Economics of Kautilya’s Arthshastra

Dr. Umesh Pratap Singh

Associate Professor, Department of Economics, Ewing Christian College, Allahabad University, Prayagraj

Kautilya, also called Chanakya or Vishnugupta (flourished 300 bce), was a Hindu statesman, a great scholar and philosopher who wrote a classic treatise on polity called Arthāŝhastra. He was the first great political realist, a master strategist and a key advisor to Chandragupta, founder of mauryan empire (reigned c. 321–c. 297), under whose guidance Chandragupta overthrew the powerful Nanda dynasty , stopped the advance of Alexander the Great’s successor and firstly unified the Indian subcontinent. (L.N. Rangarajan, 8) But Kautilya was not the originator of the science, he himself acknowledged that his work is based on similar treaties of the past. Various quotations and references shows that before Kautilya there were different schools of thought- Brihaspati, Ushanas, Prachetasa Manu, Parasara and Ambhi; and several individual teachers like Vishalaksha and Bharadwaj, of Arthashastra. (L.N. Rangarajan,4) Artha is an all embracing word with variety of meanings.        

It is remarkable that a book such as Kautilyan Arthashastra should have been written more than 2000 years ago in northern India. The text was considered lost by colonial era scholars, until a manuscript was discovered in 1905.A copy of the Arthashastra in Sanskrit, written on palm leaves, was presented by a Tamil Brahmin from Tanjore to the newly opened Mysore Oriental Library headed by Benjamin Lewis Rice. The text was identified by the librarian Rudrapatnam Shamasastry as the Arthashastra. During 1905-1909, Shamasastry published English translations of the text in instalments, in journals Indian Antiquary and Mysore Review. While the exact date of its completion is unclear, the available evidence suggests that it was written somewhere between 321 and 286 BC (Fleet). The ‘Arthashastra’ consists of detailed analysis of different aspects of ancient Indian economy covering economics, political science, public administration, law and statecraft, intended to provide practical advice for the management of the state and thereby enhance the wealth of the nation. Nevertheless, the contribution of Kautilya to political economy has been neglected by Western scholars despite the fact that his coverage of this subject was probably the most sophisticated and broadly based one globally until Adam Smith published his Wealth of Nations in 1776.

In the context of Kautilyan Arthashastra every scholar has his own perspective. On the whole, it is difficult to avoid the conclusion that those who wanted to see democracy as a form of government in ancient India saw it in the Arthashastra, just as those who saw only autocratic monarchy also saw it there. (L.N. Rangarajan 13)  It is difficult to understand how much of the book is descriptive and how much is prescriptive and in what phrases of Arthashastra is Kautilya mentioning about the rule of Chandragupta and in what phrases that about the rule of an ideal king? Sastri warns us that Kautilya’s Arthāŝhastra is “a normative plan rather than a description of existing conditions.”(Shastri,178); Romila Thapar claims that Kautilya’s Arthāŝhastra was not a detailed description of Mauryan administration, but rather a textbook on general administration. Thapar maintains that “Kautilya was the theorist of politico-economic basis of the Mauryan state.”(Thapar, 114) Burton Stein is one the historian who wonders how the wonderful humanitarian Asoka could have emerged from the tyrannical Kautilya.(Stein,78) Fortunately we have two main sources that corroborate the descriptions in the Arthashastra-the writings of the greek ambassador Megasthenes, Indika and the inscriptions or edicts of Asoka. Many historians proudly embrace Kautilya’s Arthashastra a practical book of political realism instead of the impotent idealism of, say, Plato- that actually helped in shaping history. D.D.Kosambi notes “The Greeks make excellent reading; the Indian treatise Arthashastra worked infinitely better in practice for its own time and place.”(Roger,16-17) However, all the authorities agree, that it was mainly because of Kautilya that the Mauryan empire under Chandragupta and later under Ashoka (reigned c.265–c. 238) became a model of efficient government with strong administration and efficient fiscal management.

Kautilya emphasised the need of strong and wealthy monarchy to protect the interests of the people against the invasion of other kings. He has repeatedly mentioned that the king must keep his subjects happy and should not impose any repressive rule except during emergency as he believed that Social Justice is in the kings self interest because fair treatment of the people prevents rebellions from within and lends to eager support of the king in case of an attack from outside. Kautilya makes it quite clear that the power of the king is not unlimited and there is an implicit social contract present between the king and his subjects. The Evidences of precautions against fire, prohibition on cutting trees in public parks shows that he laid emphasis on Civic responsibility as well. But as a teacher of practical statecraft, he even advocated unethical methods in the furtherance of national interest. Kautilya did take a cynical view of humanity and his teachings are based on the principle that no one can be trusted.( L.N. Rangarajan, 25)

He is often compared by many to Italian statesman and writer Niccolò Machiavelli and by others to Aristotle and Plato. Both Machiavelli and Kautilya judged political actions by results; the ends sometimes justify the means and even supported traditionally evil manner to bring about the general good for ones’s people but he makes Machiavelli seem mild in terms of offering frank and brutal advice to king. Kautilya is alternately condemned for his ruthlessness and trickery and praised for his sound political wisdom and knowledge of human nature.

Kautilya enumerates seven prakritis or vital organs of the state- the king(svamin), the minister(amatya), the people(janapada), the fortified city(durga), the treasury(kosh), the army(danda) and the ally(mitra)- of these seven constituent elements of any state, are internal elements, only the ally is an outside element.(Arora & Goyal, 6) The most important element of the state according to Kautilya is neither the government nor the army but the treasury. Jha and Jha pointed out that “Chanakya paid supreme importance to the maintenance of a rich treasury, which favourably affected entire activities of the administration.” He paid a lot of attention to good fiscal management and the ways to develop all the sectors of the economy. He said that “Spiritual quotes and sensual pleasures depend on material well being.” He believed that every good and political life- peace, conquest, order, the correct social and class structure, Dharma and so on-depends on the state acquiring wealth and using it wisely. After declaring that material well being alone is Supreme.Kautilya continued later by saying that the king will be happy only when his subjects are happy.(Roger , 65) Although the machinery of the government designed in Kautilya’s Arthashastra does not closely resemble our modern day polity, it reflects clearly some of the principles which form a part of the science of public administration.

The great aims of human Endeavour from time immemorial have been classified in India as being- Dharma (righteousness, moral values),  Artha  (prosperity, economic values), Kama (pleasure, love, psychological values) and  Moksha (liberation, spiritual values). Of the three objectives capable of being studied and practised, dharma has always occupied the premier place and the pursuit of the three objectives dharma, artha and kama can contribute to the attainment of Moksha. Artha (literally wealth) follows Dharma, as used in Arthashastra and by Kautilya, it has a much wider significance than merely wealth and the material well being of individuals is just a part of it.

Arthāŝhastra literally translated as “science of wealth” but more often rendered as “science of politics”- discusses theories and principles of governing a state. It is a book of political realism. The text contains 15 adhikaranas or books.The first chapter of book 1 is a detailed table of contents and in oneverse, states that the text has 150 chapters 180 prakaranas (a section devoted to a specific topic) and 6000 verses in all.

It is essentially a treatise on the art of Government and is by nature instructional, it seeks to instruct all kings and is meant to be useful at all times wherever Dharma is held to be pre-eminent, because it is instructional, its basis is the practice of government. Kautilya’s special contribution to the theoretical analysis of the functioning of a state is two. These are:

  1. analysis of aspects of internal administration in terms of the six constituent elements of the state- the ruler, the ministers, the urban and the rural population, economic power and the military might; and
  2. analysis of the relations between states in terms of the theory of the circle of the states.( L.N. Rangarajan, 20)

The Arthashastra equates political governance with economic governance where economic governance is the end while political governance is the means. But as economic objectives are not realized in the absence of political ones, then political governance becomes an end and economic governance the means. ‘The end justifies the means’, this is supposed to be the basis of Kautilyan philosophy. Political power and material wealth are the means and ends of governance. And good governance – political or economic – depends upon justifying the ends and means as the socio, economic and political conditions.

The state or government has a crucial role to play in maintaining the material well being of the nation and its people. Therefore an important part of Arthashastra is “the science of Economics” including starting productive enterprises, taxation, revenue collection, budget and accounts. It highlighted the importance of pursuing successful economic policies meant to increase the revenues of the state and appropriate the surplus for the state treasury. (L.N. Rangarajan, 2) However Kautilya does not lay down the laws of dharma and social life; which are found in the dharmashastra. The Arthashastra deals only with different aspects of government, the duties of a state or safeguarding the welfare of the people promoting their economic well-being and preserving dharma (L.N. Rangarajan, 83).

Thus the essence of Katutilya‘s economic treatise Arthāŝhastra is to maintain a perfect balance between State management and people’s welfare, it  focuses on creation of wealth as the means to ensure the well being of the state. Another source of ideas on economic matters was Santi Parva of the Mahabharata, the epic wherein advice concerning the accumulation and distribution of wealth was interspersed with advice on how to run a country. Kautilya defined “Economics as the most important aspect as it provides the basis for human existence and survival”. But Kautilya says that obstruction, misuse of government property and false accounting of government servants leads to reduction of wealth thus to avoid losses to the state treasury and to prevent embezzlement or misuse of power by servants of the state there has to be proper law enforcement  by a voluminous and comprehensive set of fines and punishments. Therefore an integral part of Arthashastra is dandaniti, the science of law enforcement. For punishment (danda), which procure safety and security of life, when awarded with due consideration, makes the people devoted to righteousness path while punishment, when ill-awarded under the influence of greed and anger or owing to ignorance, excites fury.

Although it is believed that welfare state is a modern concept, some scholars claim that Kautilya established the first welfare state. Kohli says “Kautilya touched almost all the aspects of human life, Civilization and culture with his concept of Yogakshema (welfare state in modern sense). (Roger, 67) Yoga refers to the successful accomplishment of an object while kshema refers to the peaceful enjoyment of that object. So yogakshema is a broad term implying the idea of welfare, well being, prosperity and happiness. (Arora & Goyal, 4)

“In the happiness of his subjects lies his happiness; in their welfare his welfare; whatever pleases himself he shall not consider good, but whatever pleases his subjects he shall consider as good. Hence, the king shall ever be active and discharge his duties; the root of wealth is activity, and of evil its reverse. In the absence of activity acquisitions present and to come will finish; by activity he can achieve both his desired ends and abundance of wealth” (Shamasastry, 38-39). This Kautilyan dictum shows that he advocates welfare in all spheres. He defined the ideal ruler as one “who is ever active in promoting the welfare of the people and who endears himself by enriching the public and doing good to them.” He not only talked about human welfare but paid attention to animal welfare too.

While concepts of happiness and welfare are complicated in Indian thought (Ambirajan, 1997), there are undoubtedly similarities between the Kautilya’s objective of economics and that expounded by mainstream economists from the time of Adam Smith onwards. This is so even though most of these mainstream economists favoured liberal market systems as a stepping stone towards the maximisation of social welfare, rather royal or state activity as a means to achieve this goal. Not only Kautilyan but many early Indian thought emphasizes that the duty of the king (State) is to protect the people, maintain peace and justice and be active in providing economic assistance to individuals and groups. Thus an implicit social contract existed between the king and the nation’s citizens. If the king did not keep to this ’contract’, he did so at his own peril.

He advocated Growth Oriented Public Expenditure, in which most of the revenue generated from taxation to be spent on productive activities and public welfare. He discussed different items where sate should incur expenditure such as on national defence, maintenance of national store house and granaries, public administration and salaries of the ministers, government departments, maintenance of armies and on the acquisition of valuable gems, stones and ornaments and whatever was left should be deposited to the treasury. At the same time, Kautilya advised the king to limit his expenditure on servants. This should be kept to less than a quarter of his total revenue. Kautilya (Shamasastry, 276) says: “In accordance with the requirements of his parts and country parts, the king should fix under one-fourth of the total revenue the charges of maintaining his servants ……… He should not violate the course of righteousness and wealth”. In essence, the treasury does not exist for the pleasure of the king but as a fund to be wisely utilized to increase the wealth of the nation.

The Arthashastra is one of the old world’s oldest treatise on the economic administration of a state. But it is difficult to use the phrase that can adequately describe the Kautilyan economy because there has been nothing like it before or since the mauryan Empire. Wolpert declares mauryan economy as a “socialized monarchy” on the other hand Basham calls it “a sort of state socialism”. Megasthenes, the Greek Ambassador to Chandragupta’s Court, said that all land was owned by the king. In fact Kautilya himself sometimes give the impression in the arthashastra that the crown owned all of the land. When he wrote this volume of epic proportion, the country was ridden in feudalism and closed and self sufficient economy. The economy based on indigenous ways of production; was in a transitional phase, moving towards the advanced aspects of distribution and production. Culture and regional politics directed the way in which trade was done.

Kautilya recognized that the wealth of nations does not depend purely on narrow economic factors but on a broad array of factors. His treatise, therefore, takes into account economic, political, diplomatic, social, military, and other aspects that may affect the wealth of a nation.

The three main economic activities -Agriculture, cattle-breeding and trade constitute Varta. It is most useful in that it brings in grains, cattle, gold, forest produce (kupya), and free labour (vishti). It is by means of the treasury and the army obtained solely through Varta that the king can hold under his control both his and his enemy’s party [1.4.1, 2]. “All state activities depend first on the treasury therefore King shall devote his best attention to it.” The Kautilyan dictum in is: ‘From wealth (Kosa) comes the power of the government.’ Because of the importance of treasury Kautilya questions the king that he should always keep the army and treasury under his own control. The main guiding principles of administration of the economy were that the state should run a diversified economy actively, efficiently, prudently,and profitably. Thus the whole economic policy was regulated and controlled by the state.

The references to public and private sector in the text gives an impression that Kautilyan economy was probably a mixed economy. Land the most important natural resource was primarily in the public sector, with the state holding all virgin land, forest and water resources. Arable land however was both in the public and private sectors. Land was granted either in perpetuity or for a limited period, on a tax paying or on a tax exempt basis. Mining and fishing were also in both sectors.

Most of the productive economic activity took place in the Janapada. ‘Power comes from the countryside, which is the source of all activities.’ Agriculture was the most important economic activity. ‘Cultivable land is better than mines because mines fill only the treasury while agricultural production fills both the treasury and the storehouses.’ The king had to ensure that agriculture was protected from harassment by not levying onerous taxes or fines and by not making undue demands for free labour .

Cattle rearing was the second most important economic activity. Cows and she- buffaloes were reared for milk and the bulls and he-buffaloes were used as draught animals. The third important pillar of economic activity was trade. The State had a financial interest in ensuring that as much production as possible was marketed. Thus apart from promoting trade by improving the infrastructure- setting up market towns, ports, and trade routes, building storage reservoirs; the state also required to keep trade routes free of harassment by courtiers, staff officials, thieves and frontier guards. Consumer protection is strongly emphasized in Arthashastra. Traders were mistrusted believing that they are always ready to make money at the cost of the consumer but even they are entitled to state assistance when they lose their goods through no fault of their. This may have been regarded as a benefit to citizens of the sovereign’s control of all trade and commerce. The sale of products at the place of production was forbidden and they could only be sold at designated official urban market places. While on the one hand this may have strengthened consumer protection as government officials could verify the quality of wares for sale, on the other hand, it was also, in all likelihood, a means to more efficient taxation of produce. Produce was taxed often on the way to market and at the market place. Furthermore, this procedure probably imparted urban-bias to the economic system.

There were departments for accounts, revenue, mines, arsenals, taxation, agriculture, forestry, trade and navigation. Kautilya‘s work dealt with such diverse economic subjects as accounts, coinage, and commerce.

Thus the augmentation of the treasury depended mainly on the abundance of harvest (Sasya-Sampat), opulence of industrial production (Prachara Samirddhi), prosperity of trade and commerce (Panyabatulya) as well as good fiscal management”. Therefore, Kautilya paid much attention to good fiscal management and methods to develop all the sectors of economic activity just mentioned as it was both in the interests of the king and of his subjects.

Kautilya was concerned not only about the creation of wealth but also in the preservation of the existing wealth. Money was used as the medium of transaction, in the form of coinage. It is worth noting that Kautilya understood, by more than 2,000 year earlier than Adam Smith, that accumulation of capital enhanced labour productivity. Additionally, he emphasised productive activities to achieve the desired objectives of king and abundance of riches. Manufacturing industry gained impetus in the Maurya period (Sodhganga). The following are the means of increasing the wealth of the state mentioned in the Arthashastra:

  • ensuring the prosperity of state activities [and Enterprises];
  • continuing well tried policies;
  • eliminating theft;
  • keeping strict control over Government employees;
  • promoting trade;
  • avoiding troubles and calamities;
  • reducing [tax] exemptions and remissions; and
  • increasing cash income                                                                                        

There were four major areas of a state economic activity as the main sources of raising revenue-

  • income from crown property – revenue from crown agricultural lands(sita), revenue from mining and metallurgy, revenue from animal husbandry, revenue from irrigation works, revenue from forests;
  • income from state control activities – manufacturing (salt, textile), manufacturing/leisure industries (alcoholic liquor), leisure activity (courtesans, prostitutes, entertainers, betting and gambling)
  • taxes paid in cash or in kind and
  • trading. 

Apart from these other sources of revenue were- revenue collected from fines or surcharges, from a number of fees or charges for services rendered to the public, from various taxes (L.N. Rangarajan, 228) He suggested different sets of methods for collecting additional revenue leaving special taxes on all groups within the population cultivating and extra summer crop seeking voluntary contributions and selling owners expropriating Temple property using a variety of methods to extract money from the durable.

Throughout the text of arthashastra the currency almost always used is a pana, a silver coin; in , there is a mention of kara which from the context seems also to mean a pana. Half, quarter and one-eighth of pana were also in circulation. There were sixteen mashakas to a pana and four kakanis to a mashaka  and copper coins of one mashaka, half a mashaka, one kakani and half a kakani.( L.N. Rangarajan,87) The value of coinage was sought to be maintained by stringent punishments for counterfeiting.

Kautilya admitted that taxation is the main source of revenue and recommended a system of tax collection and public expenditure of revenue in such a way as to build up the permanent revenue yielding capacity of the economy. As per Kautilya, ideally, the government should collect taxes like a honeybee that sucks just the right amount of honey from the flower so that both can survive. He says that the power of taxing of the state is unlimited but he criticised the excessive burden of tax on people. He advocated that tax base should be increased not the tax rate and implicitly suggested a linear income tax. Thus Kautilya’s discussion on taxation gave an idea of three principles i.e. taxation power is limited, taxation should not be heavy and excessive and tax increase should be moderate. He emphasizes fairness, stability of tax structure, fiscal federalism, avoidance of heavy taxation, ensuring of tax compliance and subsidies to encourage capital formation.(4) Kautilya’s scheme of taxation involved the elements of sacrifice by the taxpayer, direct benefit to the taxpayers, redistribution of income, and tax incentives for desired investments, some of the suggested incentives in his text are:

1. Tax Holidays: ―Anyone who brings new land under cultivation shall be granted exemption from payment of agricultural taxes for a period of two years. Similarly, ‗for building or improving irrigation facilities‘, exemption from water rates shall be granted.

2. Subsidised Loans: ―[On new settlements] the cultivators shall be granted grains, cattle and money which they can repay at their convenience.‖

3. Exemption from Import Duty: ―Any items that, at his discretion, the Chief Controller of Customs, may consider being highly beneficial to the country (such as rare seeds) are to be exempt from import duties.

He also advocated land revenue, water tax and toll, fine and penalties. According to him tax receipts can be divided into three parts; income earned through taxes on goods produced within a country, Income earned through taxes on goods produced in the capital and income earned through taxes on imports and exports. He advocates that rich persons should pay higher tax according to their paying capacity. In this way he considers the ability to pay approach. Tax should be levied one in a year.Taxes paid in cash or in kind.The complete list of taxes mentioned in the text is:

  1. Customs duty (sulka) which cosists of: import duty (pravesya); export duty (amyanishkr) and octroi and other gate tolls (dwarabahirikadeya)
  2. Transaction tax (vyaji) including manavyaji (transaction tax for Crown goods)
  3. Share of production (bhaga) including 1/6th share (shadbhaga)
  4. Tax (kara), in cash
  5. Taxes in kind (pratikara) including Labour (vishti); Supply of soldiers (ayudhiya)
  6. Countervailing duties or taxes (vaidharana)
  7. Road cess (vartani)
  8. Monopoly tax (parigha)
  9. Taxes paid in kind by villagers (pindakara)
  10. Army maintenance tax (senabhaktham)
  11. Surcharges (parsvam)

A tax frequently mentioned in the Arthashastra is vyaji which seems to have been applied both as a sales tax and purchase tax. On balance, it is better to translate it as a transaction tax that is a tax automatically levied when the state bought or sold goods. The transaction tax was automatically collected in most transactions by the use of different weights and capability measures. There were four categories:

  1. the biggest sweet or largest measure when anything was paid into the Government treasury;
  2. the second biggest one for normal trade;
  3. the third biggest for payments out of the treasury;
  4. the smallest for payment to the palace.

Each of different set of weight had to be used with its own balance. (L.N. Rangarajan, 233)

The state, even in those days, exhibited a closely controlled and orderly financial accounting system and the procedure of year-end Audit existed even then. Thus, all individuals and establishments involved in manufacturing, trading, retailing, and all such activities which engaged in monetary transactions were subject to audits and scrutiny. The chancellor was responsible for collecting revenue from the whole country, along with his delegates, the Governor Generals in each city. It was his duty to prepare the budget and maintain detailed accounts of revenues and expenditures pertaining to all activities. The governors and record keepers in every city were to keep records of the number of people in each family, their gender, caste, family name, occupation, income and expenditures pertaining to all activities. The Chief Controller and auditor was responsible for the maintaining the record office where the accounts book showing, for each and every business establishments in the market place, the nature of its activity and total income received from it. The king would then be informed of the audit results.

Arthashastra, said to be the oldest and most exhaustive treatise on governance and state administration  in the world, was written long after the death of Buddha, the state of society portrayed in the Arthashastra is, in the main, pre-Buddhistic and does not project a true picture for all periods of ancient Indian history, set forth theories of state craft and monetarism and also a code of civil and criminal law.  On the other hand, the norms under which Hindu society has functioned for the last two millennia are those of the Smritis which depict the ideal Hindu society as reconstructed and reformed after the influence of Buddhism had begun to decline in India; the earliest and most important of these, the Manusmriti was codified sometime in the first two centuries AD. (L.N. Rangarajan, 18) Thus the question to ponder about is of the usefulness of Kautilyan Arthashastra in later mauryan period and its applicability in contemporary era. Insofar as the nature of human beings remains the same and States behave as they always have done he is relevant particularly when he discusses the economy, just administration or relations between States, we can learn from his wisdom. (L.N. Rangarajan, 25) But one needs to be aware of the essential characteristics of Kautilya’s work if willing to comprehend clearly Kautilya teachings and apply them judiciously to the modern world. He talked about an ideal state but it is difficult to say whether such a state existed or will exist in future, thus to the extent any of the six constituent elements of a state mentioned in Arthashastra- differ from the ideals of Kautilya, to the extent the advice given by him has to be modified. (L.N. Rangarajan, 19) Thus Kautilya always qualifies his suggestions or advice with the injunction to modify it according to circumstances.

The given Quote from Dr Kangle’s study shows the relevance of Kautilya to the 20th century:“We have still the same distrust of one Nation by another, the same pursuit of its own interest by every Nation tempered only by considerations of expediency the same efforts to secure alliances with the same disregard of them in self-interest, the same kind of Intelligence Service maintained by one nation in the territory of another which we find referred to in the Arthashastra. It is difficult to see how rivalry and the struggle for Supremacy between the Nations can be avoided and the teachings of this Shastra which is based on these basic facts rendered altogether superfluous until some sort of a one-world government or an effective supra-national authority is established, but until that happens the teachings of this Shastra would in actual practice be followed by Nations, though it may be unknown to them and though it maybe openly condemned buy those that know it”.( L.N. Rangarajan, 26)

Many modern concepts of economics underlie much of Kautilya’s discussion is Arthashastra. As much of the coverage of Arthashastra illustrates, Kautilya was well aware of the importance for the efficient operation of the State and economic development of what is described today as good governance. Other modern issues that can be identified in Arthashastra include urban-bias, the importance for State revenue of ‘market-making’ and the significance of adequate transport infrastructure for exchanging produce, as well as for defence purposes. At the heart of Kautilyan economics is the obligation of the State to provide for the social security and welfare of the people, the basic social principle which have appealed to many Indians over the centuries. Having discussed the some economic ideas of Kautilya, it can be said that even the terminology employed in Arthsashtra may have changed but the nature and role of state in the economic system seem persistent in all settings. Covering various topics on administration, politics and economy, it is a book of law and a treatise on running a country, which is relevant even today. He provided valuable basis for economic science.

Public finances were, amongst other things, to be used to defend the realm, ensure peace at home and to dispense justice and to provide support for the development of economic activity. Many of the principles of taxation that he outlined are still in favour today, as a perusal of standard texts on public finance, such as Musgrave and Musgrave indicates. The functional relationship which discussed Kautilya in Arthsashtra between the rate of income tax and the magnitude of tax revenue is now expressed in terms of Laffer curve. He advocated limiting the taxation power of the State, having low rates of taxation, maintaining a gradual increase in taxation and most importantly devising a tax structure that ensured compliance. Other aspects, for example, raised by Arthasastra include the importance of the collection of census data and the keeping of other national accounts, useful economic ideas on foreign trade, taxation, public expenditure, agriculture and industry.

The importance of a good transport infrastructure to facilitate trade and commerce was also stressed by Kautilya. A further benefit was that it facilitated the defence and administration of the realm. The importance of such infrastructure for economic development is again being stressed today by bodies, such as the World Bank, but probably with a slightly different agenda in mind.

Kautilya has always a sane, moderate and balanced view whose practical advice is rooted in Dharma. As the academic world will move towards multicultural curriculum Kautilya and his Arthashastra will be much better known as it is a science of politics good for all times and places, one can say it a timelessly valid science.

  1. Dr. Renu Tanwar; An Analytical Study of the Relevance of Arthshastra in Modern India; IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 5, Issue 3. (Sep.-Oct. 2014), PP 32-35
  2. Clem Tisdell January 2003 ; A Western Perspective on Kautilya’s ‘Arthasastra’: Does it Provide a Basis for Economic Science?  ISSN 1444-8890
  3. Ambirajan, S. (1997) “The Concepts of Happiness, Ethics, and Economic Values in Ancient Economic Thought”. Pp. 19-42 in B. B. Price (ed.) Ancient Economic Thought, Vol. 1, Routledge, London and New York.
  4. Arora & Goyal (2016); Indian Public Administration Institutions And Issues. 3rd ed: New Age International Publishers
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  7. Clem Tisdell, A Western Perspective on Kautilya’s ‘Arthasastra’: Does it Provide a Basis for Economic Science?, January 2003
  8. Jha, K. N. and Jha, L. K. (1997) Chanakya: The Pioneer Economist, APH Publishing Corporation, New Delhi.
  9. Musgrave and Musgrave (1989), Public Finance in Theory and Practice, McGraw Hill
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  11. Sastri, K.A.Nilakanta (1996); Age of the Nandas and Mauryas. 2nd ed. Delhi:Motilal Banarsidass.
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  14. Thapar, Romila (1997) Asoka and the Decline of the Mauryas. Delhi: Oxford University Press.

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