Kautilya's Arthashastra (The Way of Financial Mangement and Economic Governance)

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Item Code: NAD214
Author: Bhagwandas Peraj Thakker
Publisher: Jaico Publishing House
Edition: 2011
ISBN: 9788184950298
Pages: 221
Cover: Paperback
Other Details 8.5 inch x 5.5 inch
Weight 330 gm
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“Kautily’s Arthashastra, as a treatise on the practice of management, economics and public finance and trade and commerce, continues to be of relevance today, even after a lapse of hundreds of years, and the greatness of his thoughts lies in their continued applicability to the present economic order which is known to be dynamic and ever changing.”

(Shri Jayantrao Patil, Minister for Home Affairs, govt. of Maharshtra). “The relevance of Arthashastra to contemporary India remains unimpaired because, inter alia, it is secular text that deals with the governance safeguard without presenting any overt philosophy or religion”.

“Written in 300 BC, Kautilya’s Arthashastra is the oldest and one of the most exhaustive treatises on governance, administration and economics.”

Kautilya, also known as Chanakya, is India’s most illustrious political economist of all time. He regarded economic activity as the driving force behind the functioning of any political dispensation. In fact, he went to the extent of saying that revenue should take priority over the army because sustaining the army was possible out of a well-managed revenue system.

Kautilya advocated limiting the taxation power of the State, having low rated of taxation and most importantly devising a tax structure that ensured compliance. He strongly encouraged foreign trade, basing it on the premise that for a successful trade contract to be established, it had to be beneficial to all. He emphasized State control and investment in land, water and mining.

Kautilya was a true statesman who bridged the gap between experience and vision. For Kautilya, governance was paramount. HE suggested built-in checks and balanced in systems and procedures for the containment of malpractices. Many postulates of Kautilya’s philosophy of containment of malpractices. Many postulates of Kautilya’s philosophy of political economy are applicable to contemporary times.


No book perhaps deserves to have as much pride of place in the personal libraries of political pundits, socialScientists, and economic scholars as Arthashastra, written by autilya (also known as Chanakya or Vishnugupt) as far back 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 Maury a 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 economic. 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 reveal revenue sources, including taxes on land, trade and initiatory; 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.

Siti’pi’isingly he was aware of even the cannons of taxation — fairness, equity, efficiency, and ability to pay, which are not inlt’ec1uently missed in the present times by the ruling class while rushing to raise revenues through indiscriminate taxation, without realizing the consequences. He made a Long plea for avoiding discontent among taxpayers.

Duuring 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. Lung before the arrival of forward and futures contracts in Europe and North America, Kautilya had even defined the 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 organizations 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 labor.

Above all, he had understood the environmental needs as well. He has emphasized 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 0f 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.


Written in Sanskrit, Arthashastra remains unique in the entire panoply of Indian literature because of its titiabashed advocacy of practical economics and real politic. Katitilya’s philosophy is based on the principles of “sam, dam, dand, bhed” (persuasion, temptations punishment and J vision) as various, different, and sequential means to an end. I admire Kautilya’s focused approach to achieve a goal using any means that are sequenced Pragmatically.

K.autilya’s Arthashastra is a masterpiece, particularly if viewed is the context of the time when the book was written. He to have had an encyclopedic knowledge about different aspects of governing a monarchy such as: administration, revenue, taxation, law, diplomacy, business and trade, coinage, .agriculture and land tenure, labour, people and the society, etc.

The moment I started reading the revered works of Kautilya, also called Chanakya, advisor to King Chandragupta Maurya, the most powerful King in India in 300 BC, I was convinced that Kautilya’s teachings are full of apt solutions to India’s current problems.

I strongly believe that India can draw important lessons and norms from Arthashastra’s rich heritage. Although the book was written over 2400 years ago, its precepts about social, political, and economic structure of an ideal state are relevant even today. Perhaps even more so!

Chanakya dreamt of an India that:
• Has a self-sufficient economy
• Provides equal opportunities to all
• Develops and efficiently manages land (the most valuable source)
• Has minimal taxes, collected in the least painful way

I am specially enamored by Kautilya’s visionary thinking when he states, “A King must collect taxes like a honeybee,” enough to sustain the state, but not too much to destroy. This is what is of utmost relevance to the Indian taxation environment today.

To me, Kautilya’s work can be best described as a treatise on corporate culture and spirituality, though the word ‘corporate’ was not in vogue at that time. Corporate Social Responsibility (CSR) which implies that companies contribute towards the welfare of society has become the buzzword today not only in India, but the world over. In my view, the principle of CSR is rooted in Kautilya’s Arthashastra and his teachings.

Not only had Kautilya thought about CSR, 2400 years ago, he had also contemplated about the best ways of dealing with enviourmental issues. Water management preserving forests, and neautring land as valuable resource, all form part of his treatise. Kautilya set down a fundamental truth— “Society iii dei,goes constant changes leaving behind those who say ‘no’ to change.” In other words, “parivartan hi sansaar ka niyam hai.” In today’s coalitional and factional politics there are many who say no’, not because what is proposed is bad for the hut because it may harm their own political career.

Chanakya Niti or diplomacy is legendary all over India, and is practised in many areas like defence, strategy formation, and foreign relations. In Chanakya Niti, the focus is on how governments should govern. I am amazed to find that in the areas of public governance superintendents were appointed ml) Ct (WS like:

• Mines, gold, trade
• Weights and measures, yarns and textiles
• Forest produce, armoury
• Agriculture and shipping

On head-hunting, Kautilya wisely said, “Avoid persons who angry greedy, proud, and fearful.” He stressed, “Spiritual development is paramount for internal strength and character is the individual, material pleasures and achievements come second.” “Whatever action is taken should be result oriented,” we are not following these rules today. If results are not achievable, the concerned personnel should be punished or penalized.

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 (wealthy traders) in society, he recommended that they contribute to the digging of wells, providing dispensaries, balwadis, community development work during earthquakes, flood, etc.

Karma yoga (dedication to work), Dhyana yqga (contemplation), and Bhakti yoga (faith) need to be integrated into our lives so that this may increase the profits made by corporations, which may be converted for the larger good of the people.

Kautilya opined that the “King has no individuality of his own. He is for the people and of the people.” This is similar to the Gandhi an philosophy that assets are to be held by managers as trustees for their constituents, We also find this perspective reflected in the Bhoomidaan Movement initiated by Vinoba Bhaveji.

At this stage, I would like to mention that Sri Sri Ravishankar, founder of The Art of Living Foundation, spoke on “Role of Holistic Science in Corporate Management” at the IMC’s 4th India Calling 2004 — Asia Pacific Business Summit at Singapore. Hearing Sri Sri Ravi Shankar, I got reminded of Kautilya’s thoughts.

In the same vein, Smt. Indu Jam, Charperson, Times of India Group and Bennet, Coleman & Co. Ltd. spoke about CSR and what defines CSR.

It is Phylosophy?


Social obligation or Duty?

Community Development?

builiding Roads, Community Halls, Schools?

Providing facilities for clean drinking water, sanitation?

Adopting a village?

Enviourment Protection?

Trees should not be indiscriminately cut. Deforestation is a crime.

In short, CSR was differently but eloquently explained by Thus, CSR is not a recent Western phenomenon. It is certainly not new to India it has been a part of our Lire for thousands of years. In modern times, Tatas and Birlas, followed by quite a few r1oratcS, have been giving back to society through CSR.

In sincerely believe that many of the problems that India faces t inlay can be tackled with the help of the meticulous suggestions made by Kautilya with respect to the country’s political and economic administration.

Arthashastra provides a comprehensive analysis of political in is station, defence matters, agricultural operations and governance matters, amongst other issues.

Even though Kautilya called his treatise as the Arthashastra, it is an all -ecompassing document covering a much larger spectrum of human activity. It provided a full account of how a monarchic state should be organized defended from the external threats and attacks and how it should be consolidated in order to have a central unified regime. While doing so, Kautilya’s Arthashastra provided a very detailed account of public finance, agriculture, trade, selection of officers and ministers and governance of the state, etc.

The bureaucracy whom Chanakya envisaged in his Arthashastra continued to be a model for kingdoms established later on. The Arthashastra provides the norms for an efficient and well functioning bureaucracy. This again is of utmost relevance to India at present.

I would like to state that Kautilya’s Arthashastra has been compiled in the context of ancient Indian culture. It is necessary to comprehend the then prevailing environment in order to correctly grasp the teachings of such a magnum opus.

The beauty of this great work lies in the fact that it provides very useful and practical analysis, which would be valid and relevant for all the times to come. It is amazing that Kautilya, who lived some two thousand four hundred years ago, had such a vision and foresight that is so universal in character, Though the political, social and economic milieu, existing then and now are vastly different in many ways, Kautilya’s teachings were relevant then and are found more relevant in the modern context too.

I am proud to say that I initiated the project and it has provided me with an immense satisfaction and pride of carrying wider the insights and teachings of such a famous and all times great “The Kautilya’s Arthashastra”,

With Kautilya as his Minister, Chandra Gupta Maurya presided over what was described as the initiation of golden India. By imbibing Chanakya’s teachings I am sure we may user in another golden age for India in the near take out the best from Kautilya’s Arthhastra which is suitable contemporary India.

This book has made a sincere attempt to comprehend the kautiIya’s thoughts understand Kautilya’ s message, aides references on the relevance of his teachings for ligament of governments and modern Indian businesses.

I am confident that this work would be found useful by readers from all walks of life and, what is more, as a result of Kautilya’s economic principles would find suitable at ions in the management of various organizations.

I recommend this study to all economic players so that they rive practical inspirations to solve the nation’s most problems.


The thorught of bringing out a publication on Arthashastra First occurred during a discussion meeting Mr. Nanik Rupani Dr. Vijay Bhatkar, Founder Chairman, India I Multiversity; Mr. PP Chhabria, CMD, Finolex Dr. Ram Tarneja, former President, IMC, Mrs. wife of Mr. Rupani, fully supported the idea.

It was decided that the study could be taken up at the Vedic Centre in Pune which was jointly set up by Priyadarshani Academy and India International Multiversity. The Publication idea also received are overwhelming response From the August gathering present at a talk Mr. Rupani gave At the international Conference at the Art of Living Centre Of Sri Sri Ravi Shankarji in Bangalore.

Subsequently, Mr. Rupani realized during his tenure Indian Merchant’s Chamber, that its Economic and Training Foundation, a body that conducts on topical issues in the area of finance, Commece and trade, could be the appropriate platform for giving hf to the publication. The entire Managing Committee of IMC, particularly Mr. Ram Gandhi and Mr. Suresh Kotak, len unstinted support to the idea.

A panel of experts completed the work and Mr. Jawahar Mulraj, Columnist, Times of India, edited it in record time.

Special thanks are also due to:

Mr. Jayantrao Patil, Minister for Home Affairs, Governmen of Maharashtra

Mr. Suresh Prabhu, Former Union Minister of Power

Mr. Srichand P Hinduja, Chairman, Hinduja Foundation

Mr. Minoo Shroff, President, Forum of Free Enterprise

Mr. Arindam Chaudhuri, Dean, Centre for Economic Research & Advanced Studies, IndianInstitute of Planni no and Management

Ms. Kiran Nanda, Advisor, IMC, & Director, IMC ERTF

Dr S R K Rao, former Principal Economic Advisor, RBI

Dr D K Bhatia, former Economic Advisor, RBI

Dr P R Joshi, former Director, DSP Merrill Lynch

Dr Vijay Deo, Scholar on Kautilya

Mr. U C Dikshit, former Director of Research, RBI

Ms. Piya Mahtamey, Economist and Management Consultant

Mr. P N Mogre, Chief Advisor, IMC

Mr. Jitendra Sanghvi, Deputy Secretary-General and Chief Economist, IMC

Dr. Mohan Mathew, Economists

Ms. Samata Dhawade, Econimist

Mr. Ulhas Latkar, Publisher, ameya Inspiring Books

India Merchat’s Chambeer

Indian Merchats’ Chamber Economic Research and Training Foundation.


The one who is unattached to the fruits of his work and who works as he is obligated, is in the renounced order of life and he is a true mystic, not he who lights no fire and performs no duty.

This verse is recited by Lord Krishna to his disciple Arjuna while explaining the importance of performing one’s duties selflessly. The Lord’s words imply that it is very difficult for people in general to perform their duties, especially in the age of kali. Everyone’s actions are aimed at maintaining one’s family and one’s paraphernalia, but no one is working without any kind of self-interest, or personal gratification, be it concentrated or extended.

To act in the Lord’s consciousness is the duty of very living entity because every one is part of the Supreme Being. The living entity who acts for satisfaction of the supreme who and not for personal satisfaction is the perfect sanyasi, the perfect yogi.

(from Bhagavad Gita —As It Is by A.C. Bhaktavedanta Swan Prabhupada)

One can extend the application of the above thought to the performance of governance duties, Governance is also function which should be discharged in line with this ideology. One can substitute ‘governance jurisdiction’ in plan of ‘supreme’ and ‘elected representatives and bureaucracy’ for: ‘living entity’.

The wealth of knowledge that Indian mythological scriptures contain and its relevance in our current times is immense the appropriate interpretation and application of the principles ingrained in these texts could help us achieve progress and welfare that can be sustained in the years to come.

We are currently facing a situation where a few political leaders are concerned with doing everything in their power to preserve their vote banks and ensure the longevity of their careers. In this process, neither is they lighting any fire (read progresses) nor are they performing or allowing others to perform their duties.

Our Constitution recognizes three main pillars of governance:

I. The legislature which makes the law,

2. The judiciary which interprets the law, and

3. The executive which consists of both the permanent

bureaucracy as well as elected political populace which implements the law. The executive is the most important in the context of democracy. History is replete with instances where it has failed to act the interest of the masses, which has led to the destruction of civilization.

The Stable social structure and prospering economic is dependent on governance. It is everyone’s wish have an ideal governing body that encourages sustain prosperity. The question that needs to be addressed is weather there could ever be such ideal machinery?

One of the earliest thoughts on this pertinent question came from Vishnugupta (better known as Kautilya or Chanakya) (c.350.-c.275 BC). His treatise Arthashastra deals extensively with aspects of political economic, and social management And is the oldest book on management in the world. It was written by Kautilya around 350 BC. When literally translated, translated if means of ‘Wealth’. The books is a masterpiece and cover a wide range of topics like statecraft, politics millitary walefair, law, accounting systems taxation, fiscal ‘polities, civil rules, internal and foreign trade, etc. No wonder Scholar through the centuries have time and again described .kautilya as a rare mastermind who was an expert in so many varied and specialized fields. Kautilya was credited with bringing down the Nanda Dynasty and influencing the defeat \Iraiidri in India when the warrior was on his way to the world. As a political thinker, he was the first to visualize the concept of a ‘nation’ for the first time in human History. During his time, India was split into various kingdoms. He brought all of them together under noel ‘Central Governance’, thus creating a nation called ‘Aiyavartha’. This later became India. He documented his lifelong work j in his book Arthashastra. For ages, rulers across the world have referred to the Arthashastra for advice on building a nation based on sound economics and spiritual values, Even though India and Indians never forgot the Arthashastra, the study and practical application of the book lost its importance for quite a few centuries. However, apart from being seen as a scholarly work, this book today needs to be once again presented to everyone so that it may be practically applied in today’s world. The book has many principles and techniques, which once applied, could cause tremendous improvement even in our day-to-day management of things and situations.

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