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Arthashastra, Kautilya, and Present Indian economy (`) 'Economics' can be defined as study of wealth.

In our text books of Economics, the first thing we get other than the definition is that the Scottish economist Adamsmith is said to be the father of Economics. Adamsmith was born in Scotland in the year 1723, because of his extraordinary doings in the field of Economics he is remembered as the pioneer or the father of the field of study. But before accepting the title given to Mr. Adamsmith, the thing which we Indians specially are to do is to study the book 'Arthashastra' written by Kautilya (also known as Chankya and Vishnugupta). The book was pan by 330 B.C. The term 'Arthashastra' literally mean 'Script of Wealth'. The book focused not only economic scenario of Maurya period but its study bring to us the causes of failure of present Indian as well as international economic strategies. 'Arthashastra' was written almost 2000 years before the birth if the man who is now known as the 'Father of Economics', is an excellent creation of Kautilya. He was a professor of Takshasila university at the very outset of life. He then started working as Prime minister of Chandragupta Maurya. He did play a very crucial role behind the up rise of Maurya Empire. Using the vast experience of that period, in his retirement life he wrote the book. Kautilya's contribution to economic thoughts of his time was immense. He had a deep insight into public finance. The study of his book brings in our minds the fact that the way he addressed the various areas of the economy is something very surprising and at the same time even after so many years its very much relevant to the present world economy. 'Etany api tu karmani, sangam tyaktva phalani ca, Kartavyaniti me partha niscitam matam uttamam.' (Bhagavad Gita, Chapter I8) All these activities should be performed without attachment or any expectation of it's result. In the words of Kautilya ' Prajasukhe sukham rajah, Prajahnam ca hite hitam Natmapriyam hitam rajah, Prajanaam tu priyam hitam' In the happiness of his subject lies the happiness of the king; In their welfare his welfare. He shall not consider anything as good only that which pleases him but treat as beneficial to him whatever pleases his subjects. Politics and Economics are deeply interlinked. The change in one is bound to bring change in another. Kautilya lived in the period of monarchism. In his view the role of king is nothing but to please the subjects. Thus any decision taken by the king must be to provide benefits to his subjects not to himself. Today, unfortunately despite of living in a democratic nation we find the exact opposite picture in the decisions of our 'elected kings'. Dishonesty, corruption, frauds are very much 'use to' terms in today's corporate world, both in public as well as private sector. The issue is not new to the nation; they have been existing from the very beginning of the civilization. Kautilya believed that no rule or regulation or audit is enough to prevent the ill practice but the character building and action oriented values can play the role easily. He used the word 'dharma' (means duty) in this context. He described the basic ethical value of any human being should be 'ahimsa' (non-violence) and 'satyam' (truthfulness). Kautilya identified several types of officials who might cause harm to the public revenue. To him, an official who causes loss may be arrogant about his learning, wealth or the support he gets from highly placed persons. He believed that to know when an employee is taking bribe or adopting unethical measure resulting in the loss of revenue of state is just like to know when a fish is drinking water. He insisted on character reference before recruiting a person in the job. The practice starting in India by Kautilya is still being followed by Human Resource Management of most of the public as well as private companies.

Kautilya believed that the employees should be compensated duely so to get their best productivity as well as loyalty. The employees should not be exploited. But at the same time he insisted that the wage bill should not exceed 25% of the total amount of revenue collected. Today even after so many centuries we find where the tea garden employees are being compensated in such a way that even it becomes almost impossible for them to think about meeting their basic needs. The same can be said about industrial labours in some areas of the nation. The low compensation making them to live in a very unscientific surrounding resulting in suffering of various types of diseases, involvement in antisocial and anti national activities leading to national wastage. On the other hand in some departments, wage bill are exceeding 60 to 70% of the revenue they earned creating a great pressure for public treasury. Its also reducing the scope for expansion of business. In nutshell both the situations are leading the nation to a very undesirable condition. Here we find that the path showed by Kautilya provides a great scope for development of economy as well of society, but unfortunately we are yet to adopt the path. In India, almost 70% of people are engaged in agricultural activities directly or indirectly. According to Income Tax Act 1961, farmers are completely exempted from tax. For that provision of the Act, the nation has to suffer a huge loss of revenue every year. Beside that the Government of India is yet to develop a scientific system to keep the records of actual production in the farming fields. On the other hand Kautilya through his book focused various important topics related to agriculture like measurement of rainfall, kinds of crops, growth of crops, distribution of seeds and fertilizers, protection of cattle, irrigation etc. regarding taxation of farming produces, Kautilya was progressive thinker. The taxes for products varied between 1/6th, 1/8th, 1/10th of their produces depending upon the circumstances. 'Arthashastra' insisted that richer farmers should be taxed more giving a permanent solution to the problem of allowing the wrong practice of using or getting the status of farmer to avoid taxation. Kautilya's 'Arthashastra' have a clear view on foreign trade. Goods were imported from China, Ceylon and other countries following the view. Levies known as 'vartanan' were collected on all foreign commodities imported to the country. Levies called 'dvarodaya' which was paid by the concern traders for the imports in addition to the ferry fees of all kind. Import duties were roughly 20% of their value. Interesting fact is that even before 1990's import duty in India was about 200% . now has reduced to about 20% giving indirect recognition to the thought of Kautilya. 'Arthashastra' can be considered a very important book for taxation even today for any country irrespective of the ideology it follows. '' Taxation should not be a painful process for the people''. The state should collect tax like a honeybee collect honey from flower so that both can survive. He believed that the strength of ruler is its treasure. Kautilya identified seven prime source of revenue. Corporate Tax : The corporation or guild of artisans and handicraft- men. Indirect Tax : Liquor, slaughter of animals, threads, oils, ghee, sugar, the state of goldsmith, the warehouse of merchandise, rivers, fruits, boats and ships, road-cess, ropes and ropes to bind thieves and taxes on minerals. Land and Property Tax : Town house and building sites, posture grounds, agriculture produce, flower gardens, wet fields. A large amount of tax on agriculture was received in kind. Customs Duty : Sulka (tax) was collected on all imported goods at the work of collecting custom duty was supervised by sulkadhyaksha (Superintendent of customs) Fees and Government Charges Tolls, fines, weight and measures, the town clerk, the superintendent of coinage, the superintendents of seals and passports. Income Taxes : Produce from crown lands, portion of produce payable to the Government. Entertainment Tax : Prostitute taxes and gambling taxes. Interesting to see that in present scenario both prostitution and gambling are illegal in India, but both exist in almost each and every part of the nation. At the time of Kautilya both of the professions are needed to be licensed and taxes were collected duely. But for that I should not be taken into account that he allowed the activities wholeheartedly. He insisted utmost importance to moral education, character building and ideal living. But despite of that if people adopted such path for their entertainment, they had to pay tax to the Government. The view of Kautilya can be used in

modern society also. People should be taxed and/or fined heavily engaged in such activities. It will play both the role of revenue enhancer as well as economic check on such unethical activities. Kautilya classified items of expenditure under 15 heads. This was known as 'Vyayasarira' (means the body of expenditure) . The majority of the items involved expenditure on state accounts. Perhaps the most important idea here is the distinction of revenue expenditure and capital expenditure. For Kautilya, there were two kinds of expenditure viz daily expenditure and profitable expenditure. Daily expenditure (today its popularly known as revenue expenditure) was the obligation of the state to maintain certain services and facilities for the people. In other words to maintain the day to day expenditure of running on administration. To him the expenditure that earned revenue 'once in period' is called profitable expenditure. (Today its popularly known as capital expenditure). Kautilya admitted some amount of corruption would always exist. He insisted exemplary punishment to the corrupt employees both material as well as corporal. He understood the need of transparency during the investigation of public servants and the practice of whistle blowing on corrupt practices. Today where the entire system is sinking in the river of corruption, his words proof their relevance themselves. A proclamation in public shall be made to the effect that whoever has suffered at the hands of this offender may make their grievances known to the king. Those who respond to the call shall receive such compensation as is equal to the loss they suffered''. He identified 40 different methods of embezzlement of public money and prescribed the harshest punishment for such an offense. Kautilya's 'Arthashastra' is a very crucial source of ideas to understand the workings of public sector units. To him the units should earn profit. The state should run a diversify economy actively, efficiently, prudently and profitably. 'Any officer who did not generate adequate profits in a crown's undertaking (should be read as Government undertaking in present context) was punished for swallowing the labour of workers. The theme was 'earn profit, avoid loss'. Whereas today we fi nd in our surrounding a numbers of public units are either closed down or privatised as they had been lied sick for long time. The reason behind it may be many, but the most common must be the so called tag line of 'service motive', using which the respective authorities are hiding their failures. Using the tag of 'service motive' the enterprises are being run in such a way that they are incurring expenditure of even twice the revenue. Regarding budget, Kautilya's idea is to identify and determine the sources and amount of revenue first. After determination of the revenue, the next task was to to identify the areas of expenditures, fixing priorities and depending upon the fixed priorities expenditures were to be incurred. On the other hand we can find the exact opposite picture today in our annual budgets where expenditures heads are first decided to ensure the satisfaction of vote banks without giving any thought to the revenue, resulting in continuous deficit budget in each and every year. While preparing budget Kautilya suggested deferred revenue and expenditures should be taken into account making his budgeting more logical and scientific. In his book, Kautilya highlighted the importance of proper maintenance of books of accounts and the role of auditors. Today one has to read the various CAG report to know how badly the accounts of Government enterprises are being maintained in India. The roles of Charter Accountants are also being questioned very often now days. Responsibly of auditors was underscored in the 'Arthashastra'. Failure to conform to regulations was a punishable offense. High officers were responsible for rendering the accounts for their sphere of activities without any contradiction in them. Those who told lies or made contradictory or doubtful statements were liable to pay heavy penalty. Fear of severe punishment kept unscrupulous and irresponsible auditors on guard while preparing audit reports. Kautilya also discussed the role and features of bank and its employees in his book. He recommended that the banker should have a good understanding of the workings of the artisans, should be reliable and person of good standing. They have to build an environment of trust and stature to conduct their business efficiently. The very first thing today is what the bankers are taught. The dictionary meaning of the term 'bank' is 'trust' and Kautilya did emphasis on the fact that without establishing faithful relationship with people its difficult to run a bank effectively.

Kautilya attached utmost importance to investment in human capital. The key of development of any state is its people and the key to develop the quality of human resource is knowledge and discipline. Kim kulen vishaalen viddyaaheena cha dehinaam Duskulam chapi vidusho devarirapi hi poojyate. (Chakyaniti) An uneducated person is useless even if he might be belonging to a renowed family. A scholar despite belonging to a lowly rated family is adored by even the Gods. 'Dhaanheno na cha heenashcha dhanik sa sunishchayah viddhya ratnen heeno yah sa heenah sarvavstushuh. (Chakyaniti) A man devoid of wealth is in fact not a poor man. He might come in wealth. But one is uneducated is actually a pauper in all aspects. From the above it becomes very much clear that Kautilya used to put supreme importance in education. Kings were encouraged to set up centers for higher education in various branches of learning by utilising state's revenue. Unfortunately our 'elected rulers' are yet to understand the importance of human capital. The allocation for human resource development in annual budgets clarifies the fact. Kautilya dreamt of an India that Has a self-sufficient economy. Provides equal opportunity to all. Develops an efficient system for managing land Has a minimal taxes, collected in the least painful way. The way he dealt with the various fields of economy of a nation make to us clear that he had both the vision and ways to bring the vision in reality. His ways are fruitful even today if followed properly. Many problems like poor corporate culture, corruption, troublesome taxation policy, deficit budgeting, regional and communal discrimination can be overcome successfully. The concept of demand and supply was also very much clear to him. He believed that these two phenomenons should be let to play independently. In case of excess supply the state should buy it from the producers so that they need not to be hampered. And later the state can sell the produces to the public at market price. The concept will be much helpful to check the unfortunate sufferings of the poor farmers around the nation and also preventing the wastage of farming produces which are being produced excessively as now the officer in charge will be held responsible for them. In short it can be said that Kautilya touched almost all the basic areas of economics through his book 'Arthashastra'. We may or may not recognise him as the 'father of Economics', but the proper study and application of his 2300 years old thoughts detailed in 'Arthashastra' will surely open the path for 'era of prosperity' to our beloved nation.

References : 1. 2. 3. 4. Kautilyas Arthashastra- JAICO publication Chankya Neeti- B.K Chaturvedi Bhagavad Gita

Rahul Roy (Ex-student, Commerce Dept -2010)