Kautilya’s Arthashastra: The Way of Fianancial Management and Economic Governance

152 Pages·2009·1.02 MB·English

KAUTILYA'S ARTHASHASTRA
The Way of Financial Management
and Economic Governance

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© Priyadarshni Academy 1, Arcadia, Ground Floor, Nariman Point, Mumbai
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KAUTILYA'S ARTHASHASTRA ISBN 978-81-8495-029-8

First Jaico Impression: 2009
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FOREWORD

—Jignesh Shah

Chairman, Promotion of Oriental Studies Committee, Priyadarshni Academy
Chairman & Group CEO, Financial Technologies Group

o book perhaps deserves to have as much pride of place in the personal
N
libraries of political pundits, social scientists, and economic scholars as
Arthashastra, written by Kautilya (also known as Chanakya or Vishnugupt)
as far back as 300 BCE. Not only was Kautilya a man of letters and a shrewd
statesman, but he also had profound knowledge of political science, military
strategy, and economics. He was the best known professor of politics and
economics at the world renowned Takshashila Gurukul (university) in ancient
India. He was the advisor to the first Maurya king, Chandragupta, and later
became the Prime Minister of his kingdom.
Arthashastra may literally mean 'Science of Money', although it is also defined
as a political science, science of political economy, or science of material gain or
profit. Leaving aside the meaning of the word itself, Kautilya's Arthashastra is
undoubtedly an excellent treatise on statecraft, economic policy, and military
strategy, and provides an outline of legal and administrative structure for
governing a political economy. Be that as it may, it is in reality a discourse on
the administration of finances through raising revenues from different sources,
economic or otherwise, and expending the same on maintaining law and order,
defence of the state and social welfare, as also for regulating economic, social
and other activities of the citizens by the State.
Arthashastra is, therefore, addressed more to the rulers than their subjects,
though the latter too gain much knowledge 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 as
much valid today to the governments as well as the populace in their day-to-day
affairs as during the Mauryan era.
Since the State raises finances from all the sectors of the economy, namely,
agriculture and forestry, livestock and dairy farming, export-import and
domestic trade, industry and crafts, and services of diverse hues, Kautilya has
discussed all these economic activities, defined their objectives, and even drawn
rules for administering such activities to the benefit of the society as well as for
earning revenues for the State. Not only has he prescribed varying fees and
charges for engaging in different activities, but even provided elaborate fees and
penalties for violations of the rules to prevent abuses, which at the same time, fill
in the coffers of the State.
Kautilya's contribution to economic thoughts of his times was immense. He had
a deep insight into public finance. Surprisingly, even as barbarians roamed
through Northern Europe, Kautilya was designing a guidebook for kings, listing
several revenue sources, including taxes on land, trade and industry; interest and
profits on state investments and enterprises; and fines and penalties for
infringement of laws and rules, while providing simultaneously principles for
investments in basic infrastructure like land development, mining and irrigation
through the construction of dams, tanks and lakes, besides offering judiciously
planned subsidies and tax exemptions to women, minors, students, disabled and
the other needy.
Surprisingly, he was aware of even the cannons of taxation – fairness, equity,
efficiency, and ability to pay, which are not infrequently missed in the present
times by the ruling class while rushing to raise revenues through indiscriminate
taxation, without realising the consequences. He made a strong plea for avoiding
discontent among taxpayers.
During Kautilya's times, trade and commerce was booming. Kautilya had laid
down detailed rules for trade, weights and measures, price fixation, etc. His price
fixation policy framework vividly suggests that he was very much conscious of
the influences of supply and demand on prices, and commodity characteristics.
He had stipulated rules for markets, sale and purchase contracts as well as for
deliveries. Long before the arrival of forward and futures contracts in Europe
and North America, Kautilya had even defined the term "futures price" as one
that takes care of what in the current market parlance we call 'carrying costs' that
include not only storage costs, but interest costs as well as transport costs. The
market rules were so framed as to benefit both the producers and the consumers.
What's more, he had described even the organisations of the artisans, which
appear to be precursors to modern corporations. He had prescribed the manner in
which such corporations should function, pay taxes to the state, trade in their
goods, and fix wages for their labour.
Above all, he had understood the environmental needs as well. He has
emphasised the preservation of forests, and even wildlife, like elephants and
other animals therein. His treatise is essentially aimed at developing a welfare
society. No wonder, he expected the King to behave in a righteous manner. In
his own words, "In the happiness of his subjects lies his happiness, in their
welfare, his welfare. Whatever pleases him personally, he shall not consider as
good, but whatever makes his subjects happy, he shall consider good." Clearly,
in Kautilya's Arthashastra, there are many valuable lessons to be learned for the
present day rulers as well as citizens. What surprises one is that although this
sage taught us so much as far back as over 2,400 years ago, we have
conveniently forgotten most of his lessons. Had we remembered them, India
would have been shining gloriously as it had during the Golden Age of
Chandragupta Maurya.
Priyadarshni Academy must be congratulated for bringing out such an
illuminating and scholarly publication, which must adorn the tables of our
political rulers, their mandarins, political and social scientists, economists, and
corporate managements.