In pursuit of a winning nation: Lessons from Kautilya’s Arthashashthra

Chanakya was so particular about raising revenue for the state by various sources. However, he has clearly laid down policies and procedures which ensured good governance, accountability, and transparency with respect to fiscal management. Without such discipline a strong empire would not have been built. As per the historical sources, Chanakya’s influence was present on three generations over emperors Chandragupta Maurya, Bindusara, and Asoka. The Mauryan Empire was at its peak during this period. Chanakya’s teachings laid the platform for a strong civil administration system. It led to finding honourable civil servants with strong personalities

The background

Kautilya was an Indian Polymath in ancient times in India. He was also referred to as Chanakya and Vishnuguptha. It is believed that he lived during the period of 375 BC-283 BC. Chanakya had many facets as a teacher, philosopher, strategist, author, economist, jurist, king maker, royal advisor, etc. It is not wrong to say that he found the Mauryan Empire. He trained Chandragupta Maurya to be an emperor and helped him achieve that target with a well planned and executed strategy. He brought down the Nanda Empire with a well-crafted strategy and replaced it with the Mauryan Empire. 

Kautilya selected Chandragupta Maurya to be the front man who later ruled most parts of India which went beyond its present territories. His son Bindusara and grandson Asoka later further expanded the Mauryan Empire. Chandragupta Maurya came from nowhere and built up an army from scratch and finally became the emperor. That was solely due to the wisdom of Chanakya. Why did he do that? Because he was driven by a larger-than-life vision of forming one united India or Bharat. He understood that having a larger number of smaller kingdoms would make India vulnerable for invasions. This era India was divided into 16 major kingdoms. 

Not only that, as per the sources, this was the time King Alexander invaded India. As per some sources King Chandragupta Maurya faced Alexander in the battlefield and as per some other sources it was King Porus who faced Alexander in the battle. Whomsoever Alexander faced in the battlefield, after a brief stint in India he decided to turn back. Based on rationale it can be concluded that conquering India was not easy, and, on his way, back Alexander died due to illness.

Kautilya authored his epic book ‘Kautilya’s Arthashasthra’ during the reign of Chandragupta Maurya. It is an account of management of affairs of the state. It covers the areas such as the state and its components, the king and his responsibilities, treasury management, state revenue and expenditure, accounts and auditing of state records, civil service, state department, law, and justice, spying services, foreign policy, state security and warfare. It is a full account of the state administration. Interestingly when Kautilya was authoring Arthashasthra, Plato authored his famous book ‘The Republic’ in Athens around 380 BC and almost on or around the same period.

One may wonder why I am trying to quote something from a book written 2,300 years ago. If you really invest time in reading the full volume which consists of 6,000 shloka’s you will understand how relevant Chanakya’s wisdom is, which is implicit in his writing. With the advice of Chanakya, the Mauryans manage to rule the largest empire that India had seen to that day. The Mauryan Empire was prosperous and wealthy.

As per the ‘Arthashasthra’ the fiscal management process was built on good governance, transparency and accountability and any breach had attracted severe punishment or ‘danda’ to the state officers as well as the subjects. This discipline resulted in a wealthy empire who managed to unite most parts of the Indian Territory and even the lands beyond the present-day Afghanistan. On these merits, there is nothing wrong in trying to learn lessons from the wisdom of Chanakya as laid down in his epic book.

In this article I have taken insights covering State revenue and expenditure, the treasury, State accounts and auditing and finally the prescribed punishment or ‘danda’ for non-compliances, cheating and fraud. One may ask what the purpose is of studying the state administration framework that had been in existence 2,300 years ago. However, we should not forget the fact that one of India’s largest empires was built on the state administration framework prescribed by the Chanakya. There are many things that present day policymakers, civil servants and the public can learn from this piece of work. Arthashasthra consists of 15 volumes. Wherever possible I have given reference to the original scriptures. Reference of 2:3:1 means the first verse (shloka) of the third part in the second volume.

From the scriptures

Chanakya states that “all activities of a state depend on the treasury and as a result the king must Protect it “(2:8:1,2). He further goes on to say that the king who weakens the treasury would destroy the state and its people (2:1:16).”

Chanakya recommends the following key offices which would be detrimental in fiscal management.

- The office of Head of the Treasury (2:5)

- The office of Commissioner of Revenue (2:6)

- The office of Royal Director of Taxation (2:2)

- The office of Superintendent of Accounts (2:7)

In section five of the second volume, the role of the treasury head is prescribed. This officer oversaw physical custody and managing the physically collected income. The guidance includes constructing of the treasury to recruitment of officers to finally accounting and offences. Most importantly it is emphasised that only trustworthy people with integrity should be recruited to the treasury. The following has been identified as ways to increase State revenue.

As per Kautilya’s Arthashasthra, the civil servants were paid very well in such a way to maintain their dignity and stature in the society. In return the highest level of integrity and ethics was expected and breach of which attracted severe punishments. Even though the states were ruled by the monarchy, the king had to rule within a set of rules known as raj neethi. Consistent breaches of such rules lead to toppling of the monarchy. This was in fact exactly what happened to the Nanda Empire which was later replaced with the Maurya Empire

- A firm and well-established state administration system which would facilitate entrepreneurship (both state and private)

- Consistency and continuity of state policies in an efficient manner

- Elimination of stealing and fraud in state administration (with severe punishment)

- Enforcing strict discipline on the civil servants (spies were used to test the integrity of the state officials)

- Increasing agriculture products (people can survive in any situation if they have enough food to eat)

- Promoting trade

- Identify the risks faced by the state and prevention and management of such risk

- Avoidance of tax exemptions as much as possible

The role of the commissioner of revenue as stated in section six of the second volume is important in terms of raising revenue to the government. The commissioner of revenue oversaw overall budgetary control of the state. The role of the royal director of taxation was narrowed down to collecting and recovering taxes to the state. The sources of state revenue were numerous and included income from state entrepreneurship, taxes, custom duty, penalties, various charges, etc… However Chanakya goes on to say, “The king should collect taxes from the people like the way one would pluck fruit from the garden. Unripe fruits are not plucked from the garden, so that the king should not impose taxes unreasonably. Anger of the people may destroy all the revenue sources (5:2:70).

Chanakya has identified the following as the main sources of state income.

- Income from the state-owned assets

- Income from the activities controlled by the state and taxes

- Trading

- Fees and service charges

- Other

Let us go into a bit detail under each category and the content is not an exhaustive list only few examples are given.

1. Income from state-owned assets

• Income from the agriculture land by way of cultivation and by leasing out the land. The lease income would be either 3/4 or 4/5 of the production. If the nursery and other equipment supplied by the lessee, the rental would be only ½ of the output.
• Income by way of water charge on consumption of water from the irrigation built by the state.
• Income from the various kinds of mines. High importance was placed on the mining industry. This is not merely due to income generating potential. For instance, metal was used in making weapons and minting coins. Sometimes other states or kingdoms were conquered merely to capture mines.
• Income from the cattle farms managed by the state.
• Income from forestry.
• Income from industries linked to irrigation projects.
• Other ancillary sources (which I am not going to describe here).

2. Income from the state-controlled activities and taxes

• Taxes from the garments manufacturing and from the salaries (2.23)
• Taxes from the Salterns (2.12.28-31,34)
• Taxes from the Imported Salt (1/6 of the value)
• Excise duty
• Entertainment tax (taxes were even collected from the prostitutes and 1/6 of the income earned by prostitutes paid as taxes)
• Income from betting and gaming
• Import and export taxes (collected at entry points to the state)
• Taxes on the transaction or turnover tax
• Taxes on profit
• Road tax
• Surcharge tax
• Special taxes to maintain the army during the period of war.
• Port taxes

The applicable taxes had to be paid in money or in kind depending on the nature.

3. Income from trading activities (2:16)

The state could generate income from various trading activities directly conducted by the state and by way of taxes and various charges imposed on private traders.

4. Fees and service charges

Income from various fees and charges such as port charges, survey charges, charges on newly minted coins, inspection charge etc…

5. Other

Other than the above there was income to the state from other services also. For instance, all gems found in the kingdom was considered as state property, Income from the administrators of the religious places, tax on inspection of thefts, grants, gifts to the king considered as state revenue, compensation received, state acquired property, valuable treasury found considered to be the state property subject to certain exceptions, property left without a last will by citizens etc… Other than the above Chanakya recommends other immoral ways of collecting revenue for the state using deceit, which I am not going to discuss here.

The Superintendent of accounts was responsible for duly accounting for all transactions. Chanakya has even prescribed the formats to account for income and expenditure (2:7:31-33). There was a reporting hierarchy with respect to the maintenance of accounts. Improper maintenance of books of accounts considered to be an offence (2:7:35). It was required to compile monthly accounts and required to submit the same before end of the next month to the treasury (2:7:26-27). Besides the above there was an auditing function and if any discrepancy was noted in the books of accounts the officer responsible should have personally reimbursed the deficits (2:7:19-20).

As per the ‘Arthashasthra’ the fiscal management process was built on good governance, transparency and accountability and any breach had attracted severe punishment or ‘danda’ to the state officers as well as the subjects. This discipline resulted in a wealthy empire who managed to unite most parts of the Indian Territory and even the lands beyond the present-day Afghanistan. On these merits, there is nothing wrong in trying to learn lessons from the wisdom of Chanakya as laid down in his epic book.

Punishment (Danda) for misappropriation and fraud

The entire section eight of the second volume is on the recovery of money/property unjustly acquired by the state officials. Apart from this section, in many other places in the scripture, Chanakya identifies various offences in terms of fiscal management. Punishment for such offences varies from simple penalties, mutilation and to capital punishment.

Conclusion

There is an indirect relationship between Chanakya’s teachings and the civil administration system that was introduced to Sri Lanka during King Devanampiyatissa’s era (however the civil administration system that we have today is based on what the British implemented). The simple version of state administration was introduced to Sri Lanka by Arahath Mahinda thero, who happened to be the great grandson of Emperor Chandragupta Maurya, whose mentor and advisor was Chanakya or Kautilya. Strong empires were built on a strong fiscal management framework. Without resources and wealth, empires could not be built. A weak treasury could destroy a nation. We can learn a lot of things from the wisdom of ancient philosophers. Timing and technology would be different yet the fundamentals within which a civil society operates remain the same.

As per Kautilya’s Arthashasthra, the civil servants were paid very well in such a way to maintain their dignity and stature in the society. In return the highest level of integrity and ethics was expected and breach of which attracted severe punishments. Even though the states were ruled by the monarchy, the king had to rule within a set of rules known as raj neethi. Consistent breaches of such rules lead to toppling of the monarchy. This was in fact exactly what happened to the Nanda Empire which was later replaced with the Maurya Empire.

Chanakya was so particular about raising revenue for the state by various sources. However, he has clearly laid down policies and procedures which ensured good governance, accountability, and transparency with respect to fiscal management. Without such discipline a strong empire would not have been built. As per the historical sources, Chanakya’s influence was present on three generations over emperors Chandragupta Maurya, Bindusara, and Asoka. The Mauryan Empire was at its peak during this period. Chanakya’s teachings laid the platform for a strong civil administration system. It led to finding honourable civil servants with strong personalities. Even in India today the Indian Civil Service is so strong, and the well-articulated country’s vision is driven by them. During my visits to India, I have noted that even the politicians would not try to interfere with the civil service, and I am not wrong to generalise this statement. Our Motherland is also aching for such a strong civil administration service with officers possessing integrity, honour, and character. We do have a few but the number is not enough. It is my belief that without further strengthening the civil administration and developing personalities we would not be able to drive our country towards a common vision. A vision that would make us a winning nation.

References:

Kautilya Arthashasthra by L.N. Rangarajan

Kautilya’s Arthashasthra translated by Hiripitiye Pangnakiththi Thero

(The writer is a Fellow Chartered Accountant and an Attorney-at-Law. He is a Fellow Certified Management Accountant and a Certified Information Systems Auditor. He possesses a Bachelor of Laws degree and a Master of Business Administration degree specialised in finance from the University of Colombo. He is the Managing Director of Moore Consulting Ltd. and a Partner at Moore Aiyar. He serves on many other boards as a non-executive director, which include a bank and an insurance company. He can be contacted on [email protected].)