary
but not sufficientto eliminatef raudulenatc countingH. e also empha-
sized the role of ethics,c onsideringe thicalv alues as the glue which
bindss ocietya nd promotese conomicd evelopment.
INTRODUCTION
The virtuouso ne despisesp rosperitayt tainedt hroughig -
nominy.T he bounds of good conduct should neverb e
AcknowledgmentsI: am gratefutl o BhoopendraP . Sinha fore ncouraging
me to exploret his topic. I am equally indebtedt o Linda Kistlera nd Richard
Mattessichf ort heirm anyi nvaluables uggestionsw, hichw ereh elpfuiln improv-
ingc ontenta nd clarityI. am also gratefutlo ther efereeasn d StephenW alkerf or
theirp enetratincgo mmentsa nd suggestionfs ori mprovingth ep resentationan d
sharpeningth ea nalysis.O nlyI deservep rosecutionf ora nyr emaininge rrors.
SubmittedM ay 2002
RevisedO ctober2 002
RevisedA pril2 003
RevisedO ctober2 003
AcceptedN ovember2 003
126 AccountinHg istorianJs ournalD, ecember2 004
crossed.T rutha nd charitya re ther ootso f righteousness.
Righteousnesiss the ornamento f all [Kautilya'sS utra,
Subramanian,p p. 39, 47, 62].
It is possiblet o knowe vent hep ath of birdsf lyingin the
sky but not the ways of governmenste rvantsw ho hide
their (dishonest) income [Kautilya's Arthashastrap, .
283].
Vishnugupta Chanakya Kautilya (popularly known as
Chanakya)h as been addresseda s an Acharyao r guru( professor
or teacher) and a statesman.N ehru [1998, p. 123] describes
Kautilya as follows: "He sat with the reins of empire in his
hands and looked upon the emperorm ore as a loved pupil than
as master.S imple and austere in his life,u ninterestedin the
pomp and pageantryo f highp osition."
Kautilyai s creditedw ithd estroyingth e Nanda (tyrantr) ule
and installingC handraguptaM aurya (321-297 B.C.E.) on the
throne.N o one really knows the dates of his birtho r of his
death. It is almost certaint hat he and ChandraguptaM aurya
were adults in 321 B.C.E. when theys ucceeded in topplingt he
Nanda DynastyI.t is reasonablet o assume thath e was oldera nd
undoubtedlyw isert hanC handraguptain ordert o commandt he
respect necessary for success in destroyingt he Nanda rule.
Kautilyaw as probablyb orn around 360 B.C.E., was veryi nflu-
ential duringC handragupta'sr ule (321-297 B.C.E.), and might
have lived beyond the latterd ate. This implies that he was a
junior contemporaryo f Aristotle( 384-322 B.C.E.). However,
therei s no evidencet hatK autilyaw as aware ofA ristotle'isd eas.
Kautilyaw roteT he Arthashastrat,h e science of wealtha nd
welfare,d uringt he latterh alf of the 4th centuryB .C.E.. The
Arthashastrcao ntains1 50 chaptersw, hicha re classifiedb y topic
in 15 books. It consistso f threer easonablyw ell developedp arts:
(i) nationals ecurityis sues includinga foreignp olicy,( ii) admin-
istrationo f justice includingc rimea nd punishmentis sues, and
(iii) policies related to economic developmentt, axation,l abor
managementa nd financialm anagement.T he latteri ncludes a
discussiono n the criticalr ole of accounting.T heA rthashastrias
a theoreticatl reatised esignedt o instructk ingse verywheraen d
for all time. Kautilya also completed two other works:
Chanakya-Sutra(sR ules of Science) and Chanakya-Rajanitisastra
(Science of GovernmenPto licies).
Kautilya's contributionst o accounting may be classified
under four headings: (i) the developmento f principleso f ac-
counting,(i i) the specificationo f the scope and methodologyo f
Sihag:A ccountingO, rganizationaDl esigna nd Ethicsi n AncientIn dia 127
accounting,( iii) the codificationo f financialr ules and regula-
tions and the creationo f an organizationals tructuret o reduce
the potentialf orc onflictso f interesta, nd (iv) the role of ethics
in the restrainto f fraudulentac counting( oftens pawned by ex-
cessiveg reed),i n them aintenanceo f law and order,t he efficient
allocationo f resources,a nd thep ursuito f happiness.
Mattessich[ 1998] sheds light on Kautilya's contributions
undert he firsth eading.H e identifiese lementso f modernp rin-
ciples of accountingi n Kautilya'sA rthashastraan d shows thati t
contains more accounting theory than Pacioli's Summa.
Mattessich deserves much credit for his interpretationso f
Kautilya'si mplicita nalysis.H e makes insightfualn d bold obser-
vations,n otingt hat many studies in accountingh istoryh ave
focused too narrowlyo n the search for the origin of double-
entryb ookkeeping.H e places Kautilya'sA rthashastroan a par
withP acioli'sS umma.
In thisp aper,I concentrateo n Kautilya'sc ontributionus n-
der the remainingt hreeh eadings.A modesta ttempti s made to
offerg limpsesi nto Kautilya'sg rand vision and his impeccable
logic.
The second sectiono f thep aper containsK autilya'si deas on
the scope and methodologyo f accounting.T wo typeso f argu-
mentsa re presentedt o show thatK autilyac onsiderede xplana-
tion and predictiona s the objectiveso f analyticali nquiriesr e-
lated to accounting. First, it is argued that he did not
recommends eparatinga ccounting from economics. He pro-
posed testableh ypothesesa nd thusi mpliedt hata ccountingh ad
an equal claim to the use of the scientificm ethod.S econd, ac-
cordingt o Kautilya,e veni fa ccountingi s considereda discipline
separate frome conomics,i ts methodologyis still scientificI. t
appears on closere xaminationt hatK autilyau nderstoodt he im-
portance of the accurate measuremento f economic perfor-
mance to economic growth.H e linkedd ecisions on production
and tradep atternst o profitabilitayn d implicitlyc onsideredi n-
novationi n accountingm ethodsa s a general-purposet echnol-
ogy (GPT), which improved the efficiency of the whole
economy.K autilya'si deas on the importanceo f the financial
health of the Treasuryt o achieve the various objectiveso f the
statea re also includedi n thiss ection.
Accordingt o Kautilya,t he major underlyingf actorf or re-
sortingt o aggressivea nd creativea ccounting( which he calls
'false accounting')i s excessiveg reed,a nd he attemptedt o con-
tain it throughm oral persuasion and legal means. He con-
sidered the conditions for ensuring honesty and systemic
128 AccountinHg istorianJs ournalD, ecember2 004
efficiencyTh. e thirds ectiono f the paper lays out Kautilya's
ideas on then ecessaryco nditionfso ri ncreasinegf ficiencayn d
complianceH. e proposeda t leastt hreec onditionsF.i rsth, e be-
lievedt hatc itizens(i ncludingg overnmenotf ficialsh) avet o be
informeodf t hel aws.W itht hati n mindh, e modifiede,x tended,
and abovea ll, codifiedt hee xistingr ulesa nd regulationsS.e c-
ond,h e proposeda n organizationastl ructurteh atr educest he
scope forc onflictosf interestT.h irdh, e suggestedco mprehen-
sives chemeso f rewardsa nd punishmenttso increasec ompli-
ance. He suggestedw ays to handlep roblemst hatm ay arise
whenevear principa(lo wner,s hareholdero,r evena king)e n-
trustfs inanciaolp erationtso hisa gents(m anagersT). hiss ection
oft hep apera lso recognizeKs autilya'cso ntributionons system-
atic recordk eepingp, eriodica ccountingb,u dgetinga,n d inde-
pendenatu diting.
Kautilyaw as aware thate thicalv alues encompassm uch
moret hant hes ocialv aluesc odifiedin rulesa nd regulationHs.e
believedt hate vent hem ostc omprehensisveet o fr ulesa ndr egu-
lationsw as insufficiefnotr c heckingg reeda nd eliminatintgh e
potentiafl orf raudulenptr acticesT. he fourthse ctiono ft hep a-
per containsh is ideas on the criticarl ole of ethicalv aluesi n
maintaininlgaw and ordera nd thec reationo f wealthH. e em-
phasizedt he role of virtuee thicsi n buildingg ood character.
Recognizintgh att hec oncepto f virtuee thicsw as alreadyw ell
developedin theV edas,t heH indur eligioussc riptureasn d phi-
losophyh, e focusedp rimariloyn thea ction-orientperdi nciples
of ethicss, ucha s theg oldenr ule,f airnessa,n d 'servanlte ader-
ship'a nd undertakinvga riousm easurest o improvteh ee thical
climateB. eforee xplorintgh esed imensionosf K autilya'ws orka
briefi ntroductiotno TheA rthashastirsa providedin the next
section.
A BRIEF INTRODUCTIONT O KAUTILYA
AND THE ARTHASHASTRA
Mattessic[h1 998]n otedt hatK autilyda evelopedso mer udi-
mentarpyr incipleosf m oderna ccountinagn d stated": Onem ay
evenr aiset heq uestiono fw hyt heA rthashastcroan cernist self,
at leastt o somee xtentw, itha ccountingis sues,w hilet hee ven
morec omprehensivwer itingosf Aristotl(ed espiter evealingan
awarenesso f economici ssues) are silenta bout accounting
theoryK."a utilyha ad a grandv isionf orb uildingan empireo,n e
thatw as prosperouss,e cure,s table,a nd based on fairnessH. e
realizedt hatt he attainmenotf prosperitrye quiredn ot only
Sihag:A ccountingO, rganizationaDl esigna nd Ethicsi n AncientIn dia 129
humane fforbtu t also the accumulationof capital,w hichw as
notp ossiblew ithoutth ed evelopmenotf a ccountinmg ethods.
Kautilysa Vision:K autilya[ pp. 120-121]s tatedh is vision
thus:
Thek ingdomsh allb e protectebdy f ortifyitnhge c apital
andt het ownsa t thef rontierTsh. el ands houldn oto nly
be capable of sustainingt he [native]p opulationb ut
also outsiders[w hent heyc ome intot he kingdomi]n
timeso f calamitiesI.t shouldb e easy to defendf rom
[attacksb y] enemiesa nd stronge nought o control
neighborinkgi ngdomsIt. shouldh avep roductivlea nd
(freef roms wamps,r ockyg rounds, alinel and,u neven
. terrainan d desertsa s wella s wilda nd [unrulyg] roups
of people).I t shouldb e beautifubl,e inge ndowedw ith
arablel and,m inest, imberf orestse,l ephanft orestsa,n d
goodp asturers ichi n cattleI.t shouldn otd epend[ only
on] rainf orw ater.I t shouldh aveg ood roadsa nd wa-
terwaysI.t shouldh ave a productiveec onomyw, itha
widev arietyof c ommoditieasn d thec apacityt o sustain
a highl evelo f taxationa s well as a [large]a rmyT. he
people shall be predominantalygr iculturis[tasr tisans
and craftsmand]e, votedt o workh, onestl,o yala ndw ith
intelligenmta sterasn d servant[s6 .1.8].
Kautilyar ealizedt hatt herew as a largeg ap betweenh is
ideal economya nd thatp revailingin 4th centuryB .C.E.. His
geniusl ies in anticipatintgh ep ossiblep roblemtsh atm aya rise
in eliminatinsgu cha gap and devisingp oliciest o resolvet hem.
Accordintgo Kautilyai,t w as them orald uty( as wella s enlight-
eneds elf-intereostf)a kingt o increasep rosperitjyu,d icialf air-
nessa nd nationasl ecuritya;n d he constructead c ompletec on-
ceptualf rameworakn d suggestepdr acticaml easurest o achieve
theseo bjectivesT.h el evelo fa bstracrt easoningac hievedin The
Arthashastwraa s uniquef ori tst ime.
Kautilya'As rthashastwraa s writteinn SanskritN. ow,f ortu-
natelym, anyE nglisht ranslationasr e available.I t hardlym at-
tersw hicht ranslatioins used,b ecausea ll are accurateK. angle's
[1972,P artI I] translatioonf TheA rthashastirsa c onsideredth e
most authenticb ut is somewhatp edantic,a nd in adhering
strictltyo theS anskrilta nguagel,a cksc larityin somei nstances.
Rangarajan[1 992]i mprovetsh et extuacll arity.
Two examplesi llustratteh e differencebse tweent he two
translationFs.i rst,o riginalr eferenc[e1 .19.34]t o the Sanskrit
Shloka( stanza)i n KautilyaA's rthashastrKaa.n gle[ PartI I, p. 47]
translatetsh isa s: "In theh appinesso ft hes ubjectsli es theh ap-
pinesso f thek inga nd in whati s beneficiatlo thes ubjectsh is
130 AccountinHg istonansJ ournalD, ecember2 004
ownb enefitW. hati s deart o himselifs notb eneficiatlo t hek ing,
butw hati s deart o thes ubjectsis beneficia(lt o him)."I ts trans-
lationb y Rangarajan[p . 149] is: "In theh appinesso f his sub-
jectsl iesh ish appinessi;n theirw elfarhe isw elfareH. e shalln ot
considera s goodo nlyt hatw hichp leasesh imb utt reata s ben-
eficiatl o himw hateveprl easesh is subjects.S" econd, theo rigi-
nal referenc[e2 .1.16]i n Kautilya'As rthashastrItas. translation
by Kangle[ PartI I, p. 56]: "For,a kingw itha smallt reasury
swallowsu p the citizensa nd the countryp eoplet hemselves."
Rangarajan[ p. 253] translatetsh us:" A King witha depleted
Treasuryea tsi ntot hev eryv italitoyf t hec itizensa nd thec oun-
try.O" ccasionallyin thisp aper,K angle;st ranslatioins used;b ut
to a largee xtentm yo bservationasn d interpretatioanrse based
on thev ersione ditedr, earrangedtr, anslatedan, d introducebdy
RangarajanT. he page referenceasr e fromt hist ranslatiobnu t
referencetso the originaol nes are also provided(t o illustrate,
[1.15]m eansC hapterF ifteenof B ookO neo fT heA rthashastra).
Datea ndA uthorshoipf T heA rthashastrMau: chc ontroverssyur -
roundst hed atea nd authorshiopf T heA rthashastrMaa. nyW est-
ernw riterhsa vea dvancedt heh ypothesetsh ati tw as notw ritten
duringt he4 thc enturyB. C.E. and thatm anys cholarsa uthored
it. Most of these hypotheseasr e advancedo n the basis of
'stylometrainc'a lysis- thef requencoyf u se ofc ertainw ordsl ike
ca (and) and va (or) whichv arya mongd ifferenpta rtso f The
Arthashast-r aan d thef actt hati t is writteinn thet hirdp erson.
RecentlyM, ital[ 2000]d evotesh is entireb ookt o rigorouslayn d
meticulousleyx aminingth e statisticaml ethodsa nd evidence
used,p articularblyy T rautmannto, tests uchh ypotheseHs.e [p.
90] finds" Thisa lso showst hatt hed ifferencine theu se of ca
andv a is basedo n subject-mattaenrd noto n authorshipM." ital
concludest hatt hem ethodus sed by Trautmannar e botha rbi-
traryan d oftenc ontradictoarnyd t hereforien,a dequatet o prove
hisc laims.
Otherc riticsa,n alyzingth ew ritingst yleq, uestionw hether
Kautilyaw as the sole authoro f TheA rthashastrTah. e writing
style,a t least in ancientI ndia,w as quite differenftr omt hat
prevailintgo day.M ital[ pp. 22-23]n otes," On theb asis of the
opinionso f Kautilyae xpressedin thet hirdp erson,t hev iewi s
put forwarbdy Hillebrandtth ati t is nott hew orko f Kautilya
but of a school,a nd this is also the opiniono f Keith and
WinternitBzu. tK ane says:" Ino rdert o avoidl ookingt ooe gotis-
ticala ncientw ritergs enerallypu tt heirv iewsi n thet hirdp er-
son."
Sihag:A ccountingO, rganizationaDl esigna nd Ethicsi n AncientIn dia 131
Today,t heree xistsn o directe videncea gainstK autilyab e-
ingt hes ole authoro fT heA rthashastrnao,r e videncet hati tw as
notw rittednu ringth e4 thc enturBy. C.E..T hei ndirecetv idence,
such as the writingst yleo f variouss egmentos f The Arthas-
hastrai,s insufficietnot c hallengee ithert hed ate of its writing
orK autilyaas thes olea uthor.
PossibleR easons fort he Neglecto f The ArthashastraK: autilya's
textw as veryw idelyr eferretdo and reveredb y scholarsf or
moret hana thousandy earsa fterit sw ritingR. ay[ 1999,p . 119]
observe"sA parft romt hem anya uthorsli keA svaghosaK, alidas,
Bana, VisakhadattaD,a ndina nd othersw ho were conversant
withi t,w e have referencetso it and quotationsf romi t right
downt o thed ayso fM illnathaan d Charitravardhainna t he1 4th
and 15thc enturieAs .D. It mayh ave lost mucho f its validity
witht he establishmenotf the MogulE mpirea nd particularly
witht hea dvento ft heB ritishr ule."
It is remarkablteh atT heA rthashastsruar vivetdh ea ctivities
ofs omeo ft her ulerso fI ndia.T he factt hatt het extw as written
in Sanskridt id notf acilitatiet sd isseminationT.h e workr esur-
faced in 1904 when a manuscriptw as handed to Mr.
Shamasastryth, eL ibrarianat theM ysoreG overnmenOtr iental
Library.
KAUTILYAO N THE SCOPE AND
METHODOLOGYO F ACCOUNTING
Theu se ofs ciencei s thes ighto ft ruth[K autilya'Ssu tra,
Subramanianp,. 83].
Cushing[1 989]o bserved":C ontemporaarcya demica ccoun-
tantsh aven otd esertedsc ienceb, utt heyh avei n a fundamental
sense deserteda ccountingT. he majorityo f the researchi n
today'sl eadinga cademica ccountingjo urnalsa pplies the re-
searchp aradigmosf e conomicasn d psychologwyi thinth ei nsti-
tutionals ettingo f accounting.H" e called this a crisisi n ac-
countingan d suggestedth ato ne of thew ayst o resolvei t is to
simplyr edefinteh e scope of accountingH. e concluded," Ac-
countinmg ayb e redefineidn scientifitce rmsa s thes ciencet hat
attempttso explaina nd predictt he economicp erformancoef
individualosr groupsr esponsiblfeo rt heu tilizatioonf e conomic
resources.B" y contrasta,c cordingto Kautilyae,x planationan d
predictioanr et hek eyg oalsf ora nyo bjectivien quiryin account-
ing. This means that by applyings cientificm ethods,c on-
temporarayc countantdso nota bandona ccountingr;a thert hey
13 2 AccountinHg istonansJ ournalD, ecember2 004
restoreit s originals tatusa nd are preparedt o realizei ts full
potential.
Book 15 ofT heA rthashastcroan tainjsu sto ne chapter'T, he
Methodo f Science'b ut surprisingliyt deals exclusivelyw ith
methodologayn d interestingilsy p, laceda t thee nd rathert han
theb eginninogf t hew orkI.t containss omes tylistircu leso ft he
kindt hato ne mightf indi n 'Universitoyf ChicagoM anualo f
Styleo' r the styleg uideo f AccountinHgi storianJs ournalB. ut
otherr ulesa rem ores ubstantivseu, cha s, statinga hypothesias ,
verbal( non-technicarle) asoningto provei t,a conclusionan d a
recommendatioInt i. s notc laimedh, owevert,h ati t has thes o-
phisticationd escribedb y Backhouse [1997, Chapters3 -7],
Godfrey-Sm[i2th00 3]o r Mattessic[h2 000,C hapter1 ].
The contenot f Kautilya'ws orki ndicatest hatt hep rerequi-
sitesf ort he establishmenotf the disciplineo f accountingal -
readye xistedin Indiad uring4 thc enturyB .C.E.. Kautilyau sed
fractionsp,e rcentagessu, mmationan d subtractioonp erations,
and evenp ermutationans d combinationqsu itee xtensiveldyi,s -
playinga deepk nowledgoef arithmetiHc.e developedn oto nly
bookkeepinrgu lesb ut also the procedurefs orp reparingp eri-
odic incomes tatementasn d budgetsa nd performiningd epen-
denta uditsI. frah'[s2 000]f indingasl so supporttsh ee xistencoef
ther equiredca pabilitieisn arithmettico supporat separated is-
ciplineo f accountingin the periodu nders tudy.H e [p. 434]
writes",B eforet heb eginninogf thef ifthce nturyB .C.E.,t hen,
all the necessary"i ngredientfs"o rt he creationo f the written
place-valusey stemh ad beena massedb yt heI ndianM athemati-
cians."
Kautilyad id not see the need fors eparatingac counting
frome conomicsa nd believedt hat any demarcationo f the
boundaryb etweent hemw ouldb e arbitraryH.e consideredac -
countingan integrapl arto f economicsB. y contrasth,e explic-
itlyt reatedP oliticalS ciencea nd Philosophyas separated isci-
plines.T his view is supportedb y the factt hat the role of
accountinwg as consideretdo be embeddedin economicp olicy.
Kautilyap erceived'e xplanatioann d predictionas' thet rueo b-
jectiveso f a scientifiicn quiryan d appliedt heset o analyzet he
impacto fv ariousp olicieso n thec reationo fw ealthH. e applied
theseo bjectivesb,o the xplicitlayn d implicitltyo, inquiriers elat-
ingt o accountingT.h isl eadst o thec onclusionb yK autilyat hat
explanationan d predictionla y withint he rightfudlo maino f
accounting.
Kautilyao n the Importancoef WealthK: autilyam ethodically
Sihag:A ccountingO, rganizationaDl esigna nd Ethicsi n AncientIn dia 133
approachede conomic issues by firste xplainingt he importance
of wealth and then suggestingp olicies for its creation.H e [p.
637] observed" Man,w ithoutw ealth,d oes not get it even aftera
hundred attempts.J ust as elephants are needed to catch el-
ephants,s o does wealth capture more wealth.W ealth will slip
away fromt hatc hildishm an who constantlyc onsultst he stars.
The only[ guiding]s tar of wealthi s itself;w hat can the starso f
the skyd o [9.4.26-27]?"A ccordingt o Kautilya,w ealth comple-
mentedh umane ffor(tb y enhancingl abor productivityin) creat-
ingp rosperityw, hichi n turnc reatesm orew ealth.
Kautilya [p. 149] added, "In the absence of fruitfuel co-
nomica ctivityb, oth currentp rosperityan d futureg rowtha re in
dangero f destructionA. kingc an achieve the desiredo bjectives
and abundance of riches by undertakingp roductivee conomic
activity[1 .19.35-36]."H e advanced the hypothesist hatt he pur-
suit of productivea ctivitiesw as the key to stabilizationo f the
currentin comea nd its rapidg rowthin the future.
Incentivest o EncourageC reationo f Wealthi n theP rivateS ector:
Kautilyae xploreda ll possible means of creatingw ealth.H e sug-
gestedm anyp olicies to encouragec apital formationin the pri-
vate sector.F or example,h e [p. 231] recommended(i ) Tax Holi-
days: "Anyo ne who bringsn ew land under cultivations hall be
grantede xemptionf romp aymento f agriculturatl axes fora pe-
riod of two years.F or buildingo r improvingir rigationf acilities
exemptionf romw ater rates shall be granted[ 3.9.33]." (ii) Full
Protectiono f PrivateP ropertyR ights:K autilya [p. 121] wrote
"The wealtho f the states hall be one acquired lawfullye itherb y
inheritanceo r by the king'se ffort[s6 .1.10]." He [p. 231] added,
"Waterw orkss uch as reservoirse, mbankmentsa nd tanks can
be privatelyo wned and the owner shall be freet o sell or mort-
gage them [3.9.34]." (iii) ConcessionaryL oans: He [p. 179] rec-
ommended, "[On new settlements]t he cultivators shall be
grantedg rains,c attlea nd moneyw hich theyc an repaya t their
convenience[ 2.1]." (iv) DutyF reeI mportsK: autilya[ p. 238] sug-
gested" Anyi temst hat,a t his discretiont, he ChiefC ontrollero f
Customs,m ay consider to be highlyb eneficialt o the country
(such as rares eeds) [2.21] are to be exemptf romi mportd uties."
Kautilyao n theF actorsR elevantt o CreatingW ealth:K autilya[ p.
255] stated:
The followinga re the means of increasingt hew ealtho f
the State: ensuringt he prosperityo f state activities;
continuingw ell triedp olicies;e liminatingth eftk; eeping
13 4 AccountinHg istonansJ ournalD, ecember2 004
strictc ontrolo verg overnmenetm ployeesi,n creasing
agriculturapl roductionp; romotingt rade; avoiding
troublesa nd calamitiesr; educinge xemptionasn d re-
missionasn di ncreasincga shi ncome[ 2.8.3].
Obstructionm, isuseo f governmenptr opertyan d
falsea ccountingb y governmensetr vantlse ad to a re-
ductiono fw ealth[2 .8.4].
Withn o distractionth, ep eoplew illb e fullyin volved
in thew orki n thef ieldsa ndt herew illb e an increasein
thes upplyo fl abor,m oneyc,o mmoditiegs,r aina nd liq-
uidst o thet reasur[y2 .1.33-35].
He added," Calamitietso thet reasurcya n be anyi nternaolr
externaalc tionw hichh as the effecot f reducingt he revenue.
Financiahl ealthc an be affectebdy m isappropriatibony c hiefs,
remissiono f taxes,s catteredc ollectionf, alsea ccountinga nd
lootingb y enemiesa nd tribesb eforet he revenuer eachest he
Treasury[8 .4.49]/'
Two observationasr e in orderF. irsta, ccordingto Kautilya
'falsea ccountingc'o uld be a serioust hreatt o the creationo f
wealthS. econd,t hisw arningw as centratl o coree conomicp oli-
cies relatingto economicg rowthf,i scalm anagemenatn d labor
managementH. e discussede ach of these means of creating
wealtha nd the need to prevenlto ss by developingac counting
methods.
FiscalP olicyK. autilyar ecommendead m ixede conomya nd ar-
guedf ora verya ctiver oleb yt heg overnmenHte. exploredet hi-
callyp ossiblea venuest o maximizet he levelo f wealthi n the
publics ectorH. e was awareo ft hel imitsp lacedo n governments
to raiser evenuet hroughta xationS. pengler[1 971,p . 72] sum-
marizesK autilya'fsi scapl olicya s follows:
Kautilya'ds iscussiono f taxationa nd expendituraep, -
parentlyin keepingw itht raditionadlo ctrineg,a ve ex-
pressiont o threeI ndianp rinciplest:a xationp oweri s
limitedt;a xationsh ouldn otb e feltt o be heavyo r exces-
sive;a nd taxi ncreasess houldb e graduatedO. ne ofh is
mainc oncernss eemst o haveb een the collectionan d
expendituroef r evenuein suchw aysa s to buildu p the
permanenrte venue-yieldicnagp acityo f the economy.
Whileh e manifesteldit tlek nowledgoef t axs hiftinagn d
incidence,h e emphasizedt he long run, cautioned
againstt oo heavyt axationin thes hortr un,a nd noted
thata rulerc ouldn ott axa t hisp leasurep, articularilny
frontierre gionsw hered isgruntletda xpayercso uldf lee
to neighborincgou ntries.