ACKNOWLEDGEMENTS:

Whenever we get on with a job, we need support in many ways.

Quite often, we get the support we require. When I sat down to
complete this project, I was not sure if I could have managed to
complete even twenty five percent of what I have done now. The truth
is- it wouldn’t have been, but for the priceless support I have received
during the course of the project work. So it is my privilege to mention
them and thank them for their help.

I would like to express my gratitude to Mrs. Aparna Jain, the

Head of Department for BMS course in S.K.Somaiya, for going
through my project several times. She was present every time to help
me out and she solved patiently, all my doubts and queries.

I would like to thank Mr. Radhakrishnan Pillai for providing me

with a lot of material using which I could complete the project. It
might have been impossible for me to carry on, without his help.

A special thanks to my family and friends for just being there

for me and letting me know that I could count on them every single
time. They gave me the will to get on with this project.

According to Chanakya, one must start all important works

after praying to The Gods. So, straight out of Arthashastra,

“Om. Salutations to Sukra and Brihaspati.”

 2

INDEX:

• EXCECUTIVE SUMMARY
• OBJECTIVE OF STUDY
• LIMITATIONS
• RESEARCH METHODOLOGY

1.INTRODUCTION

1.1 PURUSHARTAS

1.2 MEANING OF ARTHA

1.3 MEANING OF ARTHASHASTRA

1.4 KAUTILYA

1.5 ROLE OF ARTHASHASTRA IN MODERN WORLD

2. PUBLIC GOVERNANCE

2.1 THE CONTROL OF THE STATE

2.2 ROLE OF THE STATE

2.3 TOWN BUILDING

2.4 LAW MAKING

 3

2.5 UNFAIR TRADE PRACTISES

2.6 CONSUMER PROTECTION

2.7 MODERN GOVERNANCE

3.TAXATION

3.1 METHODOLOGY

3.2 AMOUNT OF TAXATION

3.3 EXEMPTIONS AND WAIVERS

3.4 THE MODERN METHODOLOGY OF TAXATION

4. TRADE

4.1 DOMESTIC TRADE

4.1.1 TRADE PROUTES

4.1.2 SAFETY OF GOODS IN TRANSIT

4.2 FOREIGN TRADE

4.2.1 TRADE &REVENUE

4.2.2 IMPORTS

4.2.3 EXPORTS

4.3 MODERN TRADE PRACTICES

 4

5. BANKING,CO-OPERATIVES &RISK MANAGEMENT

5.1 RISKS & UNCERTAINITIES

5.2 PRIVATE SECTOR V/S PUBLIC SECTOR

5.3 LOANS & INTEREST RATE

5.4 GUILDS & INSURANCE

5.5 PRESENT SCENARIO

5.5.1 BANKING SECTOR

5.5.2 INSURANCE SECTOR

5.5.3 FUTURE TRENDS

6. AGRICULTURE &IRRIGATION MANAGEMENT

6.1 THE MAIN ACTIVITY OF STATE

6.2 SUPPORTS TO AGRICULTURE

6.3 METEROLOGY

6.4 CROPPING PATTERN

6.5 IRRIGATION

6.6 AGRICLTURAL TAXATION

6.7 SUSTAINABLE AGRICULTURE

 5

6.8 PRESENT SCENARIO

7. PUBLIC SECTOR MANAGEMENT

7.1 ROLE OF PUBLIC SECTOR

7.2 INDUSTRIES IN PUBLIC SECTOR

7.3 PUBLIC SECTOR IN INDIA

8. HUMAN RESOURCE MANAGEMENT

8.1 WINNING PEOPLE/LURING PEOPLE

8.1.1 THE GROUP OF THE ENRAGED

8.1.2 THE GROUP OF THE FRIGHTENED

8.1.3 THE GROUP OF GREEDS

8.1.4 THE GROUP OF PROUD

8.2 WAGES &INCENTIVES

8.3 SELECTION & TRAINING

8.4 CURRENT HR POLICIES & MANAGEMENT

9. LEADERSHIP

9.1 PRIMARY GOALS OF THE LEADER

9.2 LEADERSHIP VALUES

 6

9.3 BENEFITSOF A RIGHTEOUS LEADER

9.4 MAKING OF A LEADER

9.5 SPIRITUAL LEADER

9.6 CURRENT SCENARIO IN LEADERSHIP

9.6.1 AUTOCRATIC STYLE

9.6.2 PARTICIPATIVE STYLE

9.6.3 LAISSEZ FAIRE STYLE

10. CORPORATE SOCIAL RESPONSIBILITY & CORPORATE

GOVERNANCE

10.1 CORPORATE SOCIAL RESPONSIBILITY

10.2 CORPORATE GOVERNANCE

10.3 THE MODERN ENVIRONMENT

11. SUGGESTIONS AND RECOMMENDATIONS

12.CONCLUSION

13. ANNEXURES

13.1 CASE STUDIES

13.1.1 FLYING LOW

 7

13.1.2 MEXICAN TELECOM INDUSTRY-UNWANTED

MONOPOLY

13.1.3 PUBLIC GOVERNANCE

13.2 ARTICLES

13.2.1 DON’T NEGOTIATE SAFETY & SECURITY

13.2.2 VETTING THE KING’S CABINET: ANCIENT

TECHNIQUES FOR A MODERN NECESSITY

14. REFERENCES
 8

EXECUTIVE SUMMARY:

This project is a report of probably the greatest treatise on

management ever written in the world, ‘The Arthashastra’.
Arthashastra, written by Kautilya, also known as Vishnugupta or
Chanakya, surmises all the important aspects or areas of management
that we pursue or study today. It encompasses of a wide array of
ideals and fundamentals that could be put to use in today’s
environment.

It becomes mandatory for every Indian to learn The

Arthashastra because of its all pervasive nature. The Arthashastra had
been lost in oblivion since ages before it was finally resurrected for
the masses. The Arthashastra is indeed a book that is one of its kinds
in the world.

Going through his works, one could see that Kautilya, the
Prime Minister of Chandragupta Maurya has guided the Emperor in
his pursuit of greatness. He possesses a thorough understanding of
economics and all the prevalent economic policies. Kautilya has given
fundamentals of town building and public governance; which, if
implemented properly could change the deplorable condition of
governance in India. Kautilya has also given valuable insights on
trade and commerce. He has even stated the importance of
international trade and gave impetus to such trade.
 9

The taxation policy and the wages structure of Kautilya can

itself be used as a reference book for the government of any country.
It gives importance to the happiness and welfare of subjects and not
only to the fulfilment of treasury.

Agriculture, co-operatives, banking, etc were all taken care of

by The Arthashastra. Human Resources Management and Leadership
are the highlights of Arthashastra. Kautilya has indeed given a great
sermon on leadership.

This project has tried to encompass all the required materials

about Arthashastra and put them to use with a modern perspective. It
has tried to solve all the modern woes of governance through the eyes
of Kautilya.

Case studies have been included at the end to give a better grip
on the subject matter and make it more practical in approach. All this
has been done keeping in mind that no individual or organisation is
hurt or offended with regards to anything written or referred to in this
project.

I hope that this work will go a long way in understanding the

intricacies of the great epic ‘The Arthashastra’ and will pave the way
for future research and studies on this less explored subject of
management.
 10

OBJECTIVE:

The objectives of this project are to:

 Highlight the values in Arthashastra which could have a

profound influence on the management tactics used today.
 To arouse interest in wisdom that had been lost for years.
 To draw parallels and differences between the methods of
administration and management during the Mauryan Empire and
the present age.

METHODOLOGY:

The data used in this research work is secondary in nature. This

project is more of a compilation of many revered works coupled with
inputs from the researcher. Reference material has come in the form
of books and websites. Meetings with Arthashastra scholar, Mr.
Radhakrishnan Pillai have also helped in collecting secondary data
required for this project. Historical data method is mainly employed in
collection of data. Efforts have been taken to ensure the authenticity
of the data.
 11

LIMITATIONS:

The project work is not without its own set of limitations

though care has been taken to ensure that they are at a minimum level.
The following limitations have come to the fore during the
compilation of this project:

 Lack of historical data has been a major problem. The

Arthashastra had been in oblivion for ages and much of the
manuscripts are said to have been destroyed or lost. It has been
difficult to join the broken threads.
 Secondary data is in the form of websites and books. Hence, it
would be fair enough to say that these may be subject to biasness
or prejudices of the respective authors.
 There has been a major shift in the psyche of people since the
Mauryan Era to the present age. Hence, reliability of the
reproduced works cannot be guaranteed. However, on reading the
manuscript, one gets a vivid view of the subject matter and efforts
have been taken to provide an unprejudiced and unbiased report
based solely on facts.
 12

1. INTRODUCTION:

India has always been a land of great souls. Be it Maharishi

Ved Vyasa or Aryabhatta or more recently, Dr. APJ Abdul Kalam,
India has been a nation basking in the glory of being the birth place of
intellectuals with no equal. The nation has seen it all; from political
turmoil to epochal feats; from relentless struggle for an identity to
being one of the fastest growing economies in the world. Some
believe India’s success is an effect of Indians having vehemently
taken to modernism and the western ideology, while others credit the
success with going back to our roots and developing an Indian
ideology. Both views make sense as the world is beginning to warm
up to Indian ideologies and embrace what is possibly the oldest race in
the world.

India traces its history to the formation of Indus Valley

civilization, some ten thousand years ago. This was followed by
several monarchies and invasions, making this land the envy of many.
This period led to the development of the glorious history of India as
we know it today. Possibly, the seeds of Indianness were sown by the
Aryans who came to India. They started their first colonies and laid
down norms and regulations which they had to abide with. They
prepared the Vedas which gave rise to the Vedic Period in India’s
history. Within the Vedas, were enshrined the doctrines of the
Ashrama system. The Purusharthas followed the Ashrama system of
Vedas.
 13

1.1 PURUSHARTHAS:

Purusharthas could be defined as the aim or objectives of

human life. They consisted of the following:

 Dharma: Dharma stands for Righteousness or Dutifulness. Dharma

was the corner stone of the entire ethos in the human context. It was
the prima doctrina of the ancient Indian values system.
 Kama: Kama stands for desire or passion. It is the drive that motivates

a certain course if action. Kama denotes the human attribute of having

a soft spot for worldly desires and a strong will to achieve those
desires.
 Moksha: Moksha means Salvation. Moksha aims to let go all worldly

ties and relations. It is the stage where a person attains Nirvana or

eternal freedom from all senses. Thus, Moksha stands for
Renunciation.

The fourth Purusharthas was Artha or Wealth. Artha

significantly symbolized more than just material pleasures or
treasures. It was wealth or power as we know it of today. As days
passed by, the importance of Artha grew in the human minds and
today, it has become the sole motivator or aim in Human life.

MEANING OF ARTHA:
 14

Artha, as discussed earlier, means Wealth. However, it is not to be

confused as materialistic accumulation or treasures. Artha is wealth in
absolute terms. It covers everything from treasures to knowledge to
courage. Artha is everything that is valuable for human beings.
Indeed, Artha predominantly speaks about economy and not valour or
knowledge. However it is a narrow approach of assessing Artha.
Thus, Artha is complex in nature.

This complexity has propelled many scholars to comprehend the

subjectivity of Artha. Many have succeeded while many have failed to
solve the intrigues of this concept. There have been many approaches
towards learning the concept of Artha. Some have been purely based
on rules or certain set of beliefs like the exhaustive Manusmriti, while
many have been practical treatises on Artha. As one studies Artha and
its complexities, one could wonder at the realms of possibilities that
this subject provides. From the basic economic theory of demand and
supply to the ultra modern theory of environmental and social
accounting, Artha encompasses all.

Even more amazing is the fact that all this was prevalent since
the times of the Vedas. Many scholars have tried to convey the
ancient teachings of the sages in the most modern way possible;
however one must say, none have succeeded, but for one.

MEANING OF ARTHASHASTRA:
 15

Now that we have discussed the meaning of Artha, we would

discuss the various approaches to learn it. Many scholars have tried to
interpret the meaning of Artha. The study of Artha came to be known
as Arthashastra. Arthashastra literally means “the science of wealth”
or “economics” as we know about it in the modern parlance.
However, as one studies Arthashastra, one gets a feeling that it is not
meant to throw light just on the topic of dealing with materialistic
riches, but also on the wealth that is intangible and cannot be
measured. The meaning of “wealth” takes a completely new paradigm
in the words of Arthashastra.

To learn about Arthashastra, one needs to learn about the composition

of Arthashastra and its author. The Arthashastra contains nearly 6000
sutras divided into 15 books, 150 chapters, and 180 sections.

The 15 books contained in the Arthashastra can be classified in

the following manner: Book 1 on ‘Fundamentals of Management’,
Book 2 dealing with ‘Economics’, Books 3, 4 and 5 on ‘Law’, Books
6, 7 and 8 on Foreign Policies and Books 9 to 14 dealing with ‘war’.
Book 15 deals with the methodology and devices used in writing the
Arthashastra.

Arthashastra is believed to have been written around 4th

Century, B.C. However, many question the authenticity of these
findings; stating that Arthashastra was written at a later date. This vast
treatise was written by Vishnugupta, who was also known as
Chanakya and Kautilya, the advisor to Emperor Chandragupta
Maurya. There are many contradictions surrounding this too. Some
 16

believe that Vishnugupta was not Kautilya and that Arthashastra,

which was originally written by Vishnugupta, was rewritten by
Kautilya at a later period. However, we assume that all three were the
same person and he was the rightful author of Arthashastra which was
written during the reign of Emperor Chandragupta Maurya. Also,
there has been enough evidence about this assumption by reading the
manuscripts and comparing the style with other writings of the same
period.

KAUTILYA:

Having seen what the Arthashastra composes of, one has to

necessarily learn about its author to understand the subtleties in the
treatise. Arthashastra, as mentioned earlier, was written by
Vishnugupta. Vishnugupta was also known as Kautilya or Chanakya.
He got the name “Kautilya” as he was born in the “Kutila Gotra”. The
name “Chanakya” derived from the fact that he was born to a person
named “Chanaka”.

According to the legend, Kautilya was the principal of The

Taxashila University. On a meeting with the erstwhile Emperor,
Dhanananda, Kautilya was dishonoured and humiliated. He vowed
revenge and dethronement of the Nanda Empire. He took a child
named Chandragupta as his disciple and strived hard to make him the
Emperor. He succeeded in doing the same and crowned Chandragupta
Maurya as the new Emperor and this marked the beginning of the
Mauryan Dynasty, a golden age in Indian history. Kautilya was
shrewd and cunning. He had a mind which was faster than that of the
 17

average human being. He guided Chandragupta Maurya and used all

his experience to carve out one of the greatest emperors, the world has
ever seen.

He made rules, dictated them and implemented them to the

fullest to run a highly skilled administrative set up that was unheard of
during those days. His political and administrative acumen was
exemplary to say the least. All this is compiled by him in a political
treatise called “Arthashastra”.

Kautilya is also credited with stopping the Greek invasion to

conquer the whole world. He was instrumental in the rise of the
Mauryan Empire under Chandragupta Maurya and his son, Bindusara,
who succeeded him.

As per the legend, Kautilya died of voluntary starvation after

Bindusara charged him of sedition. However, Bindusara realised his
mistake and apologised to him; but Kautilya was adamant and let go
his life at a ripe age.

His works were lost near the end of the Gupta dynasty and not
rediscovered until 1905. One of the first translations of Arthashastra
was done by R. Shamasastry in the year 1915. Thereon, we have seen
many translations and depictions of Arthashastra. However, there is
still a want of a lucid decipherment of the nuances of the Arthashastra.

ROLE OF ARTHASHASTRA IN MODERN WORLD:

 18

Having seen what the Arthashastra is all about, one might want
to know how it is relevant in the modern parlance. An ancient saying
says that wisdom is never bound by time. Thus, Arthashastra has
many implications which do not alter much over time.

In the modern times of insecurity and political turmoil, some

glue is required to hold together the fragments of a collapsing world
or a nation, in the narrow sense. A treatise, widely accepted and
already having been put to test, is an effective mechanism to be the
glue. The various theses in Arthashastra are relevant even today as the
world is looking out for a better future. The best quality of
Arthashastra is that it has not been written keeping in mind a
particular timeframe or a region. Its attribute of all pervasiveness has
made it omnipotent.

At a time when the world is need of a true leader, Arthashastra

does exactly that; carve out excellent world leaders. The role of
Arthashastra will be evident as we proceed further.
 19

1. PUBLIC GOVERNANCE:

Public governance implies structures and processes for

determining use of available resources for the public good. Good
governance, according to experts, implies the following: Universal
protection of human rights; laws that are implemented in a non-
discriminatory manner; an efficient, impartial, and quick judicial
system; transparent public agencies and official decision-making;
accountability for decisions made about public issues and resources
by public officials; participation and inclusion of all citizens in
debating public policies and choices. It is, of course, possible to add
many more aspects to the definition of good governance. Citizens are
equating responsive governance not only with formal institutions or
systems of democracy but also with the processes and culture of
democratic inclusiveness and participatory governance.

Public governance is something that emerged out of a

democratic set-up. However, in India, it is not a new concept. This
concept has been put to use very efficiently by the Mauryan Empire
under the rule of Chandragupta Maurya or one could say, under the
guidance of Kautilya. Kautilya believed that the state had a role in the
market as a regulator. He advocated the principle of a mixed economy
at a time when India was ruled by autocrats. He was meticulous in
outlining in detail, the technique of controlling every activity in the
state. He insisted on governance for the betterment of public and
equated the success of the king with that of the public.
 20

2.1 THE CONTROL OF THE STATE:

Kautilya has suggested control of the State on almost all

activities of governance. While the individual merchants were free to
continue, they had to comply with the authorities appointed by the
state.

Kautilya had appointed superintendents for almost every

activity included in governance. They included superintendents for the
State, for weights and measures, for trade and commerce, for
agriculture, for mining, for prostitutes, for gems and jewels, for
horses, for elephants, for cows, for tolls, for storehouses, for forest
produce, for armoury, for weaving, for ships, for slaughter houses, for
liquor, for infantry, for passports, etc.

Thus, it is very much evident that the State exercised a strong

control over the governance. However, it has to be noted that the State
only acted as a regulatory body and did not interfere in the day to day
affairs of the public.

In theory, the State had absolute control over economic

activities; however in practice, it encouraged all types of private
professions too. It was recognized that the wealth of the State was
dependent on the wealth of the public. Though the State played a
supervisory role, Kautilya did not feel the need to interfere in the
planning and decision making aspects of commerce. In the words of
Kautilya, “There shall be no restrictions in the sales of those items
 21

with a frequent demand; nor shall they be subject to the evils of

centralization.”

2.2 ROLES OF THE STATE:

According to Kautilya, the State had the following roles to play

in an economy:

 Role as a facilitator.
 Role as a regulator.
 Role as a protector.

The State was a facilitator according to the Arthashastra. It was

the duty of the State to facilitate transactions. Kautilya stressed for the
formation of a Welfare State. A Welfare State is a concept of
government where the state plays a key role in the protection and
promotion of the economic and social well-being of its citizens. It is
based on the principles of equality of opportunity, equitable
distribution of wealth, and public responsibility for those unable to
avail themselves of the minimal provisions for a good life. The
general term may cover a variety of forms of economic and social
organization

The State also played the role of a regulator. As discussed

earlier, the State had to overlook each and every activity of the
economy. The State formulated laws and practices which had to be
complied with. Even though the State did not interfere in the working
 22

of any commercial activity, it had to be informed and reported

consistently about the functioning of the business.

The State also acted as a protector of masses. Kautilya favoured

free trade and believed in created mechanisms that would protect the
commercial interests of traders and artisans. According to Kautilya,
“those who conspire to lower the quality of the work of the artisans, to
hinder their income, or to obstruct their sale or purchase shall be
fined.”

2.3 TOWN BUILDING:

Kautilya insisted in creation of villages and not on mere

formation of them. According to Kautilya, villages had to be created
at strategic places. Many such villages were built from scratch during
this period. He also laid emphasis on building commercial towns and
trade zones.

This chapter taken from the Book II of Arthashastra translated

by R. Shamasastry explains the formation of villages during the reign
of Chandragupta Maurya:

“CHAPTER I: FORMATION OF VILLAGES.”

Either by inducing foreigners to immigrate

(Paradesapraváhanena) or by causing the thickly-populated centres of
 23

his own kingdom to send forth the excessive population, the king may
construct villages either on new sites or on old ruins (bhútapúrvama
vá). Villages consisting each of not less than a hundred families and
of not more than five-hundred families of agricultural people of súdra
caste, with boundaries extending as far as a krósa (2250 yds.) or two,
and capable of protecting each other shall be formed. Boundaries shall
be denoted by a river, a mountain, forests, bulbous plants (grishti),
caves, artificial buildings (sétubandha), or by trees such as sálmali
(silk cotton tree), Sámi (Acacia Suma), and kshíravriksha (milky
trees). There shall be set up a stháníya (a fortress of that name) in the
centre of eight-hundred villages, a drónamukha in the centre of four-
hundred villages, a khárvátika in the centre of two-hundred villages
and sangrahana in the midst of a collection of ten villages. There shall
be constructed in the extremities of the kingdom forts manned by
boundary guards (antapála) whose duty shall be to guard the entrances
into the kingdom. The interior of the kingdom shall be watched by
trap-keepers (vágurika), archers (sábara), hunters (pulinda), chandálas,
and wild tribes (aranyachára).

Those who perform sacrifices (ritvik), spiritual guides, priests,

and those learned in the Vedas shall be granted Brahmadaya lands
yielding sufficient produce and exempted from taxes and fines
(adandkaráni). Superintendents, Accountants, Gopas, Sthánikas,
Veterinary surgeons (Aníkastha), physicians, horse-trainers, and
messengers shall also be endowed with lands which they shall have no
right to alienate by sale or mortgage. Lands prepared for cultivation
shall be given to tax-payers (karada) only for life (ekapurushikáni).
 24

Unprepared lands shall not be taken away from those who are
preparing them for cultivation. Lands may be confiscated from those
who do not cultivate them; and given to others; or they may be
cultivated by village labourers (grámabhritaka) and traders
(vaidehaka), lest those owners who do not properly cultivate them
might pay less (to the government). If cultivators pay their taxes
easily, they may be favourably supplied with grains, cattle, and
money. The king shall bestow on cultivators only such favour and
remission (anugrahaparihárau) as will tend to swell the treasury, and
shall avoid such as will deplete it. A king with depleted treasury will
eat into the very vitality of both citizens and country people. Either on
the occasion of opening new settlements or on any other emergent
occasions, remission of taxes shall be made. He shall regard with
fatherly kindness those who have passed the period of remission of
taxes. He shall carry on mining operations and manufactures, exploit
timber and elephant forests, offer facilities for cattle breeding and
commerce, construct roads for traffic both by land and water, and set
up market towns (panyapattana). He shall also construct reservoirs
(sétu) filled with water either perennial or drawn from some other
source. Or he may provide with sites, roads, timber, and other
necessary things those who construct reservoirs of their own accord.
The same was applicable in the construction of places of pilgrimage
(punyasthána) and of groves. Whoever stays away from any kind of
cooperative construction (sambhúya setubhandhát) shall send his
servants and bullocks to carry on his work, shall have a share in the
expenditure, but shall have no claim to the profit. The king shall
exercise his right of ownership (swam yam) with regard to fishing,
 25

ferrying and trading in vegetables (haritapanya) in reservoirs or lakes

(sétushu).”

2.4 LAW MAKING:

Kautilya held great reverence to law and order within the state.
The weights and measures were standardized and all merchants had to
comply with the same.

Kautilya also laid strict rules on the constitution of a “legal

agreement”. For him, the element of transparency was the foremost in
an agreement. During this period, oral agreements were valid;
however, there had to be a voluntary witness to these agreements. The
witness had to be of a sound mind and not a lunatic. The witness
should not act under provocation, anxiety or intoxication. Also, the
witness could not be those who had a criminal record.

Kautilya advocated the importance of forming associations. All

contracts within the association were considered legal. He also laid
out laws for joint ventures and partnerships. The Arthashastra also
gives much importance to arbitrations and trials in courts.

An interesting point to be noticed is that Arthashastra had given

due importance to passports. Every citizen had to carry a passport and
this was applicable to the foreigners as well. Non compliance with this
law led to a fine or imprisonment.
 26

2.5 UNFAIR TRADE PRACTICES:

Kautilya stressed on the importance of fair trade practices. He

also laid down fines for adulteration and supply of goods of an
inferior quality. Kautilya emphasised the need for guidelines in case
of professional services.

As per Arthashastra, “Artisans shall, in accordance with their

agreement as to time, place, and form of work, fulfil their
engagements. Those who postpone their engagements under the
excuse that no agreement as to time, place and form of work has been
entered into shall, except in troubles and calamities, not only forfeit
¼th of their wages, but also be punished with a fine equal to twice the
amount of their wages. They shall also make good whatever is thus
lost or damaged. Those who carry on their work contrary to orders
shall not only forfeit their wages, but also pay a fine equal to twice the
amount of their wages.”

He also established guidelines for medical practitioners.

According to Kautilya, “Physicians undertaking medical treatment
without intimating (to the government) the dangerous nature of the
disease shall, if the patient dies, be punished with the first
amercement. If the death of a patient under treatment is due to
carelessness in the treatment, the physician shall be punished with the
middle-most amercement. Growth of disease due to negligence or
 27

indifference (karmavadha) of a physician shall be regarded as assault

or violence.”

He appointed three commissioners to maintain peace in the State.

Thus, one can say that law and order was strictly followed in the
Mauryan Empire.

2.6 CONSUMER PROTECTION:

Kautilya realised that the role of the State was to ensure that the
consumers were not violated. Standard weights and measuring devices
were used. They were made of materials that were not expandable
under the influence of heat; nor condensable under wet conditions.

Arthashastra prescribed how much to pay the merchants,

artisans, craftsmen and goldsmiths. It also listed the wages to be paid
for metal workers and builders. Kautilya even prohibited beggars and
other entertainers from moving about during the monsoons.

The policy of consumer protection is evident in the

Arthashastra. According to it, “The Superintendent of Commerce shall
allow the sale or mortgage of any old commodities (purána
bhándanám) only when the seller or mortgagor of such articles proves
his ownership of the same. With a view to prevent deception, he shall
also supervise weights and measures. Difference of half a pala in such
measures as are called parimání and drona is no offence. But
 28

difference of a pala in them shall be punished with a fine of 12 panas.

Fines for greater differences shall be proportionally increased.”

The Arthashastra also states the following: “When a trader sells

or mortgages inferior as superior commodities, articles of some other
locality, as the produce of a particular locality, adulterated things, or
deceitful mixtures, or when he dexterously substitutes other articles
for those just sold (samutparivartimam), he shall not only be punished
with a fine of 54 panas but also be compelled to make good the loss”

Thus, one can conclude that Kautilya truly believed in the

phrase “Consumer is the King”.

2.7 MODERN GOVERNANCE:

One can see the stark similarities between the governance of the
Mauryan State and the governance that we are being promised today.
It is a different matter that these policies were implemented back then,
but the modern economy mostly receives only promises.

During the time of Kautilya, the villages were built from

scratch and not merely formed. In India, we don’ have that kind of a
mechanism. There are no towns or cities in India that have been
consciously developed with the exception of Jamshedpur to some
extent. If one compares the same with global cities like Shanghai or
Tokyo, we may find out that we lag behind.
 29

This could also be seen in the way our judiciary works. It is

clearly mentioned in the Arthashastra that the court would not allow a
person with a criminal background to appear as a witness. However,
in India, we see a lot of criminals not only standing as witnesses, but
also as governors and diplomats. This indeed raises a question mark
over the credibility of our judicial system.

The Consumer Protection Act has been enforced in India.

However, not many are getting access to the benefits of this act.
Unfair trade practices and adulteration is still rampant in India.

Speaking about diversity, one can say that the Indian State is
one of the most secular states in the world. We follow the principle of
Welfare State which was put to use by the British. However, it is
evident that this concept is much older than The Great Britain itself.
 30

2. TAXATION:

Taxation is an important part of governance. Means by which

governments finance their expenditure by imposing charges on
citizens and corporate entities. Although, principally, taxation should
be neutral in its effects on the different sectors of an economy,
governments use it to encourage or discourage certain economic
decisions. The Kautilyan State had a very adept mechanism for
taxation. Kautilya knew the importance of collecting the right amount
of taxes at the right time from the right people.

3.1 METHODOLOGY:

According to Kautilya, "Taxation should not be a painful

process for the people. There should be leniency and caution while
deciding the tax structure. Ideally, governments should collect taxes
like a honeybee, which sucks just the right amount of honey from the
flower so that both can survive. Taxes should be collected in small
and not in large proportions".

Kautilya advocated taxation on the basis of the income of the

person. The following taxes were identified by Kautilya:

 Corporate Taxes: These taxes were collected from the guilds of

artisans and the merchants.

 31

 Income Taxes: These taxes were collected by farmers and

agriculturists as a part of their produce.
 Indirect Taxes: These were levied on liquor, slaughter houses, mining,

transportation, etc.
 Land and Property Tax: These included taxes on houses, agricultural

or any other material property.

 Customs Duty: All imported goods had to bear customs duty.

 Entertainment Taxes: Gambling, entertainment, etc had to part with a

specific amount of taxes.

 Special Taxes: These were levied during special occasions such as

wars, famines, draughts, etc.

Kautilya’s method of taxation involved the element of sacrifice

by the taxpayers, direct benefits to them, redistribution of income and
tax incentives.

3.2 AMOUNT OF TAXATION:

As discussed earlier, Kautilya believed in collecting minimal

taxes. Taxes had to be collected on the excesses left after expenses.
The income structure during the Mauryan Empire was as follows:

Taxable income has to be calculated on the following:

 Current Income: It refers to the income which is steady. Normally,

1/6th of the income had to be paid in the form of taxes.

 32

 Transferred Income: This is the income which has been transferred to

an individual. For instance, the wealth transferred to the son due to the
death of his parents comes under transferred income. 1/4th of this
income had to be paid as taxes.
 Miscellaneous Income: This category again had three subdivisions.

Which included recovery of previously written off debts, realisable

economies made in investment against planned budgets any other
value added income.

Every individual had to compulsorily maintain an account book

which had to be presented to the superintendent of commerce while
paying the taxes. Every transaction had to be recorded on the date of
transaction in the account book. Not maintaining such a book was
considered fraudulent and was punishable. Also, the accounting
system had to be uniform and as prescribed by the superintendent of
commerce from time to time.

3.3 EXEMPTIONS AND WAIVERS:

The Mauryan Empire had a very strict methodology for

collection of taxes. Though the collection amount was minimal, they
had a very effective mechanism for collection of taxes and this
ensured that the taxes were paid by every person on a timely basis.
However, the Mauryan State offered exemptions and waivers on
taxation. Some of the exemptions and tax waivers are as follows:
 33

 In case of a widow with children to look after, the transferred income

due to the death of her husband is exempt from taxation.
 In case of faulty rainfall or draught, agricultural produce is exempted
from taxation.
 Taxes were exempted for soldiers with exemplary record.
 Taxes were also exempted in case of serious medical illness.

 The family of martyrs in war did not have to pay taxes.

These are a few of the cases where taxes were exempted. This
is indeed a testimony to the fact that Kautilya respected humanity and
acknowledged the efforts and pains of the citizens.

3.4 THE MODERN METHODOLOGY OF TAXATION :

India has a well developed tax structure with a three-tier federal

structure, comprising the Union Government, the State Governments
and the Urban/Rural Local Bodies. The power to levy taxes and duties
is distributed among the three tiers of Governments, in accordance
with the provisions of the Indian Constitution. The main taxes/duties
that the Union Government is empowered to levy are Income Tax
(except tax on agricultural income, which the State Governments can
levy), Customs duties, Central Excise and Sales Tax and Service Tax.
The principal taxes levied by the State Governments are Sales Tax
(tax on intra-State sale of goods), Stamp Duty (duty on transfer of
property), State Excise (duty on manufacture of alcohol), Land
Revenue (levy on land used for agricultural/non-agricultural
 34

purposes), Duty on Entertainment and Tax on Professions & Callings.

The Local Bodies are empowered to levy tax on properties (buildings,
etc.), Octroi (tax on entry of goods for use/consumption within areas
of the Local Bodies), Tax on Markets and Tax/User Charges for
utilities like water supply, drainage, etc.

Since 1991 tax system in India has under gone a radical change, in
line with liberal economic policy and WTO commitments of the
country. Some of the changes are:

 Reduction in customs and excise duties.

 Lowering corporate Tax.

 Widening of the tax base and toning up the tax administration.

Personal Income Tax:

Individual income slabs are 0%, 10%, 20%, 30% for annual incomes
up to Rs 50,000, 50,000 - 60,000, 60,000 - 1,50,000 and above
1,50,000 respectively.

Corporate Income Tax:

For domestic companies, this is levied @ 35% plus surcharge

of 5%, where as for a foreign company (including branch/project
offices), it is @ 40% plus surcharge of 5%. An Indian registered
company, which is a subsidiary of a foreign company, is also
considered an Indian company for this purpose.

Thus, one can say that the Mauryan system of taxation has been
instrumental in the formation of the modern Indian system of taxation.
 35

4 TRADE:

Being the prime minister of Chandragupta Maurya, Kautilya

was an economist par excellence. According to scholars, Kautilya was
the pioneer of economics in the world. His policies of trade and
commerce were exemplary to say the least. Kautilya was of the
opinion that trade was the most important ingredient for a State’s
prosperity. He laid emphasis on foreign trade as well as on domestic
trade.

4.1 DOMESTIC TRADE:

Domestic trade consists of trading within the countries amongst

the citizens. After agriculture, trading was considered to be the most
important occupation in the Mauryan Empire.

A] TRADE ROUTES:

It was the king’s duty to promote trade and commerce by

maintaining trade routes connecting markets and industrial zones.
Apart from promoting trade by improving infrastructure, the state was
required to keep trade routes free of harassment by courtiers, state
officials, thieves and frontier guards. Kautilya appears to mistrust
traders believing them to be thieves, with a propensity to from cartels
 36

to fix prices and make excessive profits as also to deal in stolen

property. He prescribed heavy fines for discouraging such offences by
traders and with a view to consumer protection. Further, the law on
dealings among private merchants included:

(a) Selling on agency basis.

(b) Revocation of contracts between traders.

(c) Traders traveling together and pooling their goods.

B] SAFETY OF GOODS IN TRANSIT:

It was also enjoined upon the frontier officers to ensure the safe
passage of the merchandise and to make good any loss incurred.
Responsibility to recompense loss to traders vested with the village
headman barring, of course, goods that were stolen or sent away.
Further if any property of trader was lost or driven away in an area
between villages, the person responsible was the Chief Superintendent
of Pastures, (CSP).

4.2 FOREIGN TRADE:

Kautilya was of the opinion that foreign trade was most

necessary for the growth of national economy. He was probably the
first person to envisage the concept of a ‘nation’.
 37

Kautilya imposed a few restrictions on foreign trade. Foreign

traders had to pay a sum of money in order to carry out business in the
state. This kept a regulation in the invaders who arrive to conduct
business. The foreign policy of Kautilya was really one of the
distinguishing factors of Arthashastra.

Kautilya considered the foreign businessmen as threats to the

kingdom. According to him, they should not be given the same status
as the local traders. However, Kautilya also explained the need for
foreign trade. He gave incentives for local traders exporting their
products. He strongly encouraged foreign trade, basing it on the
premise that for a successful trade contract to be established, it had to
be beneficial to all.

A] TRADE AND REVENUE:

Trade was conducted as a revenue generator in the Kautilyan

era. It was mostly carried out by he State and private trade was
allowed in areas other than the ones in which the State had a
monopoly. The revenues raised through trading went partly to finance
the army and to expand the territories.

Revenue from foreign trade was divided into three sources:

 Land Revenue: It consisted of taxes for using the land in the kingdom.

The land revenue was fixed at 1/6th of the share of the produce from
the land.
 38

 Import Duties: Import duties on foreign goods were roughly around

20% of their value. These also constituted revenue to the State.
 Miscellaneous Levies: These consisted of tolls, road cess, ferry
charges, etc.

B] IMPORTS:

The sale of imported goods was allowed in as many places as

possible so that they were readily available to the people in towns and
countryside.

Rome was the major trading partner in the Mauryan Empire.

Wine, chemicals, high quality pottery, alloys, gold and silver, spices,
etc were imported from Rome. This trade was very favourable for The
Mauryan Empire.

Traders were given the following incentives:

 Local merchants who brought in foreign goods by caravans or water

routes were exempted from taxes so that they could enjoy profits.
Thus, entrepreneurship was encouraged during the Mauryan Empire.
 Foreign merchants were not allowed to be sued by any parties for a
commercial dispute. The local partner was however allowed to be
sued. Thus the liability was always on the citizens to ensure fair trade
practices.
 39

The threshold limit on profit was also indicated. The

permissible profit margin on imported goods was 10%.

C] EXPORTS:

Foreign trade was conducted on a barter basis. Exports were

carried out by the State Trading Office. It determined the level of
expenses for exports. The State also provided for the share of profits
payable to the foreign king. All the expenses were calculated and the
profitability of the trade was determined.

Arthashastra encouraged profitable trading. It was not

conducive towards trading which resulted in losses. The traders had to
keep in mind the importance of trading with strategic nations.
Kautilya emphasized on the importance of using trade to create
alliances with strong nations. Many Indian crops, spices, fabric were
exported to Rome and other countries.

In the words of Kautilya, “Having ascertained the value of local

produce as compared with that of foreign produce that can be obtained
in barter, the superintendent will find out (by calculation) whether
there is any margin left for profit after meeting the payments (to the
foreign king) such as the toll (sulka), road-cess (vartaní), conveyance-
cess (átiváhika), tax payable at military stations (gulmadeya), ferry-
charges (taradeya), subsistence to the merchant and his followers
(bhakta), and the portion of merchandise payable to the foreign king
(bhága). If no profit can be realised by selling the local produce in
foreign countries, he has to consider whether any local produce can be
 40

profitably bartered for any foreign produce. Then he may send one
quarter of his valuable merchandise through safe roads to different
markets on land. In view of large profits, he (the deputed merchant)
may make friendship with the forest guards, boundary-guards, and
officers in charge of cities and of country-parts (of the foreign king).
He shall take care to secure his treasure (sára) and life from danger. If
he cannot reach the intended market, he may sell the merchandise (at
any market) free from all dues (sarvadeyavisuddham).”

4.3 MODERN TRADE POLICIES:

In recent times there has been considerable research about trade

liberalization and the numerous ways in which this can be achieved.
Kautilya’s views on trade reflected that he grasped among other things
a point that is extremely relevant even in the present era of globalized
commerce and trade. That is: There is no autonomous mechanism that
will ensure that a nation would benefit from trade in the absence of
certain safeguards and policy measures.

It is thus seen that the importance of the trader was recognized

by Kautilya as also the importance of the rule of law, by making
restoration for any loss caused by its failure. At the same time, traders
were prevented from oppressing people. This clearly shows that the
welfare of the people was uppermost in the mind of the king.

The connotations of harassment and obstacles to trade may

have changed. However, the fact that anti-dumping measures exist or
 41

that cartelization has to be coped with or adverse terms of trade have

to be accounted for in certain sectors underscore that safeguards are
essential even in current times and those responsible for managing
these measures should be responsible. Furthermore, Kautilya was
cognizant of the fact that the terms of trade were not just dependent on
the economics but also on other various parameters. The traders had to
keep in mind the political or strategic advantages in exporting or
importing from a particular country. The proliferation of free trade
agreements in recent times underscores this point because there is a
definite political dimension to trade treaties and agreements.
 42

5. BANKING, CO-OPERATIVES AND RISK

MANAGEMENT:

Banking and insurance sectors have always been the catalysts

of economic development. It was more or less the same during the
reign of Chandragupta Maurya. Arthashastra indicates that the
banking sector was very much developed during the Mauryan Empire.

RISKS AND UNCERTAINTIES:

Kautilya related the levels of risks and uncertainties to levels of

profits and interests. He was of the opinion that higher levels of risk
and uncertainty had to be compensated with higher levels of profits.
This could be seen in the trade policy of Kautilya. He allowed 10%
profits on imports while allowing only 5% on local trade. This was
because imports not only required a high amount of locked-up capital,
but also there was a risk of goods getting stolen or damaged in transit.

Kautilya provides for different rates of interest for different

sections of the society. According to the Arthashastra, “An interest of
a pana and a quarter per month per cent is just. Five panas per month
per cent is commercial interest (vyávaháriki). Ten panas per month
per cent prevails among forests. Twenty panas per month per cent
prevails among sea-traders (sámudránám). Persons exceeding, or
causing to exceed the above rate of interest shall be punished with the
 43

first amercement; and hearers of such transactions shall each pay half
of the above fine.” This clearly shows that Kautilya has anointed
riskier ventures with greater rates of interest.

PRIVATE SECTORS VERSUS PUBLIC SECTORS:

In case of risk management, Kautilya had a centralized control

over all the transactions. Almost all the transactions relating to
insurance were taken care of by the state. However, this responsibility
was also taken up by landlords. The landlords though had to abide
with the interest rates prevalent in the economy.

The private money lenders had to pay a sum of profits on

interests to the state. They were also entitled to a limit on the amount
of money they lent. The private money lenders could also take up the
risk for investments in merchandise. However, all the people were not
allowed to take up money lending. This right was granted only to
people with enough income to dispose off and they have to be people
of good character.

On the other hand, the government treasury also undertook the

work of insuring and managing risks. They gave money only to the
needy and to people of good character. Thus, it has to be said that
Kautilya managed both, the private and the public sector in risk
management ably.
 44

LOANS AND RATE OF INTEREST:

Kautilya distinguished six different kinds of interests:

compound interest, periodical interest, stipulated interest, daily
interest, and the use of a pledged article. Indeed the idea of expressing
interest as a percent originated in India.

According to Kautilya, “The nature of the transactions between

creditors and debtors, on which the welfare of the kingdom depends,
shall always be scrutinized. Interest in grains in seasons of good
harvest shall not exceed more than half when valued in money.
Interest on stocks (prakshepa) shall be one-half of the profit and be
regularly paid as each year expires. If it is allowed to accumulate
owing to the intention or to the absence of the receiver or payer, the
amount payable shall be equal to twice the share or principal
(múlyadvigunah). A person claiming interest when it is not due, or
representing as principal the total amount of his original principal and
the interest thereon shall pay a fine of four times the amount under
dispute (bandhachaturgunah).”

Kautilya outlined a structure based on the type of loans, factors

affecting the rate of interest, methods of calculating interest and
circumstances under which interest may not be calculated by the
lenders. Interest rates varied from 1.25% to 2% per month. The rate of
interest depended upon the risk involved and the potential
productivity of the money borrowed. The highest rate of interest was
20% per month and was charged to those involved in overseas trade as
the risk involved in this transaction was the maximum. It can be said
 45

that the Kautilyan system of lending was very effective and even
modern.

GUILDS AND INSURANCE:

Kautilya also attributes a greater rate of interest to debts taken

by a group of individuals. Since the group would share the burden of
interest, it would not be heavy on one individual. Moreover, the group
was in a position of to pay high interest since it was involved in larger
projects with a greater profit margin. However, the creditors could not
charge an interest not approved by the state.

According to Kautilya, “Those who can be expected to relieve

misery, who can give instructions to artisans, who can be trusted with
deposits, who can plan artistic work after their own design, and who
can be relied upon by guilds of artisans, may receive the deposits of
the guilds. The guilds (srení) shall receive their deposits back in time
of distress.”

PRESENT SCENARIO:

Kautilya distinguished six different kinds of interests:

compound interest, periodical interest, stipulated interest, daily
interest, and the use of a pledged article. Prior to liberalization these
two sectors were controlled and regulated by the government.
 46

Nationalized banks and insurance companies had a firm grip over the
market. Because of liberalization, the banking and insurance industry
opened up for private participation. The following are the reforms
made in the banking and the insurance sectors respectively in India.

A] Banking Sector:

The three major changes in the banking sector after

liberalization are:

 Step to increase the cash outflow through reduction in the statutory

liquidity and cash reserve ratio.

 Nationalized banks including SBI were allowed to sell stakes to

private sector and private investors were allowed to enter the banking
domain. Foreign banks were given greater access to the domestic
market, both as subsidiaries and branches, provided the foreign banks
maintained a minimum assigned capital and would be governed by the
same rules and regulations governing domestic banks.

 Banks were given greater freedom to leverage the capital markets

and determine their asset portfolios. The banks were allowed to
provide advances against equity provided as collateral and provide
bank guarantees to the broking community.
 47

B] Insurance sector:

The Insurance Regulatory and Development Authority Act

1999 (IRDA Act) allowed the participation of private insurance
companies in the insurance sector. The primary role of IRDA was to
safeguard the interest of insurance policy holders, to regulate, promote
and ensure orderly growth of the insurance industry. Some of the
prominent insurance companies are:

 Bajaj Allianz Insurance Corporation

 Birla Sun Insurance Co. Ltd.

 HDFC Standard Insurance Co. Ltd.

 ICICI Prudential Insurance Co. Ltd.

 Max New York Insurance Co. Ltd.

 Tata AIG Insurance Co Ltd.

C] Future Trends:

 Globally outsourcing industry would continue to grow.

 Following the success of US and UK, more countries in the European
Union would outsource their business.

 Technological power shift from the West to the East as India and
China emerge as major players..

Thus, if one compares the Kautilyan system of banking and risk

management with the modern system, one could see many
similarities. However, the Kautilyan ideology of keeping a threshold
over the amount of lending is the highlight in this section. It shows
 48

that such a system was prevalent in India around 3000 years ago. The
government of U.S.A. would have, in all probability, not fallen into
the economic depression or the sub-prime crisis, had they read the
Arthashastra.
 49

6. AGRICULTURE AND IRRIGATION

MANAGEMENT:

Agriculture was the most important economic activity. Kautilya

was of the view that cultivable land is better than mines because
mines fill only the treasury while agricultural production fills both
treasury and store houses. The Arthashastra spoke about the functions
of a Superintendent of Agriculture and states that the King should
understand the intricacies of agriculture. Agriculture has always been
the backbone of Indian economy. The government recognises
agriculture as the most important occupation in India. Agriculture
requires irrigation facilities to survive. This has given rise to the
irrigation sector. Hence, both go hand in hand.

6.1 THE MAIN ACTIVITY OF THE STATE:

According to the Arthashastra, agriculture, cattle-rearing and

commerce were the three main occupations in the State. However,
Chanakya gave agriculture the top status as the most important
activity in the State. In fact, Kautilya was of the opinion that a king
must also learn agriculture. Agriculture was the major constituent of
the Mauryan economy. Kautilya had appointed a minister to look after
the agricultural sector in the economy.
 50

6.2 SUPPORTS TO AGRICULTURE:

Kautilya insisted in developing villages and creating an

agrarian economy. Kautilya supported agriculture at all costs. This is
evident from the following extract:

“Possessed of the knowledge of the science of agriculture

dealing with the plantation of bushes and trees
(krishitantragulmavrikshsháyurvedajñah), or assisted by those who are
trained in such sciences, the superintendent of agriculture shall in time
collect the seeds of all kinds of grains, flowers, fruits, vegetables,
bulbous roots, roots, fiber producing plants, and cotton. He shall
employ slaves, labourers, and prisoners (dandapratikartri) to sow the
seeds on crown-lands which have been often and satisfactorily
ploughed. The work of the above men shall not suffer on account of
any want in ploughs (karshanayantra) and other necessary instruments
or of bullocks. Nor shall there be any delay in procuring to them the
assistance of blacksmiths, carpenters, borers (medaka), rope makers,
as well as those who catch snakes, and similar persons.”

Thus, one can say that Kautilya indicated that agriculture

should receive policy and administrative support from the government
officials.

6.3 METEOROLOGY:
 51

Weather forecasting was of prime importance in the Mauryan

Empire. The forecast or rain was made by observing the planetary
motion and the rise and appearance of the Sun. In the Mauryan Era, a
good rainy season was when one-third of the annual rainfall occurs in
the beginning and at the end of the season and two-thirds in the
middle.

According to the Arthashastra, “The quantity of rain that falls in

the country of jángala is 16 dronas; half as much more in moist
countries (anúpánám); as to the countries which are fit for agriculture
(désavápánam);--13½ dronas in the country of asmakas; 23 dronas in
avantí; and an immense quantity in western countries (aparántánám),
the borders of the Himalayas, and the countries where water channels
are made use of in agriculture (kulyávápánám). When one-third of the
requisite quantity of rain falls both during the commencement and
closing months of the rainy season and two-thirds in the middle, then
the rainfall is (considered) very even (sushumárúpam). A forecast of
such rainfall can be made by observing the position, motion, and
pregnancy (garbhádána) of the Jupiter (Brihaspati), the rise and set
and motion of the Venus, and the natural or unnatural aspect of the
sun. From the sun, the sprouting of the seeds can be inferred; from
(the position of) the Jupiter, the formation of grains (stambakarita) can
be inferred; and from the movements of the Venus, rainfall can be
inferred. Three are the clouds that continuously rain for seven days;
eighty are they that pour minute drops; and sixty are they that appear
with the sunshine-this is termed rainfall. Where rain, free from wind
 52

and unmingled with sunshine, falls so as to render three turns of

ploughing possible, there, the reaping of good harvest is certain.”

Thus, one ac conclude that there was a very efficient

mechanism for meteorology during the Kautilyan Era. Agriculture
was solely dependent on weather and one had to maintain an alert
forecasting of meteorological conditions.

6.4 CROPPING PATTERN:

The Arthashastra says, “According as the rainfall is more or

less, the superintendent shall sow the seeds which require either more
or less water. Sáli (a kind of rice), vríhi (rice), kodrava (Paspalum
Scrobiculatum), tila (sesame), priyangu (panic seeds), dáraka, and
varaka (Phraseolus Trilobus) are to be sown at the commencement
(púrvávápah) of the rainy season. Mudga (Phraseolus Mungo), másha
(Phraseolus Radiatus), and saibya are to be sown in the middle of the
season. Kusumbha (safflower), masúra (Ervum Hirsute), kuluttha
(Dolichos Uniflorus), yava (barley), godhúma (wheat), kaláya
(leguminous seeds), atasi (linseed), and sarshapa (mustard) are to be
sown last. Or seeds may be sown according to the changes of the
season. Fields that are left unsown (vápátiriktam, i.e., owing to the
inadequacy of hands) may be brought under cultivation by employing
those who cultivate for half the share in the produce (ardhasítiká); or
those who live by their own physical exertion (svavíryopajívinah)
may cultivate such fields for ¼th or 1/5th of the produce grown; or
 53

they may pay (to the king) as much as they can without entailing any
hardship upon themselves (anavasitam bhágam), with the exception of
their own private lands that are difficult to cultivate.”

It also states, “The superintendent shall grow wet crops

(kedára), winter-crops (haimana), or summer crops (graishmika)
according to the supply of workmen and water. Rice-crops and the
like are the best (jyáshtha, i.e., to grow); vegetables (shanda) are of
intermediate nature; and sugarcane crops (ikshu) are the worst
(pratyavarah, i.e., very difficult to grow), for they are subject to
various evils and require much care and expenditure to reap. Lands
that are beaten by foam (phenághátah, i.e., banks of rivers, etc.) are
suitable for growing vallíphala (pumpkin, gourd and the like); lands
that are frequently over flown by water (paríváhánta) for long pepper,
grapes (mridvíká), and sugarcane; the vicinity of wells for vegetables
and roots; low grounds (hariníparyantáh) for green crops; and
marginal furrows between any two rows of crops are suitable for the
plantation of fragrant plants, medicinal herbs, cuscus roots (usínara),
híra, beraka, and pindáluka (lac) and the like. Such medicinal herbs as
grow in marshy grounds are to be grown not only in grounds suitable
for them, but also in pots (sthályam).”

Thus, the cropping pattern during the Mauryan Empire has been
exhaustively dealt with, in the Arthashastra.

6.5 IRRIGATION:
 54

Kautilya believed that irrigation was the major supporter for

agriculture. He therefore laid stress on the establishment of many
irrigation facilities within the State. He also established rules for
building tanks and dams.

According to the Arthashastra, “Irrigational works (sétubandha)

are the source of crops; the results of a good shower of rain are ever
attained in the case of crops below irrigational works.”

It also states the following: “Of forts such as a fort on a plain, in

the centre of a river, and on a mountain, that which is mentioned later
is of more advantage than the one previously mentioned; of
irrigational works (sétubandha), that which is of perennial water is
better than that which is fed wit water drawn from other sources; and
of works containing perennial water, that which can irrigate an
extensive area is better.”

Any one hiring, leasing or sharing water works could use them
with a pledge to keep it clean and safe. They could also give it to
others for use by holding a part of the produce.

6.6 AGRICULTURAL TAXATION:

Kautilya was against excessive taxation. It held nominal taxes

like 1/6th, 1/8th or 1/10th of the produce. However, it depended on the
annual production and the nature of the produce.
 55

According to Arthashastra, “In case of construction of new

works such as tanks, lakes, etc; taxes on the lands below such tanks)
shall be remitted for five years (Panchavárshikah parihárah). For
repairing neglected or ruined works of similar nature, taxes shall be
remitted for four years. For improving or extending water-works,
taxes shall be remitted for three years. In the case of acquiring such
newly started works by mortgage or purchase, taxes on the lands
below such works shall be remitted for two years. If uncultivated
tracts are acquired (for cultivation) by mortgage, purchase or in any
other way, remission of taxes shall be for two years. Out of crops
grown by irrigation by means of wind power or bullocks
(vátapravartimanandinibandháyatana) or below tanks, in fields, parks,
flower gardens, or in any other way, so much of the produce as would
not entail hardship on the cultivators may be given to the Government.
Persons, who cultivate the lands below tanks, etc., of others at a
stipulated price (prakraya), or for annual rent (avakraya), or for certain
number of shares of the crops grown (bhága) or persons who are
permitted to enjoy such lands free of rent of any kind, shall keep the
tanks, etc., in good repair; otherwise they shall be punished with a fine
of double the loss. Persons, letting out the water of tanks, etc., at any
other place than their sluice gate (apáre), shall pay a fine of 6 panas;
and persons who recklessly obstruct the flow of water from the sluice-
gate of tanks shall also pay the same fine.”

6.7 SUSTAINABLE AGRICULTURE:

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According to Kautilya, “The seeds of grains are to be exposed to mist

and heat (tushárapáyanamushnam cha) for seven nights; the seeds of
kosi are treated similarly for three nights; the seeds of sugarcane and
the like (kándabíjánam) are plastered at the cut end with the mixture
of honey, clarified butter, the fat of hogs, and cow dung; the seeds of
bulbous roots (kanda) with honey and clarified butter; cotton seeds
(asthibíja) with cow dung; and water pits at the root of trees are to be
burnt and manured with the bones and dung of cows on proper
occasions.”

Apart from being the major income provider, agriculture was also the
livelihood of many during the Mauryan Era. Most of the farmers
carried out subsistence farming and hence, agriculture was the driving
force of the Mauryan Empire. That is why Kautilya laid more
emphasis on agriculture than any other occupation.

6.8 PRESENT SCENARIO:

Government procurement policy, which guarantees a minimum

price for rice and wheat crops to farmers, has created a bias in their
favor and a distortion of cropping pattern, which is not market
determined. At times, these procurement policies result in such
surpluses of food grain that, given inadequate storage facilities for
them, the beneficiaries of food subsidies are Indian rats.
Professionalizing agriculture, especially for large farms, would be
needed with professionally trained managers able to study global
 57

movement of prices, modern farming techniques and use of

technologies such as satellite farming. Courses on farm management
need to be more widespread. Similarly, agriculture is completely out
of the purview of the tax regime in India. The agricultural sector that
has been given a priority status for bank lending gets completely de-
prioritized for taxation. As against this, the Arthashastra has
highlighted the significance of taxes on agriculture and allied
activities (though it was one of the sole major sectors contributing to
state welfare).

The importance of irrigation and providing amenities could be taken

up on a priority basis. The agricultural economy that has to compete
with the international market continues to be at the mercy of the
vagaries of the monsoon. Although India had the second largest
irrigated area in the world, the area under assured irrigation drainage
is inadequate. Some land, which was fertile earlier, has become fallow
because of inadequacy of fertilizers or the incorrect usage of
fertilizers. Emphasis on organic farming, which obviates the need to
use chemical fertilizers, is an obvious alternative. Given the fact that
India has one of the natural factories for organic manure, one wonders
why organic farming has not yet got the attention it deserves.
Furthermore, this would also help to prevent slaughter of cattle
because if their manure provides a revenue stream to the farmer, he
would be averse to slaughtering them. Systematic cropping pattern
and irrigation system followed by the Kautilya Raj is what experts
need to recognize. Farmers and consumers would benefit if all
agricultural production were produced by ecologically sound and
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sustainable means. Pricing and marketing of agro products and

providing adequate infrastructure to the agricultural sector are crucial.
Evidently, as in other spheres, many of the principles enumerated in
the Arthashastra are applicable to the agricultural sector in India.
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7 PUBLIC SECTOR MANAGEMENT:

Kautilya believed in strengthening the public sector. He wanted

the kingdom to follow the dictates of a strong centralized power.
However, Kautilya has warned against the demerits of such
centralization. He was of the belief that people should be given rights
and responsibilities such that they actively participate in the
maintenance of the kingdom. Thus, Kautilya believed in a mixed
economy, though the centre vested some important powers.

7.1 THE ROLE OF PUBLIC SECTOR:

The main role of the public sector was maintaining the well
being of the nation. The public sector was supposed to hold all the
important economic posts in the kingdom. The public sector also
acted as a regulator of all economic activities in the society. It does
not mean that the private sector did not have a role to play. The
private sectors were free to carry out their transactions. However, they
had to intimate the state before any such activity took place. The state
allowed many private sectors to bloom and flourish. This was done
under the surveillance of the public sector which was run by the State.

Also, the public sector did not allow all private players to take
part in the economy. The private players were given permission only
after proper scrutiny of the character and ability of the individual(s).
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7.2 INDUSTRIES IN PUBLIC SECTOR:

As discussed earlier, many sectors were run by the State and

hence consisted of the public sector. The following activities or
businesses were predominantly under the control of the State:

 Land: All barren and unoccupied lands were controlled by the state.
The ownership of unclaimed land was with the state. The State
regularly leased land for peasants and the underprivileged for farming,
for setting up businesses or for building settlements. He tenants had to
pay a nominal sum of money to the state as fees.

 Mining and Fishing: These were predominantly controlled by the

State. However, the State also allowed private sectors to carry out this
trade by paying a trade tax to the State.

 Salt Pans: Salt pans worked under the complete authority of the State.

A Salt superintendent was also appointed for controlling this activity.

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 Liquor and Gambling: Manufacture and sale of liquor and the

business of gambling and betting was the State’s monopoly. Any

person involved in this was severely punished

 Animal Husbandry: The State allowed Animal Husbandry to the

private sector. However, the State even volunteered to take care of
animals and cattle for a sum or a fee.

 Forestry and Mining: Forestry and mining were monopolies of the

State. Forest superintendents were appointed by the State who grew
and maintained forests. Mining was a major activity of the State.

 Manufacture: Apart from weapon making and liquor brewing, all

other manufacturing activities were handed over to private sectors,
though the State regulated and controlled the working of these
manufacturing activities.

7.3 PUBLIC SECTOR IN INDIA:

India is a mixed economy where the public and the private

sectors go hand in hand. Public sectors were a monopoly in many
activities. However, as an effect of liberalization, the power is divided
among the private sectors as well.
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Integration of Indian economy with global markets has thrown

up new opportunities and challenges. Some of the public sector
enterprises with strategic vision are actively exploring new avenues
and have increased their activities to go in for mergers, acquisitions,
amalgamations, takeovers and for creating new joint ventures. The
Navratna CPSEs, which enjoy greater autonomy to incur capital
expenditure and enter into joint ventures in India and abroad should
avail of these opportunities for rapid growth overseas. Acquisitions,
JVs and green field projects in Petroleum Sector have already taken
place and are under active consideration in Power, Coal and Mining
Sectors.

Another important initiative towards re-structuring of pubic sector

enterprises is ‘Disinvestment’ in select CPSEs. The Statement of
Industrial Policy of 1991 stated that in the case of selected enterprises,
part of Government holdings in the equity share capital of these
enterprises will be disinvested in order to provide further market
discipline to the performance of public enterprises.

Some CPSEs have been such as Videsh Sanchar Nigam Ltd. (VSNL),
Indian Petrochemicals Corporation Ltd. (IPCL), Maruti Udyog
Limited (MUL), CMC Ltd., etc. have been privatized. In addition,
there are CPSEs which have been acquired by other CPSEs by way of
disinvestment and open bidding such as acquisition of IBP by Indian
Oil Corporation Limited. There are also instances of acquisition of
private firms by CPSEs as in the case of MRPL, which was a joint
sector company and became a CPSE subsequent to acquisition of its
majority shares by ONGC.
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8. HUMAN RESOURCES MANAGEMENT:

One of the most important aspects of Kautilya’s management is

his theories on managing Human Resources. Arthashastra boasts of
having a well defined Human Resource Management structure written
around 2400 years ago. Human resource is a term used to describe the
individuals who comprise the workforce of an organization, although
it is also applied in labour economics too; for example, business
sectors or even whole nations. Human resources is also the name of
the function within an organization charged with the overall
responsibility for implementing strategies and policies relating to the
management of individuals (i.e. the human resources).

In simple terms, an organization's human resource management

strategy should maximize return on investment in the organization's
human capital and minimize financial risk. Human Resources seeks to
achieve this by aligning the supply of skilled and qualified individuals
and the capabilities of the current workforce, with the organization's
ongoing and future business plans and requirements to maximize
return on investment and secure future survival and success. In
ensuring such objectives are achieved, the human resource function
purpose in this context is to implement the organization's human
resource requirements not only effectively but also pragmatically;
taking account of legal, ethical and is practical in a manner that retains
the support and respect of the workforce.
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Key functions:

Human Resources may set strategies and develop policies, standards,

systems, and processes that implement these strategies in a whole
range of areas. The following are typical of a wide range of
organizations:

 Recruitment and selection.

 Organizational design and development.
 Business transformation and change management.
 Performance, conduct and behaviour management.
 Industrial and employee relations.
 Human resources (workforce) analysis and workforce personnel
data management.
 Compensation, rewards, and benefits management.
 Training and development (learning management).

Implementation of such policies, processes or standards may be

directly managed by the HR function itself, or the function may
indirectly supervise the implementation of such activities by
managers, other business functions or via third-party external partner
organizations. Applicable legal issues, such as the potential for
disparate treatment and disparate impact, are also extremely important
to HR managers.

8.1: WINNING PEOPLE / LURING PEOPLE:

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Arthashastra identifies four kinds of people who could be lured;

the angry, the timid, the greedy and the proud. Kautilya believes that
these are the four basic behaviours which could lead to one’s
downfall. The body of an individual is controlled by his mind. The
mind recognizes desires which are either fulfilled or unfulfilled. The
unfulfilled desires linger on the mind of the individual. It takes many
forms like anger, fear, greed and pride. To fulfill those desires, the
mind succumbs to illusions and temptations posed by the
surroundings. Thus, these four are the primary vices of the senses
which have to be exploited by the King.

To exploit these behaviours, the King has to identify these

behaviours.

A] The group of the enraged:

Anger is exhibited when one's desires are obstructed. This group

includes the following people:

 The one who is cheated/denied after being promised certain

rewards (increment in pay, status etc).

 The one who is in disfavor because of a favorite of his superior.

 The one who is unable to deliver results on account of being

challenged to a particular assignment. This will particularly happen in

the organizations, which have a focus just on the results and not on the
efforts that a person puts.
 The one who is distressed after being transferred to a far-flung

area, or an area of his dislike. Here one possibility is that a person is

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willing to take on the transfer but is not remunerated properly, and

another possibility is that the person is not willing to take on such a
transfer but is forced to do so.
 The one who is on an assignment not by his choice and not of his
choice. That is, being put on an assignment without even being
motivated for it. It could be something, which is away from the
promised career path of an employee - something that definitely adds
value to the organization but not to the employee as such (as
perceived by the employee) quite true in case of knowledge workers.
 The one who has not achieved his objective in the organization

even after trying hard and giving his best service. This could be
because of a fault in the culture of that organization. For example at
times we see that even after being trained for a purpose the employee
is not able to add enough to his function - the answer could lie with
the fact that the employee hasn't learnt much, his fault. But what
concerns us here is that even though willingness is there to perform
but the culture hinders that performance.
 The one who is hindered from doing his duty. It may be because of

paucity of time, or because responsibility given is not complemented

with required authority.
 The one whose remuneration (financial and non-financial) is

incommensurate with the efforts he puts in.

 The one deserving but deprived of an office he aspires. This could

especially happen if there is delayed or no promotion (job

enrichment), and/or delayed or no inter-functional or to that extent
even intra-functional movement (job enlargement).
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 The one held back by his peers or superiors in an organization for

their own interests. Remember Hawthorne's bank wiring experiment.

 The one who is reprimanded and/or punished, (whether such

reprimand/ punishment is justified or not) after serving the

organization loyally.
 The one prevented from indulging in conduct, not in conformance

to the organization's Code of Conduct.

 The one, whose credit of work has been stolen by others.

B] The group of the frightened:

They are because they have the fear of loosing something. The
people under this category are as follows:

 The one who has thwarted someone; that is, the one who has pushed

himself up by pulling other(s) down.

 The one who has committed a serious wrong or a deliberate act

detrimental to the organization.

 The one who has become known for a wrongful act. This act might be

done in a personal capacity and not a professional one.

 The one frightened by the punishment meted out to another for a like

offence.
 The one who has seized someone else's work/credit.

 The one who is subdued by authority.

 The one who has suddenly amassed a lot of wealth at the expense of

the organization.
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 The one disliked by his superiors.

 The one who entertains hostility towards superiors or the organization

itself.

C] The group of greedy:

It is a state of overwhelming desires. The people under this category

are as follows:

 The one who is impoverished (for money/respect/opportunities). Such

people want to grow really fast in their organizations.

 The one in a calamity. Calamity generated out of one's own recurring

actions.
 The one indulging in vices. Again, this could be both personal and

professional.
 The one indulging in rash transactions. Rashness of transactions

apparently involves a financial loss or expectation of a great gain.

Such a fellow will accept challenges rashly - without even thinking
whether they are achievable or not, greedy of being noticed.

D] The group of proud:

It relates to arrogance that follows greed. The people under this

category are as follows:
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 The one who is filled with self-conceit (self-importance, pride, vanity,

snobbery, arrogance).
 The one who is desirous of honor.

 The one who is resentful of the honor done to a colleague (who is

perceived a competitor or rival).

 The one placed in a low position, but is convinced that he is capable

of being at a higher position in the hierarchy.

 The one fiery in temper.

 The one given to violence (physical, verbal or non verbal in nature).

 The one dissatisfied with his emoluments i.e. the one who thinks that

he is getting much less than what he deserves.

Now that we have identified such people who can be targeted

for the purpose of head hunting, following is the manner prescribed by
"Kautilya" to approach them.

A] To lure the enraged:

Reinforce perceptions that such people hold about their

organization by telling them, how their organization & managers lack
the eye of knowledge, commonsense and also the experience to see
what one is worth. Also explain to them the 'detrimental effects' that
such a behavior of their organization & managers can have on the
organization. Invite them then to join another organization to realize
their potential.
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B] To lure the frightened:

These people already have a sense of insecurity. Reinforce this

sentiment by warning them of a possible 'harm' that they stand from
their organization due to its own (incorrect) apprehension of being
harmed from them. Show them a safer haven where they can grow.

C] To lure the greedy:

Reinforce their desire by amplifying the fact that their

organization rewards those who are devoid of spirit, intelligence, and
eloquence, but not those endowed with qualities of the self, reinforce
the 'fact' that our organization has a culture of acknowledging &
rewarding persons of distinction, join us.

D] To lure the proud:

These people need to get their ego massaged. Approach them

by impressing upon them that their organization is fit for and is of
benefit to only people with lower qualities and people of little or no
intelligence or conviction or abilities; not for people of their standing.
Invite them to join an organization that 'knows' how to honor persons
of distinction, come to us. Professionals with years of experience can
build on the knowledge provided and use it to their good.
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It however goes without saying that a lot of networking is

required to identify such people who display the behaviors described
above.

8.2 WAGES AND INCENTIVES:

Kautilya recommended that the total amount of wages should

not exceed 1/4th of the State revenue. He used three criteria for
prescribing wages. He indicated that the wage should be high enough
to maintain the loyalty of the officials, to evoke the needed efficiency
and to reflect the relative importance of their occupation. He believed
in prescribing wages on the basis of skill and efficiency. The
following extracts from the Arthashastra explains the wage policy
during the Mauryan Empire:

 “The artisans employed in the office shall do their work as ordered

and in time. When under the excuse that time and nature of the work
has not been prescribed, they spoil the work, and they shall not only
forfeit their wages, but also pay a fine of twice the amount of their
wages. When they postpone work, they shall forfeit one-fourth the
amount of their wages and pay a fine of twice the amount of the
forfeited wages. Those women who can present themselves at the
weaving house shall at dawn be enabled to exchange their spinning
for wages (bhándavetanavinimayam).”
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 “Delay in paying the wages shall be punished with the middlemost

amercement. The same would be the case when wages are paid for
work that is not completed.”

 “Disputes regarding wages shall be decided on the strength of

evidences furnished by witnesses. In the absence of witnesses, the

master who has provided his servant with work shall be examined.”

 “Failure to pay wages shall be punished with a fine of ten times the

amount of wages (dasabandhah), or 6 panas; misappropriation of

wages shall be punished with a fine of 12 panas or of five times the
amount of the wages (panchabandho vá).”

 “A servant neglecting or unreasonably putting off work for which

he has received wages shall be fined 12 panas and be caught-hold of

till the work is done. He who is incapable to turn out work, or is
engaged to do a mean job, or is suffering from disease, or is involved
in calamities shall be shown some concession or allowed to get the
work done by a substitute. The loss incurred by his master or
employer owing to such delay shall be made good by extra work.”
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 “Wages are to be paid for work done, but not for work that is not

done. If an employer, having caused his labourer to do a part of work

will not cause him to do the rest for which the latter may certainly be
ready, then also the unfinished portion of the work has to be regarded
as finished. But owing to consideration of changes that have occurred
in time and place or owing to bad workmanship of the labourer, the
employer may not be pleased with what has already been turned out
by the labourer. Also the workman may, if unrestrained, do more than
agreed upon and thereby cause loss to the employer.”

8.3 SELECTION AND TRAINING:

Kautilya always believed in training and selecting people with

care. He never compromised with efficiency and wanted all the
workers and the soldiers to be so. Kautilya was very keen in
maintaining the level of efficiency and loyalty among the employees.
He selected employees with not only expertise, but also exemplary
discipline and character. The following are Kautilya’ views on
training and selection of people:

A] TRAINING:
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 Kautilya says, a large number of effete persons are better, inasmuch as

they can be employed to do other kinds of works in the camp: to serve

the soldiers fighting in battlefields, and to terrify the enemy by its
number. It is also possible to infuse spirit and enthusiasm in the timid
by means of discipline and training.

 That army which is vast and is composed of various kinds of men and
is so enthusiastic as to rise even without provision and wages for
plunder when told or untold; that which is capable of applying its own
remedies against unfavourable rains; that which can be disbanded and
which is invincible for enemies; and that, of which all the men are of
the same country, same caste, and same training, is (to be considered
as) a compact body of vast power. Such are the periods of time for
recruiting the army.

B] SELECTION:

 “Assisted by his prime minister (mantri) and his high priest, the king

shall, by offering temptations, examine the character of ministers

(amátya) appointed in government departments of ordinary nature. Of
these tried ministers, those whose character has been tested under
religious allurements shall be employed in civil and criminal courts
(dharmasthaníyakantaka sodhaneshu); those whose purity has been
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tested under monetary allurements shall be employed in the work of a

revenue collector and chamberlain; those who have been tried under
love-allurements shall be appointed to superintend the pleasure-
grounds (vihára) both external and internal; those who have been
tested by allurements under fear shall be appointed to immediate
service; and those whose character has been tested under all kinds of
allurements shall be employed as prime ministers (mantrinah), while
those who are proved impure under one or all of these allurements
shall be appointed in mines, timber and elephant forests, and
manufactories.”

 “Teachers have decided that in accordance with ascertained purity, the

king shall employ in corresponding works those ministers whose

character has been tested under the three pursuits of life, religion,
wealth and love, and under fear.”

8.4 CURRENT HR POLICIES AND MANAGEMENT:

The present day scenario in India or in the whole world is

economic recession, high inflation rate, low margins/profitability,
retrenchment; attrition etc. Everybody in the professional life is
affected in one way or the other. The economic scenario because of
US recession looks very gloomy. The export market is under pressure
due to low dollar rate. Industries bogged down by strict Social
Compliance/Human Rights implementation strictly enforced by the
 76

buyers. Find lot of retrenchments around the industry at one end and
at the other end there is lot of attrition. This is a challenging period of
HR people.

In the current economic scenario every company is facing the

challenge of cost cutting to survive in the market, most of the well
known giants have already decided to lay off or retrench their human
capital like never before and the people from the companies who
don’t have taken this ultimate decision yet, living their days with an
anxiety that tomorrow they may get their pink slip, they are frequently
meeting the HR manager in lunch break, tea break and whenever they
are getting the chance, if he has any shocked news for them, as a
result their performance is suffering. Every morning they are coming
and every evening they are leaving the office with a massive mental
stress.

So in that serious economic meltdown situation HR has a

crucial role to play. First, when the company has brought any heart
breaking news for its employee because HR has to declare the worst
decision to it's most valuable assets, that means there are so many
issues like legal and union (if any) which HR manager has to manage
tactfully and compensation part also need to be taken care of.
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9. LEADERSHIP:

Kautilya’s Arthashastra can also be called as a treatise on

leadership. Arthashastra has been summoned to the King by Kautilya.
Therefore, it gives more values on leadership than any other subject. It
how a king should behave and how he should not. It teaches a person
to become a king.

9.1 PRIMARY GOAL OF THE LEADER:

The leader's primary goal according to Arthashastra is to fulfill

the philosophy of the organization. In the words of Kautilya, "In the
happiness of the subjects lays the happiness of the king and in what is
beneficial to the subjects his own benefit. What is dear to the king is
not beneficial to him, but what is dear to the subjects is beneficial to
him" Thus the king was a constitutionalist who promoted the people's
welfare at all times, in all places and at all costs.

9.2 LEADERSHIP VALUES:

In order to achieve the primary goal of the organization,

Kautilya insisted on a leader who was virtuous. Kautilya thus gives a
list of values the leader has to possess which among others include:
(a) Piety; (b) Truthfulness; (c) Reliability; (d) Gratefulness; (e)
Liberality; (f) Promptness; (g) Freedom from vices; (h) Long term
 78

vision; (i) Conduct in conformity with the advice of elders. Apart

from the above list of values Kautilya also gives reference to the
values of the leader throughout his treatise. These include:

 ‘The leader with his senses under control must avoid doing injury to

others, sloth, capriciousness, association with harmful persons and

any transaction associated with unrighteousness or harm.”

 “The king should be ever active to carry out the management of

material wellbeing, which will in turn lead to spiritual wellbeing and

happiness.”

 “The king should avoid even a big profit that would be injurious to the

subjects.”

9.3 BENEFITS OF A RIGHTEOUS LEADER:

Having given the values of the leader, Kautilya further goes on

to enumerate the benefits of a righteous leader. These include:

 Personal benefits: According to Kautilya, "a king who adheres to his

special duties finds joy in this life". Further, "the king who protects
the subjects according to law earns spiritual merit".
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 Social benefits: The righteous leader establishes an administration

which leads to social benefits. "Administration when rooted in the self

discipline (of the leader) brings security and wellbeing to all living
beings. Such an administration endows the subjects with spiritual
wellbeing, material wellbeing and happiness"

 Management by example: A righteous leader sets an example for

other members of the organization. According to Kautilya, "when the

king is active the servants become active following his example. If he
is remiss they too become remiss along with him". Further, "a king
endowed with personal qualities endows with excellence the
constituent elements not so endowed" for "whatever character the king
has, that character the constituents come to have, being dependent on
him in the matter of energetic activity and remissness".

 Loyalty of dependent members: A righteous leader gains the loyalty

and love of dependent members. According to Kautilya "the subjects’

help the king who behaves justly but suffering from a serious
calamity" and "subjects support in every way the weak but just king
when attacked". Further "any king attacking a righteous king is hated
by his own people and by others".
 80

 Attraction of right talent and support: A righteous leader not only

passes on his qualities to others, but also attracts right talent to further
his mission. Kautilya while advising an aspirant to ministership tells
that "he should seek service with a king endowed with personal
excellences"

 Effects of an unrighteous leader: According to Kautilya, an

unrighteous leader not only ruins himself but ruins all his constituent
elements

9.4 MAKING OF A LEADER:

Because a righteous leader is so important, Kautilya gave a lot

of emphasis on the training of such a leader. Some of the methods of
value training included:

 Study of scriptures
 Association with elders
 Advice of ministers
 Formal instructions

The main areas of training in values included:

 Self control
 Removal of vices and developing a good character
 81

Specific guidelines regarding the making of a good leader are given

throughout the Arthashastra. These include:

 “Study of philosophy confers benefit on the people, keeps

the mind steady in adversity and prosperity and brings about
proficiency in thought, speech and action.”

 “The prince should have constant association with elders in

learning for the sake of improving his training.”

 “Control over the senses, which is motivated by training in

the sciences, should be secured by giving up the six vices (lust, greed,
infatuation, pride, jealousy and foolhardiness). Absence of improper
sense indulgence gives such a control.”

 “The king should set the preceptors or ministers as the

bounds of proper conduct for himself, who should restrain him from
occasions of harm or when the king is erring in private, should prick
him to do his duty.”
 82

 “The young price should be diverted from all evil and

should be instructed in what is conducive to spiritual wellbeing and
material wellbeing.”

9.5 SPIRITUAL LEADER:

The final aim of Kautilya was to provide the organization with

a leader who was ultimately guided by a spiritual way of life. Kangle
puts this as, "the fact that the king would be brought up to regard the
vedic (spiritual) way of life as sacred and the performance of his own
duties in accordance with that scheme of life as a means of achieving
spiritual ends would serve to make the king behave with moderation".

9.6: CURRENT SCENARIO IN LEADERSHIP:

Kurt Lewin and colleagues identified different styles of

leadership. They are:

A. Autocratic

B. Participative
C. Laissez-Faire
 83

A] Autocratic or authoritarian style:

Under the autocratic leadership style, all decision-making

powers are centralized in the leader, as with dictator leaders. They do
not entertain any suggestions or initiatives from subordinates. The
autocratic management has been successful as it provides strong
motivation to the manager. It permits quick decision-making, as only
one person decides for the whole group and keeps each decision to
himself until he feels it is needed to be shared with the rest of the
group.

B] Participative or democratic style.

The democratic leadership style favours decision-making by the

group as shown, such as leader gives instruction after consulting the
group. They can win the co-operation of their group and can motivate
them effectively and positively. The decisions of the democratic
leader are not unilateral as with the autocrat because they arise from
consultation with the group members and participation by them.

C] Laissez-faire or free rein style:

A free-rein leader does not lead, but leaves the group entirely to
itself as shown; such a leader allows maximum freedom to
subordinates, i.e., they are given a free hand in deciding their own
policies and methods.

Different situations call for different leadership styles. In an

emergency when there is little time to converge on an agreement and
 84

where a designated authority has significantly more experience or

expertise than the rest of the team, an autocratic leadership style may
be most effective; however, in a highly motivated and aligned team
with a homogeneous level of expertise, a more democratic or laissez-
faire style may be more effective. The style adopted should be the one
that most effectively achieves the objectives of the group while
balancing the interests of its individual members.

According to Dr. APJ Abdul Kalam, India requires

efficient leaders and not just managers of politicians. He believes that
leadership is a tool which could influence the population to act wisely.
A great leader is the need of the hour.

This belief was shred by Kautilya too. He was of the belief that
the King is the most important subject of a kingdom. The actions of a
king influence the actions of the subjects in a kingdom. It’s of no
wonder that the Arthashastra has been addressed by Kautilya for the
King.
 85

10 CORPORATE SOCIAL RESPONSIBILITIES

AND CORPORATE GOVERNANCE:

10.1 CORPORATE SOCIAL RESPONSIBILITY:

This is a new concept that has emerged in business. It denotes

the importance of working for the welfare of the whole society. This
concept was already followed by Kautilya. Corporate Social
Responsibility is the continuing commitment by business to behave
ethically and contribute to economic development while improving
the quality of life of the workforce and their families as well as of the
local community and society at large.

According to Arthashastra, “In the happiness of his subjects lies

his happiness; in their welfare his welfare; whatever pleases himself
he shall not consider as 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.”

Kautilya thus believed that the king has a responsibility towards

his subjects. This responsibility had to be fulfilled by the king to
ensure that the subjects are happy and prosperous. According to
Kautilya, “All activities proceed from the minister, activities such as
the successful accomplishment of the works of the people, security of
 86

person and property from internal and external enemies, remedial

measures against calamities, colonization and improvement of wild
tracts of land, recruiting the army, collection of revenue, and bestowal
of favour. Forts, finance, and the army depend upon the people;
likewise buildings, trade, agricu1ture, cattle-rearing, bravery, stability,
power, and abundance (of things). In countries inhabited by people,
there are mountains and islands (as natural forts); in the absence of an
expansive country, forts are resorted to. When a country consists
purely of cultivators, troubles due to the absence of fortifications (are
apparent); while in a country which consists purely of warlike people,
troubles that may appear are due to the absence of (an expansive and
cultivated) territory.”

He says, “It is verily the king who attends to the business of

appointing ministers, priests, and other servants, including the
superintendents of several departments, the application of remedies
against the troubles of his people, and of his kingdom, and the
adoption of progressive measures; when his ministers fall into
troubles, he employs others; he is ever ready to bestow rewards on the
worthy and inflict punishments on the wicked; when the king is well
off, by his welfare and prosperity, he pleases the people; of what kind
the king's character is, of the same kind will be the character of his
people; for their progress or downfall, the people depend upon the
king; the king is, as it were, the aggregate of the people.”
 87

10.2 CORPORATE GOVERNANCE:

Corporate governance is a term that refers broadly to the rules,

processes, or laws by which businesses are operated, regulated, and
controlled. The term can refer to internal factors defined by the
officers, stockholders or constitution of a corporation, as well as to
external forces such as consumer groups, clients, and government
regulations.

Well-defined and enforced corporate governance provides a

structure that, at least in theory, works for the benefit of everyone
concerned by ensuring that the enterprise adheres to accepted ethical
standards and best practices as well as to formal laws. To that end,
organizations have been formed at the regional, national, and global
levels.

In recent years, corporate governance has received increased

attention because of high-profile scandals involving abuse of
corporate power and, in some cases, alleged criminal activity by
corporate officers. An integral part of an effective corporate
governance regime includes provisions for civil or criminal
prosecution of individuals who conduct unethical or illegal acts in the
name of the enterprise. It comes as no surprise that corporate
governance was first practiced by Kautilya. Attainment of good
governance entails that the objectives of the state are fulfilled and
realized. This is possible through properly organized and guided
administration.
 88

This principle is relevant even today. A government is good, if

it is administered well. Kautilya suggests that good governance should
avoid extreme decisions and extreme actions. Soft actions (Sam,
Dam) and harsh actions (Dand, Bhed) should be taken accordingly.
Kautilya opines in a most modern way - ‘Sovereignty is practicable
only with the cooperation of others and all administrative measures
are to be taken after proper deliberations.’ The King and ministers
were supposed to observe strict discipline. Kautilya recommended a
strict code of conduct for himself and his administrators. Kautilya has
seriously considered the problem of corruption. He has listed, in the
Arthashastra, about forty ways of embezzling government funds.
However, Kautilya is very practical about the problem of corruption.
Kautilya feels that it is as difficult to discover the honesty or
otherwise of an officer as it is to find out whether or not it was the fish
that drank the water.

This code of conduct is useful and applicable to modern executives.

Even two and a half thousand years ago, Kautilya laid stress on
capping at a quarter of the revenue, the salaries of the King and his
officials. For good governance, all administrators, including the King,
were considered servants of the people. They were paid for the service
rendered and not for their ownership of anything. Compare this to the
expenses on salary of Government employees today which constitutes
over 50% of the revenue. Kautilya understood the link between the
salaries paid to government functionaries and their productivity.

One of the core themes of this chapter is that the Arthashastra

of Kautilya equates political governance with economic governance.
 89

The end is economic governance while political governance is a

means. Good governance is basic to the Kautilyan idea of
administration. Good governance and stability are inextricably linked.
If rulers are responsive, accountable, removable, recallable, there is
stability. If not, there is instability. This is even more relevant in the
present democratic set up. Kautilya’s precepts may have been in the
context of the monarchical set up. However, present rulers and
administrators should be endowed with similar qualities. In countries
where they are, the progress has been meteoric

He gave emphasis on maintaining relationships between all the

parties in a transaction. He says, “The nature of the transactions
between creditors and debtors, on which the welfare of the kingdom
depends, shall always be scrutinized.”

10.3 THE MODERN ENVIRONMENT:

Corporate governance reform in India has focused primarily on

the "role and composition of the board of directors." (83). Each of the
three sets of recommendations (the CII Code recommendations from
1997, the Kumar Mangalam Birla Committee recommendations from
2000, and the Murthy Committee recommendations from 2003) has
advanced a more nuanced and sophisticated understanding of
corporate governance in this respect. For example, while the CII Code
was silent on the financial-literacy levels expected of directors, (84)
the Murthy Committee recommended that companies train their
 90

"Board members in the business model of the company as well as the

risk profile of the business parameters of the company." (85) Another
notable recommendation of the Murthy Committee was that the Audit
Committee be comprised entirely of "financially literate non-
executive members with at least one member having accounting or
related financial expertise.”

An approach for CSR that is becoming more widely accepted is

community-based development approach. In this approach,
corporations work with local communities to better themselves. In
Flower Valley they set up an Early Learning Centre to help educate
the community's children as well as develop new skills for the adults.
Marks and Spencer is also active in this community through the
building of a trade network with the community - guaranteeing regular
fair trade purchases. Often activities companies participate in are
establishing education facilities for adults and HIV/AIDS education
programs. The majority of these CSR projects are established in
Africa. JIDF for You is an attempt to promote these activities in India.

A more common approach of CSR is philanthropy. This

includes monetary donations and aid given to local organizations and
impoverished communities in developing countries. Some
organizations do not like this approach as it does not help build on the
skills of the local people, whereas community-based development
generally leads to more sustainable development.

Another approach to CSR is to incorporate the CSR strategy

directly into the business strategy of an organization. For instance,
 91

procurement of Fair Trade tea and coffee has been adopted by various
businesses including KPMG. Its CSR manager commented, "Fair
trade fits very strongly into our commitment to our communities."[5]

Another approach is garnering increasing corporate

responsibility interest. This is called Creating Shared Value, or CSV.
The shared value model is based on the idea that corporate success
and social welfare are interdependent. A business needs a healthy,
educated workforce, sustainable resources and adept government to
compete effectively. For society to thrive, profitable and competitive
businesses must be developed and supported to create income, wealth,
tax revenues, and opportunities for philanthropy. CSV received global
attention in the Harvard Business Review article “Strategy & Society:
The Link between Competitive Advantage and Corporate Social
Responsibility” by Michael E. Porter, a leading authority on
competitive strategy and head of the Institute for Strategy and
Competitiveness at Harvard Business School; and Mark R. Kramer,
Senior Fellow at the Kennedy School at Harvard University and co-
founder of FSG Social Impact Advisors. The article provides insights
and relevant examples of companies that have developed deep
linkages between their business strategies and corporate social
responsibility. Many approaches to CSR pit businesses against
society, emphasizing the costs and limitations of compliance with
externally imposed social and environmental standards.
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11. SUGGESTIONS AND RECOMMENDATIONS:

As we move towards the end of this project, we would like to

know the implications of Arthashastra for the future. Every person
wants to know the relevance of what he/she is studying. We have been
deciphering the gist of Arthashastra all this while; but one should
know the use of doing so. Indeed, our present actions are inspired by
our expectations of the future. Therefore, what beholds is as important
as what is now.

Arthashastra offers a wide perspective of seeing things that

could still be put to use. The issues in Arthashastra are relevant even
in the modern world of technology and speed.

 Current times accentuate the present applicability of this because the

need for a sound and comprehensive state administration has been

accentuated by the propensity of the powerful to flout the law and do
so repeatedly.

 One of the core themes of Arthashastra is that Kautilya equates

political governance with economic governance. The end is economic

governance while political governance is a means. Good governance
is basic to the Kautilyan idea of administration. Good governance and
 93

stability are inextricably linked. If rulers are responsive, accountable,

removable, recallable, there is stability.

 If not, there is instability. This is even more relevant in the present

democratic set up. Kautilya’s precepts may have been in the context
of the monarchical set up.

 However, present rulers and administrators should be endowed with

similar qualities. In countries where they are, the progress has been
meteoric.

 Unlike in Kautilya’s state where the king was accessible to his people

everyday at least for one and a half hours, in India today it takes a
long time even to get a “hearing.”

 Some of the ground rules and measures suggested in Arthashastra,

particularly those which pertain to matters relating to budget, accounts

and audit, are applicable to present day India. In Kautilya’s state, the
king could severely punish corrupt officials, however highly they
were placed. In India, those in political office are rarely convicted
even if they are corrupt or proved guilty of committing certain
offences.
 94

 The policy suggested in Arthashastra attempts to strike a balance

between the delicate interests of the parties involved. Kautilya

indicates that although the state is in a privileged position of a
monopolist, it should co-operate with the private sector for proper
utilization of resources. Further, a strong private sector is a source of
strength to the State. Some of the principles outlined can be useful
guidelines in the formulation of new policies concerning labour
reform and legislation.

 It is interesting to note that Kautilya tried to establish guidelines for

professional service providers also, including weavers, washer men,

boatmen, shipping agents, and even prostitutes.

 Modern States are still grappling with the complexity of setting such

‘services’ oriented guidelines and in that light Kautilya’s attempts to

do so shows the sheer breadth of his vision at such an early point in
history. He also established explicit guidelines for the practice of the
medical profession, incorporating ideas that seem ahead of his time.

 Kautilya is perceptive enough and flexible enough to realize that the

State official might not be able to gauge the market; he thus states that
‘in case of failure to sell merchandise at the fixed rate, the rate shall
 95

be altered.’ Kautilya envisaged a role for the State to ensure that

excessive price fluctuation detrimental to commercial activities did
not occur. Kautilya showed a highly refined understanding of the law
of demand and supply and the pernicious effects of gluts in the
market.

 Interestingly, Kautilya’s Arthashastra is the first known treatise to

discuss such concepts. The extensive research that has been

undertaken about imperfect markets vindicates the importance that the
visionary assigned to situations that could arise from a mismatch
between supply and demand.

 Kautilya recommended an interventionist policy to counter a situation

of glut in the market; in this context, he stated that whenever there is

an excessive supply of merchandise, the Superintendent shall
centralize its sale and prohibit the sale of similar merchandise
elsewhere before the centralized supply is disposed of.

 Arthashastra’s advocacy to ‘tax the richer farmer maybe something

that needs to be done now when the Finance Minister is trying to find
ways to increase the tax to GDP ratio.
 96

 In recent times there has been considerable research about trade

liberalization and the numerous ways in which this can be achieved.

Kautilya’s views on trade reflected that he grasped among other things
a point that is extremely relevant even in the present era of globalized
commerce and trade. That is: There is no autonomous mechanism that
will ensure that a nation would benefit from trade in the absence of
certain safeguards and policy measures.

 It is thus seen that the importance of the trader was recognized by

Kautilya as also the importance of the rule of law, by making

restoration for any loss caused by its failure. At the same time, traders
were prevented from oppressing people. This clearly shows that the
welfare of the people was uppermost in the mind of the king.

 The connotations of harassment and obstacles to trade may have

changed.

 However, the fact that anti-dumping measures exist or that

cartelization has to be coped with or adverse terms of trade have to be
accounted for in certain sectors underscore that safeguards are
essential even in current times and those responsible for managing
these measures should be responsible.
 97

 Furthermore, Kautilya was cognizant of the fact that the terms of trade

were not just dependent on the economics but also on other various
parameters. The traders had to keep in mind the political or strategic
advantages in exporting or importing from a particular country. The
proliferation of free trade agreements in recent times underscores this
point because there is a definite political dimension to trade treaties
and agreements

 The king was not exempt from being endowed with certain qualities

of leadership if he was to be able to provide effective and productive

governance. Thus the political leaders have to set an example by
adhering to high standards of conduct and functioning. In
contemporary times there have been frequent reminders that it is not
positions which sustain an individual however powerful he/she maybe
but the person concerned that has to sustain power conferred not by
abusing it but by using it in a constructive manner for the people
concerned.

 Kautilya listed 34 heads of departments. Only those who had the

specified qualifications were appointed to these high posts. Except in

the case of Raj Purohita, the scribe (Brahmin) and army (Kshatriyas),
there was no “caste” reservation for the post of high level officials.”
Thus, upward mobility in the hierarchy was based on merit, suitability
and fulfilling other qualifications laid down for these posts. In a
 98

conflict between meritocracy and the political economy of

appointments, if the latter continues to be given precedence India’s
potential of becoming an economic superpower will remain untapped.

Many of these have been seen earlier too. However, these are
just a few of the major points of relevance. The real list could be
endless. Arthashastra thus is very much relevant even today. It’s just a
matter of time before one embraces the ancient wisdom of
Arthashastra and starts to build a society which is self-sufficient and
well developed.
 99

12 CONCLUSIONS:

Arthashastra was written several centuries ago. It is therefore,

amazing that this treatise covers many of the problems that the world
is presently facing. Arthashastra had been lost for mankind for many
years after it had been written. The resurrection of this work was
brought about by scholars and as they started to comprehend the
maxims and thoughts enshrined in it, they were awed and spell bound.
It is hard to believe that the Arthashastra was a book written about
2500 years ago.

These are the times of turmoil in the world economy. The

ghosts of recession and terrorism have been haunting us for a long
time. The world is falling apart at every instant. There has arisen a
need to hold together the fragments of world economy. A
comprehensive belief and an able administration are the only ways to
achieve this. Arthashastra has been hinting this since times
immemorial.

The world today is moving towards better technology, gaining

speed by every nanosecond. The citizens of modern economy do not
look back. They are enthralled by the promises provided by the
glorious future that lies ahead of them.

Today, it is imperative for a person to hold values that may

guide him/her towards eternal glory. India’s history provides the
values that may lead one through all types of crises. Arthashastra is
 100

one epic. Its comprehensiveness has made it a material that has to be

necessarily read and understood.

India won its freedom sixty-three years ago. But, the seeds of
freedom were sown by our ideologies and not by modern thinking.
Modernization is inevitable, but it should be in adherence to the past.

According to Swami Vivekananda,

“Where the mind is without fear and the head is held high

Where knowledge is free

Where the world has not been broken up into fragments

By narrow domestic walls

Where words come out from the depth of truth

Where tireless striving stretches its arms towards perfection

Where the clear stream of reason has not lost its way

Into the dreary desert sand of dead habit

Where the mind is led forward by thee

Into ever-widening thought and action

Into that heaven of freedom, my Father, let my country awake.”

 101

After learning the Arthashastra, one could see that the dream of
a self sufficient and magical nation was not lost on Kautilya too. The
words may be different, the style might be unorthodox, but the dream
was the same, the motive was only one- to build a nation that was
truly a heaven.
 102

13. CASE STUDIES:

1) Flying Low:

Indian Airlines (IA) – the name of India's national carrier conjured up

an image of a monopoly gone berserk with the absolute power it had
over the market. Continual losses over the years, frequent human
resource problems and gross mismanagement were just some of the
few problems plagued the company. Widespread media coverage
regarding the frequent strikes by IA pilots not only reflected the
adamant attitude of the pilots, but also resulted in increased public
resentment towards the airline.

IA's recurring human resource problems were attributed to its lack of

proper manpower planning and underutilization of existing
manpower. The recruitment and creation of posts in IA was done
without proper scientific analysis of the manpower requirements of
the organization. IA's employee unions were rather infamous for
resorting to industrial action on the slightest pretext and their arm-
twisting tactics to get their demands accepted by the management.

During the 1990s, the Government took various steps to turn around
IA and initiated talks for its disinvestment. Amidst strong opposition
by the employees, the disinvestment plans dragged on endlessly well
into mid 2001. The IA story shows how poor management, especially
in the human resources area, could spell doom even for Rs. 40 billion
monopoly. IA could blame many of its problems on competitive
 103

pressures or political interference; but it could not deny responsibility

for its human resource problems. A report by the Comptroller and
Auditor General of India stated, "Manpower planning in any
organization should depend on the periodic and realistic assessment of
the manpower needs, need-based recruitment, and optimum utilization
of the recruited personnel and abolition of surplus and redundant
posts. Identification of the qualifications appropriate to all the posts is
a basic requirement of efficient human resource management. IA was
found grossly deficient in all these aspects."

Frequent agitations were not the only problem that IA faced in the
area of human resources. There were issues that had been either
neglected or mismanaged. For instance, the rates of highly subsidized
canteen items were not revised even once in three decades and there
was no policy on fixing rates. Various allowances such as out-of-
pocket expenses, experience allowance, simulator allowance etc. was
paid to those who were not strictly eligible for these. Excessive
expenditure was incurred on benefits given to senior executives such
as retention of company car, and room air-conditioners even after
retirement. All these problems had a negative impact on divestment
procedure. This did not augur well for any of the parties involved, as
privatization was expected to give the IA management an opportunity
to make the venture a commercially viable one. Freed from its
political and social obligations, the carrier would be in a much better
position to handle its labor problems. The biggest beneficiaries would
be perhaps the passengers, who would get better services from the
airline.
 104

QUESTIONS:

1) What led to unrest among the employees of Indian Airlines?

2) What would be the correct way of managing employee unrest
according to Kautilya?

POSSIBLE SOLUTIONS:

Ans.1)

The management of Indian Airlines was in doldrums. The

major problem was posed by the agitated human resources in the
organization. It was a monopoly during the earlier days. But, it could
not withstand the pressures of competition. While the private airlines
offered better services and payment to their employees, the employees
of Indian Airlines were greatly discontented.

This discontent boiled over and this lead to strikes by the

employees. All the employees went into strike, thus causing
disruptions in the services of Indian Airlines. The causes for employee
unrest were:

 Lower pay packages than private sectors for the employees.

 105

 Extensive remuneration for the senior employees led to discontent

among the junior employees.
 The rates of highly subsidized canteen items were not revised even
once in three decades and there was no policy on fixing rates.
 The selection and remuneration policy of Indian Airlines were not
satisfactory.

These were some of the major problems that led to employee unrest.

Ans.2)

According to Kautilya, one must keep one’s employees happy all the
time. The employees who have discontent may show the four
characteristics:

 Anger: Kautilya says that angry people could be lured by pacifying.

They must be given new avenues to unlock their potential. They must
be explained about the detrimental effects, their behaviour could have
on the organization and on themselves. Their anger must be
channelised by making them produce better results.
 Fear: The fearful are easy to lure. One has to tell them about the

problems they could face as an effect of their actions. They should

then be given a feel of security so that they are willing to bend
themselves and work accordingly.
 Pride: One must soothe the egos of the proud. More than money, they

care about their position and esteem. They could be given new posts
 106

and could be a sense of respect. The proud people would yield in once
their egos are massaged.
 Greed: The greedy people must be given what they don’t desire. By

doing this, their greed would be controlled. For instance, a person who
seeks increase in salary could be given more incentives. This would
help the person to forget about the salary and focus on productivity.

By doing these, the management could keep in check the employee

unrest. However, it does not mean that the employees should not be
given fair wages. Kautilya has always stressed the importance of
paying fair wages to all employees. The wages should be in
proportion to the work done. Kautilya believes in respecting the
elders; but states that wages should be administered purely on the
basis of merit and experience. Seniority must be respected; not
rewarded.
 107

2) Mexican Telecom Industry: Unwanted

Monopoly?

Mexico’s telecommunications industry, to a large extent is dominated

by wire-line operator Telmex and mobile operator Telcel. Both belong
to Carlos Slim – the world’s richest man as per Fortune’s list in
August 2007. Telmex provides local, domestic long-distance and
international fixed-line voice services, Internet and data
communications, while Telcel provides wireless services. Both
Telmex and Telcel hold a mammoth portion of the market share in the
Mexican telecommunication industry. In this context, these companies
have been constantly criticized that they take undue advantage of their
dominance and thwart competition in the industry. It is also said that
the weak regulatory authorities and flaws in regulations abetted the
Mexican telecom giants in ensuring low competition. However, these
companies defend themselves by arguing that they invest more than
their competitors and provide good services throughout the country
including low-margined rural areas.

While Telmex got natural monopoly through privatisation, Slim

implemented ‘Gillette Plan’ to establish Telcel’s dominance in the
mobile market. Following this strategy, mobile phones were sold at
cheaper prices, as once the customer bought a mobile phone they
needed prepaid phone cards to use it constantly. The strategy worked
well and the company made huge profits. According to a report in
2008, “America Movil, the largest cell phone operator in Latin
 108

America, provides service to 7 out of every 10 mobile users in

Mexico, well ahead of the No. 2 operator, Movistar, the brand of
Spain’s Telefonica.”

Economists opine that high costs of telephone and Internet services

that resulted from lack of competition are hindering Mexican
economy’s growth. In Mexico “high telephone and electricity costs,
blamed on monopolies, are driving many factories to countries like
China.” Felipe Calderón, who became the President of Mexico in
December 2006, vowed to make Mexico more competitive by
dismantling monopolies. In November 2007, he affirmed once more,
that increasing competition in telecommunication industry was his
priority. But, till mid 2008, there were not any significant move
against big companies. Some say that the telecom investigations
which are ongoing will be a big test of whether President Calderón
and CFC are up to the task.

QUESTIONS:

1) What are the various problems faced in a monopoly?

2) What were Kautilya’s views on monopoly and how to avoid it?

POSSIBLE SOLUTIONS:

Ans.1)
 109

A monopoly is a state where one firm is the only player in an industry.

In a monopoly, the single firm decides the prices. It does not have any
competition.

Monopoly is a peril as it causes many problems for the consumers.

They are:

 Exploitative prices: Monopoly gives a firm, the right to fix

prices. The firm may charge high or low prices. It may also use
discriminatory pricing strategy. This is unfair for all he sections of the
society.
 Quality: Since there is no competition, a monopolistic firm will
not pay attention to the quality. The consumers have no choice, but to
accept the quality they are being dished out.

These are a few of the main problems faced in a monopoly.

Ans.2)

Kautilya always encouraged fair trade and competition. He did

not allow any industry to flourish single handedly. Monetary
assistance was given for all industries in order to set up trade and new
businesses.

It is thus seen that the importance of the trader was recognized by

Kautilya as also the importance of the rule of law, by making
restoration for any loss caused by its failure. At the same time, traders
were prevented from oppressing people. This clearly shows that the
welfare of the people was uppermost in the mind of the king.
 110

Kautilya believed that monopoly was not suitable for an

economy to flourish. He believed in competition and that it was not
only beneficial to the people, but also conducive to the national
economy.
 111

3) PUBLIC GOVERNANCE:

Software icon N R Narayana Murthy today blamed poor public

governance for major ills faced by the country such as illiteracy,
malnourishment, lack of sanitation facilities and dismal food and
power management.

Murthy said even 63 years after independence, 35 crore Indians can't

read and write, and the country has the largest mass of malnourished
children. Twenty-five crore people do not have access to safe drinking
water, while 75 crore have no access to sanitation facilities.

"35 per cent of (total production of) grains are allowed to rot", the
Chief Mentor of Infosys Technologies Ltd said at the inaugural
function of first year BE/B.Arch classes at the BMS College of
Engineering here.

He said India has an installed electricity generation capacity of 145

gigawatts but only 84 gigawatts are available, which is "sadly a
shame".

Lot of it is due to poor (public) governance. There is no doubt

about it", Murthy said. "Unfortunately, whatever, our public
governance is in charge of, whatever our public governance has
touched, has not made as good a progress as that happened in a
significant percentage of private governance".
 112

While he would not say that all of private governance is good, private
governance institutions have by and large done better because of
competition, entry of multinational companies and the need to
compete at the global level.

Murthy also said: "This country requires discipline like no other

country. We are like this because we are not a disciplined set of
people. And that discipline has to start right in classrooms".

He said information technology industry has earned India "a little bit
of recognition" in the world, first time in 300 years.

"Today we are thought of as people who can indeed do something

worthwhile. This was not so some 25 years ago. Indians (till three
decades ago) were seen as people incapable of doing anything
worthwhile. Wherever you went, you were looked down upon as
people worthy of pity. But that scenario has changed a little bit thanks
to at least one (IT) industry", Murthy added.

QUESTIONS:

1) What are the ill effects of poor public governance in India?

2) What could be done to improve public governance according to
the Arthashastra?

POSSIBLE SOLUTIONS:

Ans.1)
 113

According to Mr. Narayana Murthy, the Chief Mentor of

Infosys Technologies, the biggest problem faced by India today is
poor quality of public governance. Effective public governance is a
must for all-round development of a country. Poor public governance
leads to the downfall of the economy. This results in the emergence of
many social evils. In India, public governance is not being practiced
in the earnest. This is the reason for all the social evils in India. Some
of these social evils are as follows:

 Illiteracy: Even 63 years after independence, 35 crore Indians can't

read and write. This is a very huge number, given the statistics of
other developing countries.
 Malnourishment: India has the largest mass of malnourished children.

 Lack of sanitation facilities: It is indeed pathetic that 75 crore people

in India have no access to sanitation facilities.

 Dismal food: The quality of food grains in India is deploratory to say

the least. 35% of the food grains are allowed to rot. Twenty-five crore
people do not have access to safe drinking water.
 Power management: India has an installed electricity generation

capacity of 145 gigawatts but only 84 gigawatts are available, which

is "sadly a shame".

These are a few of the various problems faced by India, primarily due
to poor public governance.

Ans.2)
 114

According to Arthashastra, public governance is an issue of

utmost importance. Kautilya gave a lot of importance in maintaining
the standards of public governance in the Mauryan Empire. Kautilya
believed that the happiness of a king lied in the happiness of the
subjects. If the subjects were unhappy, the king could never attain
happiness.

According to Kautilya, attainment of good governance entails

that the objectives of the state are fulfilled and realized. This is
possible through properly organized and guided administration. This
principle is relevant even today. A government is good, if it is
administered well. Kautilya suggests that good governance should
avoid extreme decisions and extreme actions. Soft actions (Sam,
Dam) and harsh actions (Dand, Bhed) should be taken accordingly.

Kautilya says, ‘Sovereignty is practicable only with the cooperation of

others and all administrative measures are to be taken after proper
deliberations.’ The King and ministers were supposed to observe strict
discipline. Kautilya recommended a strict code of conduct for himself
and his administrators. Kautilya has seriously considered the problem
of corruption. He has listed, in the Arthashastra, about forty ways of
embezzling government funds. However, Kautilya is very practical
about the problem of corruption. Kautilya feels that it is as difficult to
discover the honesty or otherwise of an officer as it is to find out
whether or not it was the fish that drank the water.

Thus, Kautilya believes in a sovereign set up where only those

promises are made which could be fulfilled and those promises which
 115

are made are certainly delivered. India requires politicians of actions

and not promises.
 116

14. ARTICLES:

Article 1:

Name of paper: MUMBAI MIROR (Times of India)

Date: Monday, 14th August, 06 (page 22)

DON’T NEGOTIATE SAFETY AND SECURITY

-Radhakrishnan Pillai

The days of conventional wars are gone when kingdoms or nations

were warning with the weapons like swords and later with
sophisticated and more disastrous mass destruction weapons. Now the
wars are being played between democracies and terrorism. And hence,
the nature of these wars is more complex. This is the time when
aspects of security cannot be undermined.

Now, the terrorists targets are common men, battlefields are at public
places and aims are of disrupting economies. Corporate setups are the
soft targets and the only weapon that we have is the vigilance to fight
back any such unanticipated disaster.

Chanakya says,

“For the guard not reporting to the city-superintendent an offence

committed during the night whether by the animate of the inanimate,
the punishment shall be in conformity with the offence, also in case of
negligence” (2.36.42)
 117

This means, how an alert security person should be. He has to report
He has to report every single offence committed to his superiors. He
cannot take any seen or unseen movements for granted. If security
official does not do that even the security personal shall be punished.

A special focus has to be given to corporate security personals in the

following manner:

 EXTRA TRAINING:

The guards, watchmen and other security people in your organisation

have to be given extra training and information about the current
scenario. They should be oriented about the changing threats in the
mega city like Mumbai. You can also take the help of local police or
even intelligence agencies to give them latest updates on security
measure taken by the local, state and union government.

 SUPPORT THE SECURITY MEN:

All employees have to be made aware of the alarming situation we are

into. They should cooperate with security officials. Being checked up
your bags and personal belongings should not be taken as a mean to
offend you. Do not feel insulted or ashamed. The security personal is
doing his duty. Be a part of the system and help the system to protect
us.
 118

 WORK AS A TEAM:

It is important to note that it is not the duty of only security team.

Each one has to play his role. Even security men are human beings
working round the clock to ensure safety. Understand their problems
as well. Note that we have to work as a team.

Today the nation, its economy, corporate houses and our lives is under
threat. And we have to rise and fight for it.

ARTICLE 2:

Vetting the King's Cabinet: Ancient Techniques for a Modern

Necessity:

Monday, 8thNovember, 2010

Quite contrary to the modern practise of vetting cabinet appointments

and advisors before their appointment, this chapter suggests secret
ways of testing the loyalty of key appointments after they have taken
up their posts. However, unlike the current practice, the vetting is
meant to not check up on potential, background or indeed character
traits but rather ensure loyalty and appropriate behaviour once the
advisors have taken up their positions. For this, Chanakya suggests
three key ways of testing loyalties and behaviour of cabinet members.
Moreover, he provides specific instructions for each of these.
 119

Before describing each of the tests, it is necessary to note that the

motivations and ideas for these are guided once again by the crucial
principle of the "Purusharthas."

The first of these is under a very curious definition of "the virtuous

solution" or the "test of virtue" or "Dharma" Chanakya suggests that
the king reach a secret agreement with the royal priest and find a false
pretext for dismissing him/her from the post, thus freeing the priest to
appear as the injured party and carry out a secret task.

In turn, the priest then approaches any suspicious advisor or indeed all
advisors in turn, to declare the king as lacking in virtue and incapable
of governance. The priest also suggests that the king ought to be
replaced by a better person, determined by all the advisors. The priest
must also misinform the advisors that he has spoken to the rest of the
cabinet who are in agreement with such a seditious plan.

Here it is crucial to note that kingship was not necessarily determined

solely by lineage in classical India. A system of limited democracy
seems to have prevailed amongst the elite members of the court. In
other parts of the region, a rudimentary form of democracy allowed
the people to choose and/or dethrone the ruler. This early system
survived at least in some of the Rajputana till the medieval era, with
documents from the Sisodia court at Chittorgarh suggesting that the
nobles played a crucial part in the ascension of a king.

Chanakya continues with his "test of virtue" by explaining that once a

traitor is identified, mostly by his/her gullibility and agreement to the
 120

plan proposed by the royal priest; the king should soon after ensnare
that advisor in some scandal and relieves him of his post.

Here it is crucial to note that, in the whole process, the advisor is

never confronted openly, nor is there any suggestion of a public trial.
Instead, the advisor is simply dispatched, gently and on other pretexts.
This route does allow the king a lot of discretion in not only removing
an advisor from the cabinet but also re-instating them to an equal or
higher post should the circumstances change.

The second test is the "test of greed" (or Artha). For this test, the king
uses his military chief for a similar purpose, first dismissing him and
then allowing him to incite other cabinet members to rebellion. The
difference here is the motivation: unlike the priest who uses
persuasion and accusations of a lack of virtue against the king, the
military chief is granted state funds to lure any treacherous advisors.
The military chief uses the spy services to contact the cabinet
members, offering them lucre in exchange for their support. The
traitors are again dismissed from their posts on false charges.

The third test is the "test of lust" (or Kama). For this test, the king
makes use of a female ascetic who is closely linked with the royal
family and the court. Indeed, in context of Chanakya's civil code
which suggests an ease of divorces, prevalence of remarriages, as well
as no particular disfavour attached to widowhood, this may suggest a
possible area where middle-aged or older single women - widowed or
divorced - were politically active.
 121

The ascetic establishes contact with the advisors, and sets up a honey
trap. She lures the advisor with sexual intimacy, but then offers
potential for money, progress, status as rewards for the advisor
revolting against the king.

The fourth technique is a "test of fear." For this, the king uses one
advisor who organises a boat trip, hunting trip or some other
entertainment. The king not only prohibits the entertainment but also
insults the organiser publicly. After this, the kings' spies approach the
disappointed and annoyed advisors in guise of young students who
wish for an uprising against an unjust king.

In this final option, the use of students or "brahmacharis" or those

who have not yet come of age is of particular interest. I have found no
other explanation in other texts, but the verse itself suggests that this
last technique may work best for the younger advisors who are likely
to be angered or disappointed easily.

In the remaining verses, Chanakya specifies the kinds of tasks that

should be granted to the advisors who pass each test. The phrasing of
these verses suggests that the advisors may be re-instated in specific
positions should they fail one test but succeed in another. One risk, to
me at least, of this technique is that the king may spend his first
months or year in office with constant cabinet reshuffles. But,
perhaps, this is a less risky option than having poor or disloyal
advisors occupying the wrong office.

-POSTED BY SUNNY SINGH

 122

REFERENCES:

During the course of project work, a lot of secondary data was

required to compile. Data has been sorted out from the following
sources.

1 BOOKS:

 ‘Kautilya’s Arthashastra’ by Jaico Publications.

 ‘Corporate Chanakya’ by Radhakrishnan Pillai.
 ‘Arthashastra’ by R. Shamasastry.

2 WEBSITES:

 http://www.ibscdc.org/corporate_governance_case_studies.asp

 http://economictimes.indiatimes.com/

 http://en.wikipedia.org/wiki/Chanakya

 http://en.wikipedia.org/wiki/Arthashastra

 http://www.businessdictionary.com/

 http://www.thehindubusinessline.com/2010/11/09/06hdline.htm

 http://www.citehr.com/research.php?q=arthashastra&x=0&y=0

 http://www.freeindia.org/biographies/greatpersonalities/chanak

ya/
 http://www.tradechakra.com/events/business-and-economy.php