Kautilyas Arthashastra

Vinayak Narvekar

Purpose of Presentation
Bring out in depth thinking of Kautilya
Relating it to contemporary scenario
Improvement in our thinking

Slide : 2

Background of Kautilya
Born in a poor Brahmin family in 350 BC (i.e. 2450
years ago)
Intelligent, Scholar, Statesman
Offered himself to work as Adviser to King Nanda of
Magadha
King Nanda insulted him & threw him out of the court
Kautilya swore revenge & proclaimed,
I will not tie the knot of my hair till the time I did not
end the Nand family
Slide : 3

Background of Kautilya
Brought up, Taught Chandragupta & with own expertise
in Politics & Diplomacy, dethroned King Nand & destroyed
the Royal family
Made Chandragupta Maurya, the King of Magadha
Went on to become Prime Minister of Magadha
Also worked as Professor at Takshashila University
Famous as Chanakya & Vishnugupta, as well.
Grand Son of Chandragupta Maurya = Samrat Ashok (Ashok Chakra in Indian Tricolour is
taken from Ashok Stumbh constructed by Samrat Ashok)
Slide : 4

Background of Kautilya
Bought a book on Chanakyaniti/ Nitishastra
About Philosophy & Ideology
Couple of universally true & all time applicable
quotes from it are,

Slide : 5

Chanakyaniti
A wise person must always ponder over How is the time treating me?
How many true friends have I made?
How is the place I live at?
How much do I earn and how do I spend it?
Who I am and what am I capable of?
Time consumes all creatures. It kills everyone. It is
awake when people sleep. No one can escape from its
consuming power.
Do not stay too close to the King. It is dangerous. But do
not stay too far off from them. It will gain you no rewards.
Just keep hovering around at a safe distance.
Slide : 6

Chanakyaniti
Do not be too simple and too straight. Go to the jungle
to see how the smooth and straight trees have been cut
down mercifully but the crooked ones stand unharmed.

All the desires are impossible to fulfill. The fate cant

grant all of them and efforts fall short. The best
alternative is to learn and be content with what one gets.

Slide : 7

References
Looked out for books on Kautilyas Arthashstra
Went to IIM, Lucknow (IIML) in Nov 09 for Management
Development Program
Came across 3 books in IIML Library on
Kautilyas Arthashstra written by Dr. R. P. Kangle in 1965

Slide : 8

References
3 books contain
Book 1 Shlokas - Totally in Sanskit
Book 2 Line by line translation of Book 1 in English
Book 3 Interpretation of Kautilyas Arthashstra
Naturally read only Book 3
Subsequently also read:
The Way of Financial Management & Economic
Governance Kautilyas Arthashastra
Downloads from Internet
Slide : 9

Slide : 10

What is Arthashastra?
Arthashastra In Marathi / Gujarati means Economics,
but the book includes
Much More ..
than just Economics
That too 2450 years ago..

Slide : 11

Chapters
Topics
Internal Admn. & Economics
5 chapters
Relation with Neighbour states
8 chapters
Miscellaneous
2 chapters
Total

15 chapters

Slide : 12

Chapters
Topics - Internal Administration & Economics

Concept of King & his ministers & their duties

Duties of Executive Officers

Laws, Taxes, Administration & Code of Law

Consequence Management for Crimes, measures in

emergencies, salary Structure of Govt. Servants

Advice for managing continuity on demise of King

Slide : 13

Chapters
Topics: Relation with Neighbour States

Constituents of state
Discussion on foreign policy
Dealing with Calamities
Preparations before any expedition
Detailing on War - modes, camping, marching
Subjugation of oligarchic principles by Would be
Conqueror
Postures of weak king v/s strong king to overcome strong
king
How to rule conquered territory?
Slide : 14

Chapters
Topics Miscellaneous

Secret remedies & practices to overcome enemies &

traitors

32 methods of treating the subject

Slide : 15

Disciplines covered

Politics
Economics
Administration
Judiciary

Foreign Policy & Diplomacy

War Science

Slide : 16

Politics

Slide : 17

Duties of King
In the happiness of Kings subjects lies his happiness, in
their welfare, his welfare. Whatever pleases him
personally, he shall consider as good, but whatever
makes his subjects happy, he shall consider good.
King: Not only responsible for safety & security
of subjects but for
Yogakshema
which also includes Welfare, Well being, Prosperity and
Happiness of the subjects
Slide : 18

Duties of King
We talk of Welfare State as a concept
DemocracyBy/for/of the People by Abraham Lincoln.
But it dates back to 350 BC
Kautilya has advocated that,
If required by subjects, King should enter into Treaty/
Truce with even natural enemy for well being of
subjects
e.g.

Shivaji entering into Truce with Mughals

India trying miserably to patch up with Pak

State formed for Economic Governance & People Welfare

as end, Political Governance only a mean.
Slide : 19

King Education & Succession

Curriculum for Kings Study
Philosophy
Political Science
Vedas
Economic Science
Military Science
Historically institution of King -> Dynastic
Succession plan of King Defined
Eldest Deserving & Worthy Son or
Adopted Son or
In case only Unmarried daughter, Adopted Son can succeed
King only if the daughter commits not to get married
Slide : 20

Office of King

Ministers
Pre-requisites for being Minister given
Only Eligible person to apply for the post
King to conduct Interview
Appointment as Minister
Removal of Minister by the King

Similar to American (better) way of forming Ministry

instead of British & Indian way
Underlying principle being,
There is stability if rulers are responsible, responsive,
accountable, removable, recallable,
otherwise, there is instability.
Slide : 21

Authorities at helm Servants of State

King
Ministers
Executive officer Amatya
Chief of Army
Chief of Intelligence Agency

Every High office including King considered as Servant of

State & hence given Salary
Salary at High Offices fixed at

~ 48K silver coins p.a.

High Salary - To keep away from Corruption

e.g. Judges Salary in British Era > Current Judges Salary
When liquidity is low, Payment of Salary in kind.
Slide : 22

Economics

Slide : 23

Economic Philosophy
Wealth & well being of the subjects can be most
advanced by a fair & efficient system of taxation, one
which will supply the King with tax revenue but will not
stifle economic growth.
Cannons of Taxation:
Taxing power is limited
Taxation should not be felt to be heavy or exclusive
Tax increases should be gradual (i.e. based on ability
to pay)

Slide : 24

Economic Philosophy
Principles of Ideal Tax System:
Convenient to pay
Easy to Calculate
Inexpensive to administer
Fair (Equitable) in its burden / based on ability to pay
Not inhibit economic growth and development
e.g. Just as fruits are gathered from garden after it
becomes ripe, revenue should be collected after it
becomes ripe. Collector of revenue or fruits when
unripe, shall never be carried on, lest their source
may be injured, causing immense trouble.

Status of Collector of Revenue = Chief of Army

Slide : 25

Nature of Taxes
Indirect Taxes
On Manufacturing on lines of Excise
Import & Export Duties on lines of Customs
Direct Taxes
Individual Income Tax & on Guilds of Artisans (Corp Tax)
Wealth Tax
Profession Tax
Others
Land Revenue
Others Toll, fines & Penalties
Slide : 26

Sources of Income
Primary Sector

Agriculture

Cattle Feeding
Secondary Sector

Treasury / Govt. Service

Army
Service Sector
Trade & Commerce

Slide : 27

Agriculture
Utilisation of Land
Land Private Property allowed

No Mans Land States Land

State to give it on lease on payment of Taxes
Leased Land- If not tilled, Land taken back
Provision of seeds, cattle & cash by State for farming on
State Land

Slide : 28

Agriculture
Wages for Labourers for Agriculture, Gardening etc
1 Silver Coin per month + food for labourer +
family
Or
1/10 of Crop or any other output + No food

Slide : 29

Agriculture
Revenue for State from Agriculture
Land Revenue
Produce of State Land
1/6 of produce of private land (16.67%)
Farmer allowed to sow seeds of his choice but in
emergency, state can direct sowing of required
seeds

Slide : 30

Agriculture
Irrigation of Land States responsibility
Co-operative work for Water Tanks promoted
Water Tank, if not used, confiscated
Water Tax
20% to 33.33% of agricultural produce
Total Tax = Ranging between 36.67% to 50% of output
Exemptions from Water Tax for:
Applicable Water Tax
New Water Tank
- 0% for 5 years
Renovated Water Tank
- 0% for 4 years
Overgrown with Vegetation - 0% for 3 years
Slide : 31

Animal Husbandry
Leasing of Pastures to Herdsmen
State to lease pastures for Herdsmen
Census of Cattle based on
- Type of Cattle
- Age of Cattle
- Use of Cattle
Male for Agriculture, Transport
Female for Milk, Food like Butter, Ghee
Hides (only of Old Cattles)For Leather Goods
Further detailing - Quantum of Fodder required
- Timing of milking cows, buffaloes etc.
- Quantum of milk depending on cattle's Age
Revenue to State per Cattle defined
Slide : 32

Jungles
Jungles: Dravya-vana (Jungle with Minerals)
Hasti-vana (Jungle with Elephants)
Ownership of all Jungles - With State
Dravya-vana Iron, Copper, Lead
Factories for production of Metal-ware
Utensils
Weapons State Monopoly
Wooden-ware
For storing food
Building Material
Slide : 33

Mining
Department for Mines responsible for Mining
All mines
- State Property
Other mines

- Governed by

- Gold & Silver - Inspector of Gold & Silver

- Others
- Inspector of Metallurgy
Function

- Development of new mines

- Maintenance of old mines
- Quality Control & Supervision

Salt mines
- Leased out (Private Sector
allowed in Non Core Sectors)
Slide : 34

Trade & Commerce

Types of Sale

- Local & Imported

Prices

- Cost plus pricing

Costing

- Done by State based on information given

Profit Margin defined - 5% on Local &

- 10% on Imported
Tax Structure

- Local 4% to 16%
- Imports 20% of Profit

Currently, Differential Tax on Domestic & Foreign Companies

Slide : 35

Trade & Commerce

Authority

- Superintendent of Trade

Since revenue mostly in terms of Agri. produce

- Sale by State to Private Traders
- Sale thru Govt. Servants (like PDS) @ 10% Comm.
Weights & Measurement Act in place
Contingency like
- Authority to intervene &
flood, draught,
control prices & supplies
demand/supply mismatch
Fines & Penalties - 1000 Silver Coins for higher than
defined profit
Slide : 36

Exports & Imports

Importance of Import = Export
Solicited Imports for
Domestically not available goods
Cheaper & Better Utilisation of Resources of both states
Advocated 2 way trade & not just Export
Heavy taxes on import of luxury items & lower on common
consumption ( ranging from 4% to 20%)
Duties meant for revenue & not as trade barrier
Urged Kings to form trade missions to promote EXIM
Entry permits for imports, documentation & consequence
management
Passport & OGL system prevailed
Price Parity between Local & Imports maintained
Slide : 37

Coins

Slide : 38

Other Occupations
Mfg of textiles

- Women allowed to work

Mfg of Chariots - State Monopoly

Shudras

- Allowed to work in any profession

Artisans
- Can work as independent artisan
- Can form a guild/ association
Armed Forces - Open for all varnas
Slide : 39

Other Economics Points

Guarantees by State- Given to party outside state
on behalf of artisans within State
Delay in delivery against Guarantees - Penalised
Rules set for loans, mortgage, interest & repayment
A debt should be paid off till the last penny. An
enemy should be destroyed without a trace.
Tough Consequence Management put in place

Slide : 40

Public Expenditure
Types of Public Expenditure
Daily Expenditure
Capital Expenditure
Importance of current capital expenditure stressed
since else revenue to suffer in future
Infrastructure Development
Dams
Canals
Forts
Moats

Slide : 41

Labour Theory of Value

Wages based on
Time Spent
Output produced
Skill necessary to perform the task (Mark to Market)
Labour Policy
Wages can be paid either at end/ middle of cultivation/ Mfg.
Wages not contingent upon sale of goods
Prod. not to suffer due to irresponsible acts of workmen
Guilds of artisans/ (Trade Unions)
Guilds of artisans can be formed by workmen
Board of Overseers appointed to review functioning of
guilds w.r.t. wages and working conditions
Slide : 42

Budgets & Accounts

Office of Budgeting & Accounts responsible for
financials
Income Heads
7
Expenditure Heads
15
(like Schedule VI of Companies Act)

Slide : 43

Budgets & Accounts

Targets for revenue increase & expense reduction

(like Managing Margin Project at FES)

Restriction of Salary Cost 25% of Revenue only

(like 6% of Net Sales for M&M)

In Current Scenario,
Govt. needs Fiscal Responsibility & Budget
Management Act to control Deficit

Pay Commission Rewards make Treasury empty

Slide : 44

Administration

Slide : 45

Crime, Fraud & Consequence Mgt.

Kautilya being a philosopher himself, knew fraud & crime
are one of the human tendencies. Hence,

40 ways of embezzlement by officers in authority

explained
Clear Internal Controls/ Hierarchy of command in place
Transfer policy in place to prevent frauds
More than 1 officer (at lower levels) to avoid frauds
Award for discovering fraud 1/6th of amount involved
(Whistle Blower Policy)
Secret Agents to track such officers
Penalty up to death or death with torture

Slide : 46

Crime, Fraud & Consequence Mgt.

e.g.

Traitorous person allowed to be killed by Secret Services

including by means like sent on war mission with weak
troops

If more than one traitorous person, secret services allowed

to make them fight

Slide : 47

Education
Universities like Takshshila, Nalanda operated during the
same time for education in
Agriculture
Animal Husbandry
Military
Commercial &
Religion

Slide : 48

Judiciary

Slide : 49

Judicial System
4 Tier Judicial System
Judges
King
Judge : with jurisdiction of 800 Villages
Judge : with jurisdiction of 400 Villages
Judge : with jurisdiction of 10 Villages
Rules explicitly framed for Time to file reply to complaint by defendant,
Evidence to be produced etc.
Slide : 50

Judicial System Illustrations

e.g. of Progressive Judicial System

Normally complaint will be taken up for hearing by

Courts but in case of injustice to temples, brahmins,
women, minor, aged person, sick person or orphan,
court can suo moto take up the case

Person wanting to become a monk needs to take

permission from all 3 judges

Woman with husband away from her for long time is

allowed to remarry with consent from all 3 judges
Slide : 51

Judicial System

Full Penal Code & Police Manual under various

circumstances explained incl. 3rd degree for
torturing criminals

Treatment in case of Police Excesses

Slide : 52

Kautilyas Arthashastra
does not only mean
Economics
but

Art & Science of

Managing a State
Slide : 53

Vision of Kautilyas Knowledge 2450

years ago needs to be acknowledged
given the depth & its even current
relevance

Slide : 54

Thank You

Slide : 55