Kautilya’s Arthasastra (300 B.C.): Economic Ideas
Ratan Lal Basu
Copyright 2011 Ratan Lal Basu
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Contents
Study of this book would give the reader a complete grasp over the economic ideas delineated in the Arthasastra composed around 300 B.C. in India by Kautilya, a great Brahmin scholar and the Prime Minister of the Maurya king.
To enable free reading the English translations of the supporting excerpts from the original text has been relegated to the end of the book under 'notes'. The interested reader may digress to the notes at anytime he likes to get the ideas expressed in this book substantiated by the text. Although American spelling has been used throughout the main book, the British spelling in the quotations from the text (under notes) has been kept intact. However, some diacritical marks (in the English rendering of Kangle) which are likely to corrupt the file has been avoided.
Kautilya’s Arthasastra is a famous treatise of ancient India. It was composed around 300 B.C. The author, Kautilya (also known as Chanakya and Vishnugupta) was a great Brahmin scholar and a teacher of statecraft, which, in those days embraced economics, politics, war science, espionage and various aspects of religious and social life. Artha in the narrow sense means money but in the wider sense it means all material means to meet human requirements and sastra means the holy book. The basic purpose of the book to specify guidelines for unifying the innumerable states in the Indian subcontinent into a strong and large monarchic state capable of repulsing foreign invasion and ensuring free flow of goods and services throughout the subcontinent. This became necessary because of rapid expansion of trade. Multiple sates with multiple laws and restrictions on entry had created a serious hindrance on the path of free flow of goods and services which became essential with rapid expansion of trade and commerce. Moreover invasion of Alexander the Great proved that smaller states were most vulnerable to foreign invasion.
The process of unification of the smaller state, existing in Hindustan from time immemorial had already started since the reign of Ajatasatru (660 B.C.) who had conquered 36 smaller states to form a vast Magadha state. The Nanda dynasty further increased the size of the state by conquering new smaller states. Kautilya wanted to accelerate the process further and his mission came to fruition as, on the basis his guidelines and under his shrewd stewardship as the Prime Minister of the Maurya Emperor, his disciple, the king Chandragupta Maurya was capable of unifying Hindustan into a vast state embracing the geographical areas of most of present India, Pakistan, Bangladesh and parts of Afghanistan. He could also ensure internal law and order, protection against foreign invasion and economic prosperity following the guidelines of Kautilya and his Arthasastra.
The magnum opus was mentioned and partially quoted in various available ancient Indian texts; but the manuscript of the original text was not available to the scholars till 1909. The manuscript was discovered by Shamasastry, the librarian of Oriental Manuscripts Library of Mysore from the house of a native Brahmin scholar in 1902 and the edited full text was published by him in 1909 and later on the text was translated in English by him and other scholars.
The treatise deals exhaustively with statecraft, economics, espionage, administration, war science, ecology and various other aspects pertaining to human living. The entire text is divided into fifteen books, each containing several chapters. Although there are occasional insertions of prose, the treatise is written mainly in slokas (Sanskrit verse consisting of two lines). In our quotations under 'notes', the symbol I/1/1 means book-I, chapter-1, sloka-1.
In this book we are going to take up some economic and related issues dwelt upon in the great treatise. The topics to be taken up for discussion are listed in the content below: Environment and Ecology, Empowerment of women, Price policy, Agriculture & land use, Craft industries, Role of the state sector, Taxation and fiscal policy and Division of labor.
It is a matter of surprise that more than two thousand years ago, Kautilya had touched upon environmental issues of which human society has become aware only since the mid-twentieth century. According to him the sources of hazards pertaining to environment and ecology are human indiscretion and natural calamities. He prescribed preventive and remedial measures for both in his book.
Man-made hazards
Kautilya attaches utmost importance to the preservation of forests and other natural resources. He prescribes that appropriate plants should be grown to protect dry lands and pasturelands should be properly protected. Kautilya entrusts the task of protecting forests and other natural resources with the king (through different state officials). The king should protect different types of forests, water reservoirs and mines by enacting appropriate laws and enforcing them with the assistance of honest and efficient officials.[1]
Houses and other dwelling places, roads, cremation grounds etc. should be properly constructed preserving environment. Every house should have proper arrangements for controlling fire. Any violation of the rules pertaining to these matters would make one liable to punishment.[2]
Every house should be constructed strictly on the basis of the rules (preserving environment) prescribed by the authorities. There should be proper arrangements in each house for sewage and proper disposal of wastes. The violators would be fined according to the gravity of the offence.[3]
In the above specifications Kautilya takes into consideration all aspects necessary for perfect harmony and eco-friendly milieu in the dwelling places of the citizens.
Kautilya prescribes various fines and other punitive measures for polluting the environment by throwing dirt on the roads and highways or voiding urine and faeces at public places.[4]
But Kautilya was wise enough to realize that sometimes people are compelled to commit the above mischief due to illness or similar reasons. In that case the miscreant is to be exempted from fines.[5]
Throwing carcasses or dead bodies at public places in the city are to be punishable with fines.[6]
The dead bodies are to be cremated at cremation grounds only. Otherwise the offender will have to pay fines.[7]
Kautilya also prescribes that every one should be careful about preserving common property and bio-diversity. Otherwise he would be fined.[8]
No one should do anything to have harmful external effects on cultivation, irrigation system and properties of other persons. Violators of this rule would be punished with fines. In case of setting fire to properties of others or common property, or bursting a dam containing water the punishment is death-sentence.[9]
Natural hazards
Damage to environment may be caused also by natural hazards. All of them cannot be prevented by human material endeavors. But we may prevent some of them by our knowledge of science and with coherent efforts. Kautilya’s prescriptions for disaster management are worth noting, particularly the anticipation of disasters and prior preparation for preventing them as far as possible. First he classifies the natural calamities into eight categories, viz. fire, floods, disease, famine, rats, wild animals, serpents and evil spirits. The last one, however, has no realistic connotation but in those days, and even today considering the beliefs of common people, it has much significance. From a thorough study of the treatise, it appears that Kautilya himself had little faith in these superstitious practices, but to respect the faiths and beliefs the masses in those days he had mentioned these in the text. Kautilya emphasizes that the king should take appropriate measures to minimize the harmful impacts of these calamities.[10]
Some of the important measures as prescribed by Kautilya to prevent the three major natural calamities are discussed below.
Fire hazards
The responsibility, of controlling hazards from fire and devising rules for the citizens so as to minimize hazards from fire, lies with the City Superintendent.[11]
Remedies against fire in residential areas and punitive measures against violators of fire-prevention rules are prescribed in different slokas. In summer all citizens should take steps against the outbreak of fire. Fire cannot be kindled inside the houses (most probably built with hay and other inflammable materials) during the midday when the possibility of spreading of fire is very high. In case it is extremely urgent, citizens should cook outside the house so that catching fire of the house is minimized. Various indigenous devices to extinguish fire should be kept in every house. Violation of these rules would be punished with fines, the amount depending on the gravity of the offence.[12]
The City Superintendents are to take preventive measures against fire by compelling people to remove inflammable matters from their houses and he should also take initiative in setting up fire extinguishing devices in various public places.[13]
Flood hazards
Kautilya prescribes various measures for prevention of hazards from flood-situations. In the rainy season, villages situated near water should move away at highlands above the level of the floods and they should keep a collection of wooden planks, bamboos and boats. Kautilya also emphasizes on mass-participation in rescue works for the flood affected citizens. This is to be done both by moral suasion and legal sanctions.[14]
Famine hazards
The role of the state in famine management, as prescribed by Kautilya, is noteworthy. The ruler should have prior preparation for anticipated famines so that he is not caught napping. When the disaster actually occurs, he should take prompt measures so as to minimize the harmful effects on the masses. The most interesting aspect in these prescriptions is that the ruler should relinquish if he fails to handle the famine situation. Help of friendly foreign governments may also be sought if it is not possible to manage disaster by the efforts of the government of the affected country alone.[15]
In fact ecological and environmental awareness of Kautilya can be found in almost all the chapters. It is clear from the above discussion that Kautilya was much concerned about matters pertaining to the preservation of environment and ecology. To this end he prescribed various rules and also the punitive measures for violation of such rules. In this regard Kautilya’s approach was holistic as he considered preservation of environment and ecology as an integral part of human living.
Introduction
One of the most important issues for which ancient Indian literature has much relevance today is women’s rights and empowerment. Nowadays there is much talk about this issue. Even an International Women’s Year and Decade were observed. In India since independence, various show-biz measures for empowerment of women have been adopted, e.g., reservation for women in various jobs, legislative bodies etc. All these would come to naught unless measures are adopted for financial security of women, and sexual security of women is ensured by stringent punishments for sexual crime by men against women. In fact all talks of equality and rights of women, without any financial security, strictly enforceable property rights, sexual security and norms preserving dignity of women, are simply empty talks. In this article we are going to take up the case of property rights and financial security of women in the Arthasastra of Kautilya.
Financial security of women
In the Arthasastra of Kautilya, as in many other ancient Indian texts, the basis of financial security to married women was ‘stridhana’ (woman’s property). It consisted of landed property, jewelry, and money sufficient for maintenance of the married woman and her children. The funds were to be provided right at the time of wedding by the husband, the relatives of the husband and that of the woman who is to be married. The amount of the fund depended on the financial capabilities of the donors involved and the existing social custom; but in any case, it should at least be sufficient to cover the subsistence of the woman and her children in case her husband dies, remarries or abandons her for any reason in which the woman has no fault on her part. Maintenance of ‘stridhana’ was a legal compulsion and violation was subject to punishment. The state was to enforce the observance of the rules pertaining to this financial arrangement.[1]
The woman could use the fund (when the husband was still alive and living with her) under the following situations (and the husband was also permitted to use the fund under certain situations). The fund could be used for the maintenance of her sons and daughters in the absence of the husband, to ward of various hazards, or for religious purposes. The couple could jointly spend from the fund after the birth of a child to cover the expenses for relevant rituals and festivities.[2]
The husband could, however, use the fund in the above cases only when the marriage had been a pious[3] one.[4]
Property rights of a widow
Rules related to the right over women's property of a widow the following according to the Arthasastra.
If a widow does not remarry, she would enjoy ‘woman’s property’ until her dying day.[5]
After remarriage the widow generally forfeits her rights to woman’s property earned in the earlier marriage. However, a widow without sons may use this property for religious purposes alone.[6]
A widow with sons always forfeits woman’s property (from earlier marriage) after remarriage. She can use this property only for the maintenance and benefit of the sons.[7]
If a widow, without children, remarries in order to have children and a family, she may be permitted to enjoy woman’s property if remarriage is done according to the likes of the earlier father-in-law’s family.[8]
The wife can abandon the husband and still enjoy woman’s property if the husband becomes degraded or has settled in a foreign land or become outcast or even impotent.[9]
Remarriage in case of short absence of husband
Kautilya clearly specifies the period for which a woman is to wait (to be permitted to remarry if she likes to do so) in case of short absence of husband under various circumstances. The case arises when the husband goes away from the wife with the promise to return after a short period. The wives of a Sudra, a Vaisya, a Ksatriya and a Brahmin without a child shall wait for a period of one year and with child for two years if they are not provided for by the husband for the period ob his absence. They would wait for double the period in each case if they are provided for. In case they are not provided for. the trustees of women's property at first and later on the kinsmen would maintain them till they are remarried.[10]
Remarriage in case of long absence of husband
The husband may have to go away for business or other purposes requiring long absence. Kautilya also specifies the period for which a woman is to wait (to be permitted to remarry if she likes to do so) in case of long absence of husband. If the husband does not return after the stipulated time period, the wife may remarry after waiting for seven more menstrual periods if she has no child and for one year, if she has child.[11]
Conditions for remarriage if the husband does not return in time
If the husband does not return after the stipulated period and the woman is willing to marry, she can marry only certain specified relations of the husband. Otherwise the marriage would not be recognized by law and considered as adultery and the woman would lose right over woman's property.[12]
Inheritance of woman’s property
After the death of a woman her woman’s property would be inherited by her sons and daughters (whether the husband is still alive or dead). In the absence of children, the husband, if alive, would receive a part of it and the other parts would be shared by the respective contributors.[13]
Financial obligations of men to the dependants
According to Kautilya’s Arthasastra, it would be obligatory for a man to provide for the upkeep of his wife and children as well as parents, minor brothers, and unmarried and widowed sisters. In case he fails to discharge duties in this regard, he will be fined. He is not obliged to do these duties if anyone mentioned above (except mother), becomes an outcaste. It appears that he is to maintain his mother even if she becomes an outcaste.[14]
If a person desires to renounce family life to become an ascetic can do so only after he makes adequate provisions for the wife and children. Otherwise he would be punished with fines. And nobody should be permitted to induce a woman to renounce family life.[15]
Introduction
A close study of the ancient Indian texts, especially the Arthasastra of Kautilya reveals, to the surprise of the modern scholars, who believe that the concept of demand and supply was generated in the West during the 18th century, that due regard was paid to demand and supply in price determination in this ancient text. The state took an active role in price determination, but state intervention in this regard had never been contrary to the market forces. Prices were to be ultimately determined on the basis of cost of production on the one hand and intensity of demand on the other. But ‘just price’, determined in this manner, was to be approved and implemented by the state. Duty of the state in this regard was not to fix prices arbitrarily, disregarding market forces, but to see to it that traders and producers could not manipulate prices to make exorbitant profits, could not cheat the buyers or could not create crisis and instability by taking advantage of shortages. Ancient authors, particularly Kautilya, were well aware of the psychology of the businessmen who, out of greed, would always distort free play of the market mechanism and charge exorbitant prices, if left alone. So the state should either determine the prices itself or approve the prices announced by the traders or producers – both on the basis of the concept of “just price” and paying due regard to the forces of demand and supply.
According to Arthasastra principles, in case of temporary discrepancy (excess demand or excess supply), prices cannot be permitted to increase or fall, but are to be. fixed at a given level till the discrepancy passes off. In case the discrepancy persists, the state should not attempted to keep prices rigid. In this situation, prices are to be increased (in the case of excess demand) or reduced (in case of excess supply) step by step and by ‘trial-and-error’ process so as to arrive at a new equilibrium restoring balance between demand and supply and avoiding hardships to buyers (sellers) with a rapid upward (downward) swing of the price level. But in this regard, private persons are never to be given a free hand. Prices are to be readjusted either directly by the state, or on the basis of approval by the state of the revised prices announced by the sellers. Now we examine the specific measures in this regard in the Arthasastra of Kautilya. First let us explain the concept of just price as delineated in this text.
Concept of just price
The specific methods to fix and alter prices and the measures to implement them have been delineated in detail in the Arthasastra of Kautilya. According to this text, the superintendent of commerce is to be entrusted with the task of enforcing the price policy. The prices of different commodities is to be fixed by him. He, however, cannot fix prices arbitrarily. In fact, a uniform rule should be followed throughout the country to determine the ‘just price’ of each commodity.[1]
Just Price may be defined as:
Just Price = Average cost of production + tolls and taxes + transport and associated costs + profit margin.
Where,
Production cost = cost of raw materials + wages + interest.
In the Arthasastra this concept of ‘just price’ springs directly from the ancient Indian world outlook of balance embedded in the text, according to which prices are to be so determined as to strike a balance between the interests of the buyers and that of the sellers. To fulfill this objective, the following guidelines are recommended in the Arthasastra.
Goods are to be sold at places specified by the state and prices should be announced (for approval by the state and knowledge of the buyers) by the businessmen. In no case would the goods be permitted to be sold to the final buyers at the place of their origin.[2]
The significance of the above rule appears to be that all commodities should add some value trough transport and trade before passing on to the final buyers. There may, however, be other explanations as the rule stated in the text is brief without any detailed explanation.
All goods for sale should bear official ‘seal’ and properly weighed, measured and numbered. Violation of this rule is subject to punishment. Selling goods without official seal, forging or distortion of the seal would be punished with fines, amount depending on the degree of offence.[3]
To pay less duty than legally due, the trader may under-state the quantity or price of his good. In such a case the excess good and value would be confiscated by the state. Or he would be heavily fined. Similar punishment would be effected on the trader if he tries to mislead the officials by showing a sample of goods of lower quality and lower value than his actual assortment of goods.[4]
Enhancement of price by bidding is discouraged. by confiscating by the state the excess profit earned through enhancement of price by bidding or by imposing heavy fines on the miscreant.[5]
The government officials, who take underhand means to guard the guilty merchants (accepting bribe etc.), are to be punished with fines. To enforce the above rules Kautilya prescribed for a strong spying network to detect all attempts by traders to deceive the government and also to make the traders and officials aware of omnipotence of the king.[6]
Components of just price
The Arthasastra of Kautilya also provides detailed guidelines for determination of various components of price as discussed below.
Wages
Guidelines for wage determination are scattered in Book-III, Chapters-13, 14; Book-IV, Chapter-2 and Book-V, Chapter-3 of the Arthasastra. The basic principles of wage-determination, in the private sector as prescribed in these chapters, are that wages should be so determined (by contract between the employer and the employee, which once settled, would be binding on both the parties) that the employer is not cheated and at the same time the employee is not exploited. Violation of contract by either party would be subjected to punishment. Wages are to be determined on the basis of existing custom where they are available.[7]
For cases, where wages are not negotiated or determined by some existing local custom, Kautilya prescribes some rules for determination wages.[8]
Disputes regarding work between the employer and the employee are to be settled only on the testimony of the witnesses. In the absence of witnesses the judge would inquire the place of work to arrive at a judgment pertaining to settlement of the dispute.[9]
Non-payment of wages by the employers is punishable with fines.[10]
Wages in the state-sector are to be determined according to the quality of the work. One important aspect of state sector employment of laborers is the provision of incentives through gifts etc. to the efficient laborers.[11]
A lengthy list of wages of various state-sector employees is described in Book-V, Chapter-3 of the Arthaśāstra.[12]
Interest
Interest rates are to be rigidly fixed by the state (considering the degree of risk involved) so as to prevent usury and exploitation of the weak borrowers. Annual interest rates for various categories of borrowers are to be:[13]
For non-commercial loans = 15%
For less risky commercial loans = 60%
For risky commercial loans = 120% and
For foreign trade = 240%.
If we closely look at the above chart, it is found that the rate of interest on loans for foreign trade (240% per annum) was much higher than that on loans for internal trade. This is quite contrary to the present day state policy pursued in India where, considering the chronic balance of payments crisis, it is desirable that interest on loans for foreign trade, esp. for exports, should be lower than that on loans for internal trade. The most feasible explanation for highest rate of interest for foreign trade, as prescribed by Kautilya , lies in the risk factor in different kind of loans. In those days transport and communication systems were undeveloped. So, foreign trade was much more hazardous than internal trade. In those days, modern commercial banks and lending institutions were non-existent and most of the private money-lenders were not much resourceful. So, risk factor used to play a dominant role in determining the rate of interest. If we look closely at the chart for interest rates above, it is found that even in case of internal trade, interest rate increases according to the degree of hazards involved in trading. Interest rate on loans for hazardous internal trade (120% per annum) is double of that on loans for hazard-free internal trade (60% per annum). By the same logic one may conclude that interest rate on loans for foreign trade, which involved much more hazards (than internal trade), would be higher in general as compared to interest rates on loans for internal trade.
Profit
Profit rate is also to be rigidly fixed by the state so as to avoid uncertainty and to prevent traders from profiteering. There are also specific guidelines for ascertaining transport, storage and other associated expenses. Rigid and simplified rules are to be observed for determining tolls and taxes on all the commodities produced and traded. Higher profit rate is permissible for foreign trade. The net profit for indigenous goods would be 5% and for foreign goods, 10%. Any trader, trying to earn a higher profit than prescribed by the state, would be punished.[14]
Implementation
Price policy in the Arthasastra was inexorably associated with the methods of implementation, which consisted of: (a) administrative measures; (b) accounting; and (c) buffer stock.
Administrative measures
As regards implementation of price policy, a crucial role is to be played by the superintendent of the toll house. Simultaneously with collection of tolls, he is entrusted with the task of implementing prices fixed by the superintendent of commerce. If the concerned officials shirks their duties or adopts corrupt practices in connivance with the traders, they are to be punished.
The espionage network is to play an important role in the implementation of price policy. False statements regarding costs and prices, adulteration, smuggling, overvaluation, under-valuation, etc. by the merchants, cannot be detected without the help of the spies.
Government officials, entrusted with the task of implementing price policy, would not resort to corrupt practices as they would always be alert that spies in different guises are looming at every corner. Anybody, whatever is his apparent identity, may be a disguised spy and so, the fear of being detected and punished would automatically discourage merchants and government officials to resort to underhand practices by violating rules and procedures of price control laid down by the state.[15]
As regards the ubiquitous nature of the espionage network of Kautilya, a modern author opines:
“There were spies in every traders’ caravan.” (Kosambi 1981, P.147)
The espionage network is likely to facilitate perfect implementation of price policy by ensuring: (i) dissemination of correct information relevant to costs and prices, and (ii) prevention of corruption. (Mukherjee, 1976)
Accounting
Detailed and accurate methods of accounting and auditing, as delineated in Arthasastra of Kautilya, reminds one of the accounting methods of a highly developed capitalist economy. Salaries of all the state employees should be paid promptly, all state orders should be in writing, power and duties of all the state departments should be clearly defined, separate registers should be maintained for every item and accounts should be regularly entered in prescribed registers.[16]
As regards the functions of the officers of different departments pertaining to auditing of the records of the respective departments, Kautilya prescribes detailed guidelines. All the officials related to these tasks are to be punctual and the should perform their duties honestly, diligently and with skill. Any dishonesty, negligence or lapses on their part would be punished with fines. In this regard Kautilya puts forward detailed guidelines resembling modern accounting practices.[17]
The account books of different departments are to be presented in full before the audit officer in time. In case of delay due to unavoidable circumstances, some concessions in this regard may be made, but only up to a specified limit.[18]
The guidelines for checking up of the accounts by the audit and accounts officer are also prescribed in detail by Kautilya.[19]
Kautilya mentions various restrictions on the accounts officer and punitive measures against him, in case he fails to discharge his assigned duties in a proper way.[20]
According to Arthasastra prescriptions the director of stores should be conversant with receipts from outside and inside, for the current year and for many years before and after the current year, so that when asked he would not falter in respect of expenditure, balance and collections for these years. The accounts and finances of the different government departments are to be inspected regularly and with accuracy.[21]
Buffer stock
In the Arthasastra much emphasis is laid on the maintenance of a buffer stocks of all commodities and replenishing them regularly so as to meet accidental shortages and thereby, to ensure smooth implementation of the price policy.[22]
In ancient India, proper measures were adopted for the development of agriculture so as to ensure supply of food for the population and raw materials for craft industries based on agriculture. There were also measures for proper land use so as to ensure continuity of fertility of the soil and highest possible productivity of land without causing any damage to ecology and environment.
It may be argued that in ancient days agriculture was the main pre-occupation of the economy of a country so it acquired utmost importance. But in modern era, industry is the driving force of an economy as it is free from the natural limitations of agriculture. Still the importance of agriculture cannot be ignored altogether in a modern economy. Even today industry is the basic source food for the people and it supplies raw materials to many industries like the textiles. In a country like India, agriculture has some special importance as majority of the population depend for their livelihoods on agriculture. It is true that we will have to depend ultimately on industry for rapid economic development of the country, but without a strong agricultural base, industrial development in a country like India may come up against various bottlenecks. So along with industry, due importance should be attached to the agriculture and allied activities also.
Now let us see how these matters are handled in the Arthasastra of Kautilya.
In Arthasastra of Kautilya, we get detail guidelines as regards agricultural development and proper land use. Kautilya asserts that prosperity of the country depends on agricultural development. He emphasizes the roles of agriculture and animal husbandry and elaborates on the merits of activities associated with these two sectors. These sectors are the major sources of food and many other essential articles for human living. He also opines that the strength of a country vis-à-vis its enemy country depends on the soundness of these activities.[1]
According to Kautilya agriculture should be a profession of the Vaisyas (the trading class). This was the common practice ever since the Vedic period. Under certain circumstances, however, he goes against the tradition and prescribes agricultural activities by Sudras, especially in newly established villages.[2]
The measures to be taken by the king for agricultural development and proper land-use as prescribed by Kautilya consist of rules for settlement in the countryside (old or new), selection of appropriate persons who are to be entrusted with the task of land development, how land is to be distributed for various uses like agriculture, pastures, factories, forests, water reservoirs and irrigation networks, habitations etc. Kautilya also prescribes measures for encouraging private persons efficient in activities pertaining to agriculture and proper land use, and punitive measures for those who violate rules in this regard or create obstruction to these activities.
It is an important question how to develop land in the hitherto uncultivated areas. It is quite natural that without government initiative and encouragement, people on their own would not be interested in settling in these areas. So, Kautilya prescribes state sponsored schemes for developing land for cultivation in these areas.
One way of development of hitherto uncultivated land was to provide tax concessions to those who were willing to cultivate the uncultivated land.[3]
If any person left leaves land given to him uncultivated, the state should promptly seize it and hand it over to some diligent cultivator. Also these persons are to pay compensations for keeping land idle. This is a strong measure to discourage misuse of land resources of the country. The energetic cultivators should also be encouraged by the state through grants and loans.[4]
Kautilya also associates various allied activities with agricultural pursuits and delineates in detail the role of the state in encouraging these activities. Along with agricultural activities, the state should sponsor and encourage activities associated with development of general forests, forests suitable for living of elephant and other wild animals, pasture lands, and also marketing, and transportation and communications facilities. In fact, development of all these fields, is interrelated and interdependent. So, for proper development of each of these areas, a holistic approach is necessary and the Arthasastra delineates such a holistic approach. Kautilya was wise enough to realize that a single activity cannot properly flourish in isolation.[5]
Kautilya prescribes measures for irrigation facilities which are essential for development of agriculture as like today, in those days, too, rainfall was not regular and equally distributed over all regions of the country. Agricultural pursuits in the dry and drought-prone areas was dependent solely on irrigation water In other areas too, irrigation was required during dry seasons, and years of scanty rainfall because of climatic irregularities. For these reasons Kautilya suggests construction of water reservoirs, wells, tanks, fountains etc. Trees should be planted for soil and water conservation, esp. in dry areas. In this regard, the state should also seek people’s participation. People undertaking these activities should be encouraged by the state in various ways.[6]
How various crops are to be cultivated are described in detail in II/24. Here Kautilya describes how different crops are to be planted according to the specificity of soil and weather conditions. Variations of the same crops (depending on specific conditions) are also mentioned. In Arthasastra Kautilya mentions the various grades of the staple crops like rice and under which conditions each variety is to be cultivated On the whole, agriculture, according to Kautilya, is to be eco-friendly and sustainable; and there should be a proper balance among different kinds of uses of scarce land. All varieties of seeds are to be collected in proper time and preserved properly.[7]
Crops are to be sown according to appropriateness of soils, climatic conditions etc. He specifies clearly which variety of crop is to be sown under a specific soil water supply and climatic condition. Before sowing the seeds, the land is to be appropriately ploughed. Then the ploughed land should be adequately irrigated according to the type of the crop. Also types of crops to be sown may be selected on the basis of availability of water and climatic and soil conditions.[8]
Kautilya opines that if wind and sunshine are properly distributed allowing the fertilizer to become appropriate for the land, the growth of crops is certain. He also describes the order of crops to be grown on a particular plot of land so as to maintain a balance in fertility of soil and ecology and replenishment of fertility after each cultivation.[9]
Kautilya also describes how seeds are to be prepared before sowing, and how crop saplings are to be properly maintained. He also prescribes some natural devices to drive out serpents , insects and pests from the crop field.[10]
In course of industrialization, particularly during the era of liberalization, one of the most serious problems is the problem of increasing unemployment as modern industries are highly capital intensive. For rapid economic development of the country, modern industries with sophisticated foreign technologies are to be built up. At the same time, it is to be seen that adequate employment opportunities are generated for the job-seekers (whose number is increasing rapidly with growth of population). Formal sector led by modern industries, is incapable of handling the employment situation. So, the informal sector is to shoulder the major burden of job creation for the rising job seekers. In most of the developing countries like India, the agricultural sector has already been saturated as regards providing employment. In fact, it is burdened with the problem of surplus man-power (the so called ‘disguised unemployment’). So, it is an urgent necessity to find out a safety net for the job seekers. The handicraft industries are likely to play a major role in this regard. Looking at the case of India as a specific example, we find that the craft industries sector is burdened with various problems, most of which have remained unresolved in spite of efforts by the Government of India since the First Five Year Plan.
In ancient India, these craft industries were highly developed and efficient. So the question arises if we can learn from the ancient text as regards reviving the craft industries and make them capable of bearing the responsibility of handling the unemployment situation, especially, in backward countries like India.
The most mention-worthy thing in this regard is that job creation through the crafts automatically takes place if the crafts prosper without any subsidy or government reservation (which is an undesirable aspect of present policy regarding the crafts in India). In ancient India, this was feasible because of the high quality of products of the crafts.
Now-a-days many cheap goods are produced by the large-scale modern industries, but there are also craft products, which depend on individual skill and ingenuity and, therefore cannot be imitated by modern industries. These products are likely to command a large market only if the quality of products is ensured. But here the craft industries in India today has failed miserably. Because of the low quality of products (even cheating of the customers) the craft industries in India requires government reservation – their substandard products cannot be sold unless the government departments buy them or they gain monopoly power through government reservation. This policy of generating employment through the crafts is definitely at the cost of the consumers and, therefore this is not at all desirable. So, we are to study how the quality of products was ensured in ancient India. This was mainly ensured by the craft guilds and strict government regulations regarding quality of products of the craft industries. We are going to discuss these matters below in the light of prescriptions of Kautilya in this regard.. But before going into the prescriptions of Kautilya regarding the crafts, let us have a glimpse of the history (origin, evolution and decline) of the craft industries in India.
History
A large number of highly efficient crafts, many of which originated as early as the Vedic period, flourished in ancient India, especially since 700 B.C. M.A. Buch cites the existence of the following crafts during this period: cotton, silk and woolen textiles; perfumes; glass-works and mirrors; umbrellas; shoes and other leather goods; wood works; ivory works; mining and metallurgy (gold, silver, iron, tin, zinc, copper, lead), ornaments etc. (Buch 1979, Vol.-I, PP. 116-97)
The artisans, in each branch of craft, had acquired remarkable skill because of helpful socio-economic and political set up. (Ibid. PP.202-36)
Buch mentions the following conducive conditions for the rapid growth and prosperity of the craft industries:
(i) Autonomy and dignity of labour.
(ii) High position of labour in society.
(iii) The Indian economic system, relying more on status than on contract, was much favorable to artistic production.
(iv) Absence of inequality.
(v) Patronage of the State.
(vi) The caste system, the guild and the village community were institutions, which were in many ways favorable to the creation and conservation of true art.
(vii) The guilds used to maintain quality of products.
(viii) Village community and land tenure system led to wonderful continuity and unity of ancient Indian arts and crafts.
(ix) Genius for imitation of the artisans.
(x) Systematic technical training from childhood.
(xi) Governing influence of religious ethics.
(xii) Healthy home atmosphere.
Crafts of ancient in ancient India were highly organized under strong guilds, which had evolved since the Vedic times. Almost every important craft or occupation in a locality used to form a guild. Persons belonging to each craft used to acquire the profession on the basis of heredity, used to settle down in a well defined region and were organized in guilds under a jetthaka or pamukha. The guilds possessed both executive and judicial power and were entitled to arbitrate between its members through executive officers. Some guilds worked as banks and used to receive permanent deposits. Sometimes a number of guilds got united to form a federation presided over by a bhandagarika (Mookerji 1980, PP. 601-02)
Panikkar opines that guilds used to enjoy great economic and political power. (Panikkar 1966, P. 36)
The British rule in India, particularly since the middle of the 19th century, gave a deadly blow to the major crafts in India. The kings and the noble class, with refined tastes for high quality craft products, were degenerated and the guild system got disintegrated under the administrative reorganization of the British rulers. The newly emerging factory industries in Britain opted for a reliable and secure market for their products in India. This necessitated deliberate destruction of the craft industries like the cotton textiles, which were likely to out-compete the British industries producing the same type of products at that time. (Gadgil 1973, Ch.-3, PP. 33-36)
But in the process, only the major crafts like the cotton, woolen and silk textiles were affected adversely. However, a host of crafts, producing artistic goods, which could not be produced in modern factories, remained almost unaffected. But the plight of the artisans became precarious because of poverty, exploitation by the middlemen and moneylenders, and erosion of market for quality products (because of the degeneration of the noble class with refined tastes). Many artisans left their hereditary profession and sought employment elsewhere.
In recent years, however, there has been a sign of revival of many of the crafts depending on an expanding foreign market. This sector has also opened up possibilities of generating considerable employment opportunities.
Now let us look into the information on craft industries obtained from the Arthasastra of Kauilya, and examine if they are of any help in the process of revival of the craft industries in India and for that matter all backward countries with heavy burden of unemployment today.
There are innumerable mentions of the the state-sector craft industries in the Arthasastra of Kautilya. Most of these industries were under the supervision of specific state departments headed by a superintendent or director, e.g. the director of mines, of metals, superintendent of armory etc. The industries include mines, metals, ornaments diamonds, gems, gold and pearls, yarns, cloths, armors, furniture, umbrellas, glassworks, pottery, chariots etc. There are also specifications of factories and product processes, the types of artisans to be employed, the conditions of employment etc. for each craft.[1]
Besides these prescriptions for state sector craft products, there are mentions of thousands of commodities, produced at various places and this indicates the range and variety of craft products in those days.[2]
Thus we see that varieties of high quality craft products were produced in ancient India. The high quality of the products was the cornerstone of success for the crafts in those days. This was possible because of the existence of the guilds which maintained a strict surveillance over the quality at all stages of production beginning from the raw materials. They also helped the individual artisans to market their products. Thus employment was automatically generated without any reservation for the crafts. Kautilya was also aware that the guilds themselves may acquire monopoly power and thereby destroy competition. So, state control over the guilds and artisans was necessary in order to protect the interests of the consumer.[3]
Kautilya opines that the guilds are to play the crucial role in ensuring quality of raw materials and final products.[4]
Kautilya prescribes various regulations to control the craftsmen so that they may not deceive the buyers of their products. Specific regulatory rules are also prescribed for each class of artisans.[5]
From the above analysis we may safely come to the conclusion that emulation of Kautilya's principles is likely to play a crucial role in revival of the craft industries and ensuring the quality of their products making them capable of absorbing the vast body of unemployed and at the same time meeting the needs of the consumers, especially, in highly populated backward countries like India.
In the Arthasastra Kautilya prescribes for a vast state sector embracing all the major fields of production in the economy. According to his guidelines the state should have monopoly power over most of the natural animal-products and plant-products. It may also be presumed that the state had ownership of most of the mines producing metallic ores and controlling power over trade in these products. The state also leased out mines to private businessmen. But in this respect the best mines were to be explored by the state itself and the difficult ones to be leased out to private party. The state should have monopoly power over salt mines. But here also some salt mines were leased out to private party in exchange for rent and surcharges. The state had almost monopoly power over exploration of gold and production of ornaments and other articles by these precious metals. All measuring scales and weights were to be produced by the state.[1]
In brief, the state sector had a command over the entire economy.[2]
Kautilya gives an elaborate account of the state sector economic activities. It is seen that almost all the goods available in those days were produced in the state sector. The state also used to participate in inland and overseas trade. In certain fields, the state used to enjoy almost exclusive monopoly power. They were: mining, fisheries, transport, production of boats, ships, and vehicles, coins and salt. In these spheres, however, private persons were permitted to operate under certain conditions and under strict state control. The state had exclusive right over all forest and oceanic product.[2]
In other spheres, however, private production was permitted. Agricultural commodities were produced in both the private sector and the state sector. It appears that most of the trading (internal and foreign) activities were carried on by private traders.
Thus, a study of Arthasastra of Kautilya creates the impression that the major part of the national product was produced in the state sector.
For smooth and efficient operation of the state machinery, Kautilya divided the vast state sector activities into a large number of departments, each department entrusted to a superintendent, director or departmental head. The most important departments were:
i) Stores department, ii) Revenue administration; iii) Audit & accounts department; iv) Treasury; v) Department of mines and factories; vi) Department of gold; vii) Department of magazine; viii) Department of trade and commerce; ix) Department of forests; x) Armory; xi) Department for weights and measures; xii) Department for space and time; xiii) Customs department; xiv) Department for yarns; xv) Department of agriculture; xvi) Department for spirituous liquor; xvii) slaughter house; xviii) Department for courtesans; xix) Shipping department; xx) Department for cattle; xxi) Department for horses; xxii) Department for elephants; xxiii) Department for chariots; xxiv) Infantry; xv) Army; xxvi). Department for passports & pastureland; xxvii) Village administration; xviii) Department for secret agents; xix) City administration.
Various hypotheses have been put forward to explain the prescription of such a vast and all comprehensive state sector in Arthasastra. None of them is, however, fully satisfactory. The important ones are discussed below.
(i) The vast size of the empire necessitated vast amount of revenue. For small states, it was possible to mobilize necessary revenue by taxation alone. But for a vast state like one conceived by Kautilya, adequate finance could not be mobilized through taxation alone. So it became necessary to supplement tax revenue by profits from the state sector business and productive activities.
(ii) Private sector productive activities (particularly by the craft industries under the guilds) were not adequate to meet the requirements of the society. So it was necessary to undertake productive activities under the state.
(iii) Protection and proper use of natural resources like forests, lakes, rivers, mineral and water resources etc. compelled the state to have exhaustive monopoly over these fields.
(iv) Technological expansion in that period necessitated state intervention and direct participation by the state in productive activities.
In fact, none of these explanations is fully satisfactory. So, further research in this regard is an urgent necessity. Two observations, however, about the vast state sector in the Arthaśāstra, could be made on the basis of existing information:
(a) The concept of a vast state sector was a temporary phenomenon, specifically relevant to the age of the Arthasastra when for the first time India as a single political entity encompassing a vast geographical area emerged. We draw this conclusion because this concept is absent in the guidelines prescribed in the major texts in the later periods in ancient India.
(b) In the Arthasastra, utmost emphasis was given to the efficiency and profitability of the state sector.
The discussion of the state sector in Kautilya's Arthasastra would remain incomplete without a glimpse of the audit & accounting system by which such vast activities of the state were harmoniously carried on.
Audit & accounting
Detailed and accurate methods of accounting and auditing, as delineated in the Arthasastra of Kautilya, remind one of the accounting methods of a highly developed capitalist economy. Salaries of all the state employees should be paid promptly, all state orders should be in writing, power and duties of all the state departments should be clearly defined, separate registers should be maintained for every item and accounts should be regularly entered in prescribed registers. Kautilya also delineates rigid guidelines as regards the functions of the officers of different departments pertaining to auditing of the records of the respective departments.[3]
The account books of different departments are to be presented in full before the audit officer in time. In case of delay due to unavoidable circumstances, some concessions in this regard may be made, but up to a certain reasonable limit.[4]
He also puts forward specific guidelines of checking up the accounts by the audit and accounts officer.[5]
The accounts officer should follow the guidelines strictly and without deviation. All lapses would be punished with fines, the amount depending on the gravity of the offence.[6]
Kautilya lays down accurate and detailed guidelines for maintaining accounts by the director of stores and regarding inspection of the works of the officers of different government departments.[7]
He also prescribes in detail the accounting activities of the city-superintendent.[8]
Kautilya also prescribes various philanthropic and benevolent activities of the state. The king should consider the happiness of the subjects his own happiness and what is beneficial to the subjects his own benefit. This explains the basic attitude of the ruler towards his subjects – his basic purpose is not to gratify his personal welfare but the welfare of the subjects.[9]
In distress and calamities afflicting the people, it is duty of the king to rescue them to the best of his capacity, and he should also take prior preparation for all exigencies. People affected by war or natural calamities are to be exempted from taxation.[10]
Taxation
Tax has been the major source of revenue of the government from the very ancient times. Even today, it is the most important source of revenue of modern governments. The advantage of taxes is that the money collected from this source is not to be returned to the payer, payment of taxes (by those on whom taxes are imposed) is compulsory, and no direct benefits are to be provided to the payees in exchange for tax payments. Moreover, tax policy may be used as an important fiscal instrument for regulating the economy. Nowadays, tax system has become extremely complicated because of increasing complexity of the economic system. Tax system as delineated in the Arthasastra of Kautilya was, however, less complicated and easier to implement. And it appears from the text that most of the taxes levied by the state were indirect commodity taxes.
In Arthasastra there are detailed methods of tax collection and penalties for violation of each rule. The tax and toll collection center would be erected at gates of cities and towns and efficient officials would collect taxes and tolls from the traders after recording in detail of their whereabouts, the goods they have brought and the price & quantities of the goods entering the city (from the announcement of the traders). Any one trying to evade taxes would be heavily fined. Similar action would be taken for false information furnished to the officials by the traders. Manipulation of official stamp is equally punishable and in such a case the officials may seize the entire assortment. Certain goods like weapons, armors, coats of mail, metals, chariots, jewels, grains and cattle etc. are declared as un-exportable and carrying such goods would be liable to punishment with fines and seizure of the goods. Entry of worthless and harmful goods would be prevented by the officials. Goods for religious rituals, for marriage and other social festivities would be exempted from taxes.[1]
Besides the usual duties, the traders would have to pay in addition a road cess to the frontier officer (the rate varying from commodity to commodity) for provision of security and insurance against theft and other hazards that may cause damage or loss of the goods on the way.[2]
Tax rates for various commodities
Duty for the dealers in different kinds of spirituous liquors, not produced in the state sector are to be 5% of the value of the commodity. Prostitutes are to pay an income tax double the usual tax on income. They should also pay tax on imported instruments they use for musical or other entertainments of their customers. For commodities imported or produced in the private sector within the country, Kautilya prescribes commodity wise tax rates: the rates varying from five percent to twenty percent ad valorem. Kautilya also prescribes surcharges (5%-9%) on certain commodities. Import of foreign goods which have beneficial effects on the country are to be encouraged by tax concessions.[3]
From the above analysis it is clear that Kautilya lays emphasis on indirect taxes than on direct taxes. Most of the taxes mentioned in the text are commodity taxes.
Fiscal policy
In the Arthasastra, Kautilya emphasized strongly on the importance of a resourceful treasury for the functioning of the state. Moreover stress is laid on sound finance, measures to enhance and enrich the treasury and to generate surplus in the state budget. At the same time it is emphasized that revenue collection of the state should not harm the interests of the country and its people. Kautilya insists on a surplus budget and suggests measures to avoid deficits in the budget. This is in conformity with ancient Indian principles of sound fiscal management which is quite contrary to modern practices of deficit budgeting.[4]
In Arthasastra, Kautilya also prescribes measures of for mobilizing finance for situations of crisis (apada dharma). In such a situation caused by war, drought, natural calamities etc. the state is to eschew the normal practices of revenue collection. In such a situation, Kautilya suggests various devious and apparently unethical methods of additional resource mobilization. But he is always cautious that the hardships caused by such methods do not fall on the poor and the weaker sections. From a close study of these prescriptions, it is found that at the time of crisis, pressure for collecting additional finance (whether ethical or apparently unethical) is to be exerted on the well to do persons alone and not on the poor.[5]
Division of labor has gained much importance in the modern era. Originally it started with the social division of labor, i.e., each person adopting a separate profession. It became necessary, as with the progress of productive activities of human society, it was not possible for a person to produce all the goods and services he requires. So, he works according to his capability, and with the income thus earned he purchases from others (through the market) all requisites for his livelihood. With the emergence of factory industries, division of labor has become more intense, as in an industrial establishment each person produces only a part of the total product. In ancient India, division of labor was looked upon as a part of the harmony of the universe and something ordained by the creator. From this standpoint, division of labour was based on the caste (varna) system.
But at present the society has become more complicated and viewpoints regarding traditional castes have changed considerably. The nature of human activities, too have changed, multiplied and become more diverse and qualitatively different. Under this situation it is almost impossible to revive the traditional caste system as such. The problem has become more complicated with the increase in the degree of intercourse with people of foreign countries as a consequence of the revolutionary changes in transport and communications in recent years. So, the question arises if the caste-based division of labor has any relevance for modern days at all. Here we may briefly mention that although the ancient system as such may not be appropriate today, the essence of the ancient system is likely to be of much significance.
Kautilya defines division of labor on the basis of division of the society into four major castes, viz., Brahmin, Ksatriya, Vaisya and Sudra. Kautilya defines the functions of these four castes according to the Vedic tradition:
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