Economics of Kautiliya Shukra and Brihaspati.pmd

CHAPTER ONE
INTRODUCTION
Hillebrandt drew attention to a number of quotations from a prose
work ascribed to Chanakya, also known as Vishnugupta and Kautilya.
Prof. Hillebrandt was unaware at the time that this original treatise had
already been discovered by R Shyamashastry of Mysore. Mr. Vincent
Smith noticed this work in his Early History of India. (Brihaspatisutra,
1929:13)
Sources of Information
Oriental Economics
There are many oriental thinkers who had contributed in the
theoretical and practical fields of Economics prior to Adam Smith.
The existence of earlier sources is clearly indicated in the beginning of
Kautiliya Arthashastra.(Kautiliya Arthashastra, 2003, 1.1.1) 1 The
Atharva-Veda which is one of the world’s oldest literatures reads that
the Arthashastra is a branch of Atharva-Veda. 2 The second view is
that the Arthashastra is a branch of Rig-Veda. (Brihaspati-sutra,
1929:1) 3 According to Shukra-niti the tradition of the treatise goes to
Brahma- the creator. (Shukranitisar, 1.3) 4 The information on Oriental Economics is lying scattered in
various places. Some of them are as follows-
1. Vedas, Upanishads, Smritis and Puranas
2. Ramayana and Mahabharata
3. Brihaspati-sustra
4. Shukra-niti
5. Kautiliya Arthashastra
6. Bouddha and Jain Scriptures
Vedas, Upanishads, Smritis and Puranas
Vedas are regarded as the most ancient document of human
civilization.The meaning of Veda is knowledge. In the beginning this
knowledge was transferred from one generation to another on oral
In this study economic
tradition. Therefore Veda's are also known as Shruti. In Rig-Veda
thoughts of Kautilya, Shukra and Brihaspati have been comparatively
surveyed with classical, neo-classical and modern economic theories.
In its technical form the ancient Science of Polity first became
economic udeas are scttered in different mantras. The discussions on
price theory is found Rig-Veda. (Rig. 2010, 4.24.9) In Yajur-Veda the
description of grain, pulses and vegetables is found. (Yaju., 2003, 18.12)
In Atharva-Veda description of farming, use of manures, method of tilling
known by the publication of the Kamandak’s Nitisara with selections
the field are given in various mantras. (Atharva., 2010, 3.17, 3.18)
from the commentary (edited by Rajendra Lal Mitra and others in
The next sources of ancient ideas are Upanishads. These are
Bibliotheca Indica, 1861-1881). In 1908 a notable paper by Prof.
regular academic exercises in Vedic schools. The students and their
1 2

teachers used to learn lessons. The pedagogy of learning is expressed
in dialogues, observations, case studies etc. Most of the Upanishads initiate
the lesson with some social or economic issues. (Bokare, 2009: 90)
The most ancient among the Smritis were in prose, and are
known as the Dharma-sutras. Only a few fragments of some of these
works have yet been discovered. The Dharma-shastras appear to have
been later redactions in verse of the earlier Dharmasutras. The most
important of the Smriti works at present known are those attributed to
Gautama, Apastamba, Vasishtha, Bodhayana, Vishnu,
Manu,Yagyavalkya, and Narada. They all devote some of their chapters
to discussions of political subjects like the duties of kings, public
finance, civil and criminal laws, and judicial procedure. These chapters
are of inestimable value to the student of ancient Political Economy.
(Banerji, 1916 : 4) In Yagyavalkya-smriti economic topics on wage,
rent, interest, partnership, ownership of property, and anti monopoly
regulations are found. But Ideas of Political Economy in Manu-smriti5 are more mature than anyother of Smritis. After making a comparison
between Manu-smrit and Kautiliya Arthashastra Gautam concluded that
Kautiliya Arthashastra is only a revised version of Manu-smriti.
(Gautam, 2009) Some economic ideas of Manu-smriti are as follows-
• Divine Theory of state
• Taxes to the king are his remuneration for keeping law and order
• Taxes are fixed by rules
• Beside cash taxes labour taxes were taken
• The council of ministers shall have a minister for finance
• Fixed percent of profit is allowed to the traders
• Compound interest is not permissible
The Puranas appear to be works which were originally
composed for the purpose of giving instruction to the less advanced
sections of the community in all matters concerning this world and the
next. Their great value from the historical standpoint lies in the fact
that they contain a considerable amount of genuine historical tradition
and preserve more or less correct lists of the various dynasties of
kings who ruled in Aryawarta from the earliest times until towards the
close to the Hindu period in the history. (Banerji, ibid, 5) Agni Purana
treats of Public Finance in considerable detail. Similarly Matsya Purana
deals with Political Economy.
Ramayana and Mahabharata
The Ramayana and the Mahabharata are not historical works
in the modern sense of the term ; but they give us a graphic and fairly
accurate picture of the life of the Aryas. The stories found in these
Epics are largely based on real occurrences, and although the main
themes of the Epics are the wars of the heroes, both of these great
works present us with glimpses of the Political Economy of early
Hindu society. (Banerji, ibid, 3) According to William Monyir the date
of Rmayana may be 300 BC but Kieth opines that the date is actually
600 BC. The Political Economy has been described in detail in two
chapters- Kiskindha-Kand and Ayodhya-Kand. The state in Ramayana
has been described as a combination of seven organs- the king, the
ministers, geographical area, capital city, force, and friends. Ramayana
suggests that statesman should have a good knowledge of Arthashastra
(a loose name of Economics).
CV Vaidya opines that Mahbharata has three editions. The first
edition of this book was Jaya and was presented by Vyas. The second
edition of the book was Bharta Samhita and it was presented by Sauti.
Finally Vaishampayana revised it in the present form of Mahabharata.
(Vaidya, 1905, Chap 1-2) The number of slokas of the first edition
3 4

was 8800 but at present it consists of 100 thousands slokas distributed
in 100 chapters.
In the Mahabharata, a mythical account is given for the origin
of the Science of Political Economy.According to the legend, Brahman
composed by his own intelligence a treatise consisting of a hundred
thousand slokas. Its name was Paitamaha Tantra. In it were treated the
subjects of dharma- right conduct, artha- wealth, and kam- pleasure. A
large portion of it was devoted to the Science of Governance, that is to
say, the growth, conservation, prosperity and destruction of states. It
was first studied by Shiva and abridged by him for the benefit of mankind.
Further abridgments were made by Indra, Brihaspati, Shukra, and others
respectively.(Banerji, 1969: 3n) From the view point of Economics
following discussions are useful (Bokare, 2009:91)-
• The king is responsible to protect and promote livelihood
of the citizens.
• The state should build roads, drinking water facilities and
other social service activities.
• Academic institutions should be sustained by charities
by the government.
• The state should promote market places.
• If there is partnership in work, profit or loss should be equally
shared. Liabilities also shared equally.
• The collection of tax is necessary for the welfare of people.
Brihaspati-sutra
Brihaspati is also known as Guru, Vachaspati, and Angiras.
The only historical source about the information of Brihaspati is Kautilya
Arhashastra. For detail information about Brihaspati and his Artha-
sutra we depend on the stories explained in Mahabhrata and in various,
Puranas. Bhoja in his Yuktikalpataru (11 th century AC) while referring
to the Niti literature says that Brihaspati and Ausanas are two reverend
teachers 6 . Ashvaghosha in his Buddha Charita (about first century
AC) has remarked about Brihaspati. (Brihaspati-sutra, 1929: 3) The
well-known Kamasutras of Vatsyayana refers to Brihaspati as the
compiler of Arthashastra. (ibid) 7 Bhasa refers to a Barhaspatya
Arthashastra in his play named Pratima 8 . So we know that the
Barhspatya Shastra claims a great antiquity in the history of Hindu
literature 9 . (ibid) Three compilations are known in the names of
Brihaspati- Brihaspati-smriti, Brihaspati-samhita, and Brihaspati-sutra.
The Smriti of Brihaspati was also in verses but that work is, however,
lost now. The small collection of some slokas which is generally called
the Brihaspati-smriti is available but it is a child’s play as compared
with the Barhaspatya shastra referred to in the Mahabharata. Prof.
Julius Jolly collected fragments of Brihaspati Smriti from different law
books and their commentaries but these fragments are also incomplete.
(ibid: 7) The other treatise connected with the name of Brihaspati is
the Barhaspatya Samhita. We find it often quoted in other different
books 10 . It is in the form of a dialogue between Nahusha and Brihaspati.
The work is in the mixed style of prose and verse. This Samhita also,
as is apparent from the numerous quotations in the above mentioned
work, bears no connection with the present sutras. (ibid: 9)
Another work of Brihaspati is Brihaspati-sutra. The present
Brihasaptai sutras even if they do, possess but a very remote connection
with the Barhaspatya Arthashastra. These sutras may only here and
there contain a view of the old Barhaspatya School. As regards the
date of this work, nothing can be said with certainty. This much
however, is certain that the work is not anterior to the sixth or seventh
century AC. (ibid: 9)
5 6

Content of Brihaspati-sutra
The present collection of Brihaspati-sutra is a small collection
having 445 sutras only. The first chapter having 112 sutras deals with
the personal conduct of the ruler. The 75 sutras of the second chapter
deal with duties, principles and descriptions. The 148 sutras of third
chapter deal with knowledge and descriptions of different cults, and
various countries in Aryavarta. The 51 sutras of fourth chapter deal
with omens and counsels, and chapter five deals with different methods
for a ruler or upayas to the rulers. The last chapter-chapter six is
miscellaneous in character. Chapter division and number of sutras is
given in table 1.1.
Table 1.1. Chapter Divisions in Brihaspati-sutra
Chapter Description Numbers
One Personal conduct 112
Two Duties and principles 75
Three Vidya- Knowledge 148
Four Omens and counsels 50
Five Upaya 30
Six Naya 30
Total 445
Source: Brihasapti-sutra, 1929
Shukra-niti
It is very hard to explain the historical facts and facet of
Shukra. The only fact is Shukra-niti. It is a full scale comprehensive
book on Political Economy. The description of Mahabharata and other
books provide information about Shukra. He is known as the teacher
of Anti-Gods. His other names are- Bhargava, Usana, and Asur-Guru.
According to the legend of Mahabharata the name Shukra and his
highest place was given to him by Lord Shiva.
The date of Shukra-niti is estimated to be 400-500 BC but its
present form was fixed in 1700 AC. According to Mahabharata the
numbers of slokas in Shukra-niti is 1000 but the author of Shukra-niti
states himself that the total number of slokas are 2200. It is to note
that present collections of Shukra-niti have more than 2500 slokas.
Oppert’s collection is regarded as the most perfect than others. Nepalese
translation of Shukra-niti is based on Oppert’s collection.
Content of Shukra-niti
1. The first chapter contains the theory of state, duties and
liabilities of a king, sovereignty, unity, indivisibility of state,
seven organs of a state, gazette, decision making techniques
town planning etc.
2. Subordinate organs of state cabinet of ministers, laws of
administrations qualification of ministers, chief of army, tax
collector, and treasurer.
3. Civil laws, economic and social activity, and the best
professions for social life.
4. Fourth chapter has seven units. First unit contains the
description of friends of state, Second unit contains method
to increase the government fund, its accounting. Third unit
contains education system. Fourth and fifth contains social
and legal system, and sixth unit contains security system whereas
seventh units contains attack and treaty with other states.
5. Fifth chapter contains the remaining policies of the state.
In comparison to classical economists Smith and Ricardo,
Shukra used the term Political Economy in his definition. From the
7 8

view point of modern economics following subject matter is of utmost
importance-
1. Economic activity
2. Price determination
3. Tax collection, use and accounting
4. Qualification of the treasurer
5. Adulteration and remedial measures
6. Business activities
7. Banking activities
Kautilya’s Arthashastra
The most influencial of all is Kautiliya Arthashastra. It is one
of the great books of political thought, ... on each reader it leaves its
mark, a chill as when a dark cloud blocks a warm sun. (Boesche,
2002:1) This treatise is an exposition on statecraft, economic policy
and military strategy which identifies its author by the name Vishnugupta
Chanakya, who is traditionally identifies with Kautilya or Kautalya (about
400-300 BC), a renowned Professor of Arthashastra at Taxila
Univerisity. According to him the numbers of sutras is 6000 but present
collections consist of 4800 sutras and 380 slokas. Therefore 10 percent
of the matter is missing.
The book is divided into 15 Departments or Books known as
Adhikarana. The First Five Books deal with tantra, or the internal
administration of the state, the next Eight Books define its relation with
neighbouring states while the last Two Books are miscellaneous in
character.
There is controversy in the date and authorship of ancient
treatises whether it is Kautiliya Arthashastra or Brihaspati Artha-sutrra
9
or Shukra-niti. Thomas R Trautmann and I W Mabbette agree that
Arthashastra is a composition from no earlier than the second century
AC, but based on earlier materials. Thomas Burrow goes even further
and says that Chanakya and Kautilya are actually two different people.
(Wikipedia, 2009) The controversy about the date of this work has
revived by Prof. Jolly. He has pronounced that the work to be a piece
of forgery of about the third century AC. (Jayasawal, Appendix) Jolly’s
conclusion is that the real author was a theoretician, no statesman but
perhaps an official in a state of medium size. According to Jolly, the
ascription of the work to Kautilya or Chanakya was entirely due to the
myths currently regarding that fabulous minister who was looked upon
as the master and creator of the art of polity and as the author of all the
floating wisdom on the subject of Niti, but Jayasawal has presented
some evidences from the Arthashastra which are compatible only with
the fourth century BC. (Jayasawal, 1978: Nehru, 1985: 46, Kautilyako
Arthashastra, 1967: c)
Although the original work is very old, it was obtained by
Shyamashastry, the then librarian of Bhandarkar Oriental Library, in
1905 by a Brahman of Mysore. He edited and published it in 1909 at
first. Subsequently, the English translation of the Arthashastra by
Shyamashastry was published in 1915. Second and third editions of
this translation were published in 1923 and 1927 respectively.
Mahamahopadhyay T Ganapatashstri provided laudable service by
translating the original text into Sanskrit in 1924-25. Kalyanev translated
it into Russian language in 1959 and Vachaspati Gairola translated it in
Hindi in 1962-63. R P Kangle edited the Sanskrit text, translated in
English and wrote the commentary during 1960-65 in three volumes.
Nepali Translation was presented by K R Aryal in 1967, and L N
Rangrajan rearranged and edited it in 1992.
10

In the very beginning of the treatise Kautilya pays respect to
two of his teachers Shukra and Brihaspati. Kautilya quotes some 112
scholars in the text. In 25 of these opinions are attributed to schools
of the shastra, namely, the Barhaspatya (in six places), the Ausanas
(in seven places), the Manavas (in five places) the Parasaras (in six
places), and the Ambhiyas (in one). In 28 places the opinions are
ascribed to individual teachers, Bhardwaj (seven times), Vishalaksha
(seven times), Pisuna (five times), Kaunapadanta (four times), and
Bahudantiputra (once), in remaining 59 cases the opinions are attributed
to Acharyas- the teachers. A term referring to most or all of these
predecessors; twice we have the some used once, Apare- others.
(Kautiliya Arthashastra- 3, 2003 : 42) A list of ancient scholars is
given in the table. 1.2
Table 1.2. Schools and Thinkers of Arthashastra
Manava Barhaspatya Ausanas
Bhardwaj-Drona Vaisalaksa Parasar
Pisuna Kaunapadanta Vatvyadhi
Bahudantiputra Vatsyayan Karnika Bhardwaj
Charayana Ghotmukha Kinjalka
Pisuna-Putra Ambhiyas Unknown
Source: Jayasawal, 1978 : 4
Besides these persons there are many other thinkers whose
contribution has been given high importance in ancient times. For
example, in Aswalayana Grihya sutra a name is found- Aditya, who
was thought of a great scholar of his time. (Jayasawal, 1978:4)
11
Arthashastra after Kautilya
Jayasawal opines that the tradition of Arthashastra continued
after Kautilya and Kamandak also, who was a statesman and a pupil of
Kautilya. In this tradition, he opines, the most valuable work is
Nitivakyamrit of a Jain Scholar Somdev Suri. The date of the manuscript
of this books is estimated by Jayasawal as 1463 in the reign of Sultan
Bahalol Lodi. In this book 31 scholars have been cited all are related
with the Arthashastra School. Out of 31 there is found the names of
20 authors whose names are not to be found in any other places.
Probably they are all later than Kautilya and Kamandak. (Jayasawal,
1978: 8-14) Gairola supports this view of Jayasawal in his translation
of Rajnitiratnakar. It is one of the important books written in the tradition
of Kautiliya Arthashastra. The author of this book, Acharya
Chandeswor- was a minister in the state of Mithila in the times of
Harisimha Deva. In this treatise he has quoted 16 names in his book.
Among them Kulluk Bhatta, Shrikar and Laxmidhar are new ones.
(Rajnitiratnakar of Chandeshwor, 1969: 20-25) According to
Jayasawal and Gairola during Moghul and large part of the British rule
the importance of this subject gradually diminished. (Jayasawal, Ibid;
Kautiliya Arthashastram, 1960: 71-73)
Boudha and Jaina Scriptures
Boudha scriptures provide the detail information about political
and economic conditions in ancient period. Lord Buddha’s discourses
are collected in three Pitakas- Sutta, Abhidhamma and Vinaya. Jatak
stories provide information about administration, trade, and professions
in ancient period.Vardhaman Mahabir is the founder Jainism. His
thoughts are scattered in different scriptures known as Anga, Upanga,
12

Painna, Mula Sutta, Nandi Sutta and Laya Sutta. Jaina Scriptures clearly
defined the difference between the Science of Governance and the
Science of Religion. Boudha Samgha and Jaina Samgha both were
granted the state protection. The economic and political condition
described in Boudha and Jaina scriptures is very much similar to each
other.
Mainstream Economics
The English word economics has been derived from the Greek
word Oikonomia meaning management of household administration.
This word was used by Greek philosopher Aristotle (384-323 BC) at
first. Other Greek thinkers are Xenophone (430-355 BC) and Plato
(428-348 BC) who were the disciples of Socrates. Adam Smith's book
Wealth of Nations (1776) is the first book of modern economics. He
borrowed his ideas from Mercantilists and Physiocrats.Classical
economists Ricardo, Malthus, J B Say, and J S Mill and Neo-classical
economist Marshall followed his ideas. After Robbins, modern
discussions on economic theories were started. Marxian stream of
economics is known as Socialism. Keynesian stream is known as
Macroeconomics. However, the stream of Adam Smith, Alfred
Marshall, and J M Keynes is known as the main stream economics.
Notes
1 k[lyJof nfe] kfng] ofjGToy{zf:qfl0f k"jf{rfo{} M k|:yflktflg k|foz:tflg
;+x[To}sldbdy{zf:q+ s[td\ ..
(This treatise is a compendium of almost Arthashastras composed by
ancient teachers on the acquisition and protection of territory.) Kautiliya
Arthashastra-1, 2003, 1.1.1
2 tq CUj]bofy{zf:qd'kj]bM ..===
(That is the branch of Rig-Veda is Arthashastra.) Atharva. 49.3
3 j]bfgfd'kj]bfZrTjf/f] ejlGt .====cyj{j]b:o cy{zf:qd\ .
(Four are the branches of Vedas. Arthashastra is of the Atharva-Veda.) ibid, ch. 4
4 :joDe'e{ujfgNnf]sflxtfy{ ;+u|x]0f j} ====.
(God Swayambhu composed it for the welfare of the people.) Shukra- niti 1.3
5 The date of Manu-smriti is estimated by the scholars to be 600 BC or
more. The commentary of Manu-smriti by Medhatithi has been estimated
by Maxmuller as 1 AC.
6 gLlta{ [x:kltk|f{ ]Qmf ty}jf}zg;Lk/f .
peof]/lj?4fq lg?Kof gLlt?Qdf ..
(The best policies have been composed by the two- Brihaspati and
Shukra from two opposite sides.)Yuktikalpataru cited in Brihaspati -
sutra, 1921:2
7 a[x:kltZ˜yf{lwsfl/sd\ .
(The author of Arthashastra is Brihaspati.) Kam-sutra, 1.7 cited in
Brihaspati-sutra, 1929: 2
8 /fj0f– fj0f– sfZokuf]qf]˜l:d ;f+uf]kf+uj]bdwLo], dfgjLo+ wd{zf:q+, dfx]Zj/+ of]uzf:q+,
afx{:kTody{zf:q+, d]wfltlyGof{ozf:q+, k|fr]t;] >f4sNk+ r .
(Rawana says- I have studied Veda, Manu’s Dharma-Shastra,
Maheshwor’s Yogashatra, Barhaspatya’s Arthashastra, Medhatithi’s
Nyayashastra, Prachetas’s Shradh-Kalpa.) Pratima Natak. 79 cited in
Brihaspati-sutra, ibid
9Some of the mantras that describe the relationship between Brihaspati
and Arthashastras are as followsafx{:kTo]
r zf:q] j} Znf]sf ljlgotfM k"/f ..===
(For the support of your argument the Science of Brihaspati provides
logics...) Mahbharata Shanti Parva, 2003, 56.36
a[x:kt]d{t+ /fhGgwLt+ ;sn+ Tjof .
ty}jf}zg;+ zf:q+ lj1ft+ t] g/f]Qd ..
(O, the best among kings, you have studied views of Brihaspati and of
Shukra…) ibid, 122.11
10 In Gaja Lakshana Prakarana or in Bir Charitram.Brihaspati-sutra, 1929:9
13 14

CHAPTER TWO
DEFINITIONS AND METHODS OF ORIENTAL
ECONOMICS
Introduction
Adam Smith, the father of modern economics named his book
as Wealth of Nations. In the 18th and 19th century the content of this
book was given thename of Political Economy. Different scholars tried
to use different technical titles to denote the subject matter of
Economics. 1 (Seth, 1971: 1) Now a day Economics is a broad name
of the subject matter which denotes, price theory, income theory,
government finanance and economic growth. The scope of this subject
is growing faster, therefore, the tools of economic analysis are being
applied throughout society, not only in business and finance but also in
crime, education, the family, health, law, politics, religion, social
institution, and war. (Wikipedia, 2009) This new trend of economics
also support the wide subject matter of Kautiliya Arthashastra.
In this chapter we shall analyze the different uses of the word
Arthashastra (a parallel word to economics). At the same time we shall
compare the definitions of Kautilya and Shukra with the definitions of
Marshall's and Robbins's definitions of Economics. At the end of the
chapter we shall examine the methodology of oriental economics.
15
Different uses of the Word in the Past
In ancient times Arthashastra and Danda-niti were used
interchangeably. Therefore, Brihaspati calls this subject as Arthashastra
but another teacher Shukra prefer to call it Dandaniti.
(Mudrarakshas : 1, cited by Agarwal, 1997:7) In Mahabharata this
subject was known as Rajdharmanushasan or Science of Political Ethic.
(Mahabharata Shanti Parva, 2003, 12.58) In Amarkosh, other words
for Arthashastra are the Philosophy, the Science of Law and Order,
and the Science of Logic2 . Although, the literal meaning of Arthashastra
is the Science of Wealth but more often rendered as Science of Politics
by the analyst.
Different authors have translated the Sanskrit word Arthashastra in
different ways. A few examples are listed below-
• A treatise to help king in the acquisition and protection of the
earth. (Kautiliya Arthshastra-3, 2003: 3)
• A treatise on polity. (Basham: 51, cited by Boesche, 2003: 1-27 )
• A science of material gain. (Kosambi: 14, cited by Boesche, ibid)
• Universal laws on politics, economics, diplomacy, and war.
(Zimmer: 36, cited by Boesche, ibid)
• A science of political economy. (Boesche, 2003: 27)
• The code of common wealth. (Jayasawal, 1978: 5)
• The science of polity. (Kautilya's Arthashastra,1967, 15.1)
• The science of wealth and welfare. (Rangrajan, 1992: 100)
The comment of Sen and Basu is interesting- While the Sanskrit
translation of the word Economics is Arthashastra, the English translation
of Arthashastra cannot be Economics, as it contains concepts which
go beyond the scope of economics as understood by western economic
thinking. (Sen and Basu, 2006: vii)
16

Kautilya's Definition-
The definition of Arthashastra given by Kautilya is as followsdg'iof0ff+
j[lQ/y{M. dg'iojtL e"ldl/Toy{M . t:ofM nfekfngf]kfoM
zf:qdy{zf:qldlt .
Manusyanam vrittirarthah. Manusyawati bhumirityarthah.
Tasya labhapalanaopayashastram Arthashastramiti.
Kautiliya Arthashastra-1, 2003: 15.1.180
Different translations of the this definition are given below-
Shyamashastry- The subsistence of mankind is termed Arthawealth;
the earth which contains mankind is also termed Artha- wealth;
that science which treats of the means of acquiring and maintaining
the earth is the Arthashastra- Science of Polity. (Kautilya's
Arthashastra, ibid)
Rangrajan- The source of the livelihood of men is Artha
(wealth), that is to say, the territory (and the inhabitants following
various professions) is the wealth (of a nation). The science by which
territory is acquired and maintained is Arthashastra- the Science of
Wealth and Welfare. (Rangrajan, ibid)
SK Srivastava- Arthashastra is the science that deals with
the acquisition and growth of the wealth of the state. (Srivastava,
1981: 574)
The translations above are focused in the following subject
matter-
1.Human profession is economic activity.
2.Land use for agriculture and settlements is the source of
income for individual as well as for state.
3.Economics is the study which treats the methods of getting
return from these sources and concerns itself with the increase
of sources.
17
Shukra's Definition-
The definition of Arthashastra given by Shukra is as follows-
>'lt:d[lt clj/f]w]g /fhj[Qflb zf;gd\ .
;'o'STof cyf{h{g+ oq x\oy{zf:qd\ tb'Rot] ..
Shruti smriti avirodhen rajvrittadi shasnam.
Suyuktyartharjanam yatra hyarthashastram taduchyate.
Shukra-niti 4.3.37.
Arthashastra is the science which examines the actions and
administrations of state, in accordance with the dictates of revelation
(Veda) and of laws (Smriti) as well as the means of appropriate livelihood.
This definition focuses itself on the following points-
1. Economic activity should not contrast tradition,
belief and laws of society.
2. Economics is also related with political administration.
3. The earnings of wealth should be to get the optimum level
of returns.
Thus according to Katuilya, Arthashastra is a study of material
well being and according to Shukra- Arthashastra is the study of
economic and political behavior of human beings within the boundaries
of Shruti and Smriti.
Definition of Marshall and Robbins
Although there are many definitions (many more than any other
science according to economists Barbara Wootten) of Economics but
the leading definitions are two. These are as follows-
Marshall's Definition- Political Economy or Economics, is
a study of mankind in the ordinary business of life, it examines that
part of individual and social action which is most closely connected
with the attainment and with the use of the material requisites of well
being. (Marshall, 1890: 1)
18

The main points of Marhsall's definition are as follows-
1. Economics is the study of individual and social action.
2. Ordinary business is human profession.
3. Closely connected with material requisites of well being.
Robbins' Definition- Economics is the science which studies
human behavior as a relationship between ends and scarce means,
which have alternative uses. (Robbins, 1932: 16)
The main points of Robbins' definition are as follows-
1. Economics is the study of human (individual and social)
behaviour.
2. It is related with scarce means and wants.
3. It concentrates itself to the use of scarce means.
Table 2.1. Comparison of the Definitions
Head Kautilya Shukra Marshall Robbins
Economic Human Part of Ordinary Wants-means
activity profession tradition business relation
Relation Closely Related Not clear Not
with state related mentioned
Focus Material Optimum Material Economizing
prosperity production welfare resources
Economic Mentioned Implicit Not clear Ignored
growth
Comparison of the Definitions
The comparison of oriental and occidental definitions of
economics is presented in the table 2.1. Oriental definitions of
economics are production oriented. Therefore they stress on economic
growth. Definitions of Marshall and Robbins are consumption oriented,
19
therefore they are silent about economic growth. All the definitions
are same in the sense that they give emphasis on economic activity in
social life.
Basic Terms of Oriental Economics and its Limitations
Every economic terminology, at present use, has a long
historical background. Factors of production (now known as inputs)
were assigned technical names after a very long time since the origin
of the subject. Capital was accepted as an indispensable factor of
production by Jevons at first. Organization/entrepreneur was regarded
another important factor by Marshall. He also tried to separate these
two factors according to their functions.
Robbins was the first person who used the word scarcity in a
new economic sense. Ragnar Frisch used many terms of Physical
Sciences in Economics with a new perspective. The concept of
equilibrium of demand and supply opened new doors to the use of
equations in Economics. The recent concept of marginal approach
took several years to be developed in terms of derivative (Barla, 1997:
36-38). Now a day derivatives and functions are the common tools of
optimization theories in economics. The concept of depression that
was introduced in 1930 as lack of effective demand by Keynes, was
redefined as lack of liquidity by modern economists in 2007. Therefore
every technical term and concept, which is very common to the student
of economics today, has its long, unique and interesting historical
background.
Terminology of Oriental Economics also has its interesting
and a long historical background. The term Artha3 used in Arthashastra
has 10 meanings in Sanskrit. All the meanings do not matxch with the
20

subject matter of Econmics. Some other terminologies used by Kautilya
and his contemporary economists later became obsolete. Some words
changed their meanings and started to be used in a different sense
according to the change of socio-political situations. Therefore we
cannot say exactly what their proper meaning was at Kautilya period.
According to Shyamashastry, the text consists of some obsolete words
and some words violate the rules of Panini, the great Sanskrit
grammarian. (Sen and Basu, 2003: 10)
Another point that is to be regarded is that the socio-economic
conditions of ancient times were quite different in comparison to modern
times. Due to progress in science and technology we are using new
and more technical words in Economics. Therefore their discussions
are general in nature.
Methodology of Oriental Economics
The 15th part of the book- Tantrayukti, in a single chapter
illustrates the various stylistic devices used to elucidate a scientific
subject along with the definition of Arthashastra. Tantra means a science
and yukti means methods. Thus these methods are related with methods
of Oriental Economics. In this chapter Kautilya explains about the
mythology that is used to complete his thesis.
The medical books used these scientific methods to find
conclusion in the past. The Susrutsamhita- a medical book by Susrut
describes closely allied 32 tantryuktis.The Charakasamhita- another
medical book by Charak enumerates 34 tantrayuktis the two additional
seem to be pratyuchar (repetition), and sambhara (possibility).
Tantrayukti was compiled possibly in sixth century BC to systematize
debates in learned assemblies. It is distinctively stated in the Susrutsamhita
(Kautiliya Arthashastra-2, 2003: 312n). The word
tantrayukti has been translated as plan of the book by Shyamashastry,
methods of science by Kangle, and methodology by Rangrajan
(Shyamashastry 1967, 15.1, Kautiliya Arthashastra-3, 2003: 312,
Rangrajan, 1992: 100).
In the 15th book Kautilya has described the following methods
to verify his thesis or reject earlier theories-
1. The book or the department of the subject- adhikararana, is
a part of the total thesis. (Kautiliya Arthasastra-1, 2003, 1.1.1)
According to Kangle, the object with respect to which a statement is
made is the topic. For instance- this single (treatise on the) Science of
Politics is composed mostly by bringing together (the teachings of) as
many treatises on the science of Politics as have been composed by the
ancient teachers for the acquisition and protection of the earth. (ibid)
2. A brief description of the matter contained in a book is its
content, as, the end of learning; association with the aged, control of
the organs of sense, the senses, appointment of ministers and so on.
(ibid, 1.1.3)
3. Similar facts- yoga, pointing out similar comparable facts
by the researcher is yoga. (ibid, 1.4.16) The arrangement of a sentence
is employment (of a sentence), for example, the world consisting of
the four castes and the four divisions of life and the like.
4. Denotative meaning, that which has its limit in the word is
the meaning of the word- padartha. (ibid, 2.9.21) For example, mulahar
is the word. He who consumes in unjust ways the property, inherited
from the father and the grandfather is mulahar in the meaning.
5. The purport of a reason, a reason proving a thing is the
reason for (establishing) a thing is called hetvartha. For example, for
charity and enjoyment of life depend upon wealth. (ibid, 1.7.7)
21 22

6. Expression of fact in brief, mention is uddesa, for
example, control over the senses is motivated by training in the
sciences. (ibid, 1.6.1)
7. Explanation of a fact, word by word and in a clear manner
in detail is nirdesh. For example, absence of discrepancy in perception
of sound, touch, colour, flavour, and scent by means of the ear, the
skin, the eyes, the tongue, and the nose, is what is meant by restrain of
organs of senses. (ibid, 1.6.2)
8. An advice or guidance such as one should behave in this
manner is updesa. For example, he should enjoy sensual pleasures
without contravening his spiritual good and material well being.
(ibid, 1.7.9)
9. When a rule dwelt upon in connection with a question is
said to be a reference or quotation is apadesa. (ibid, 1.15.47-50)
10.Setting forth (a thing) with what is already said (application)
is atidesa. For example, what is said of a debt not repaid holds good
with failure to make good a promise gift. (ibid, 1.16.1)
11. Setting forth (a thing) with what is going to be said is
pradesa. For example, by making use of such strategic means as
conciliation, bribery, dissention, and coercion, as we shall explain in
connection with calamities. (ibid, 7.14.11)
12. Setting forth an unknown fact with help of known is
analogy. For example, he should protect those of his subjects who
have passed the period of remission of taxes. (ibid, 2.1.18)
13. What naturally follows from a statement of facts, though
not spoken of in plain terms, is implication or connotation, arthopatti.
(ibid, 5.4.1)
23
14. A fact with reasons on both sides in doubt or no conclusion
is samsaya. It occurs when the statement of a reason is equally
applicable to two cases of circumstances. (ibid, 7.5.19)
15. An information common to another topic or to what has
already been specified in connection with another is (similar) situation,
presanga. (ibid, 1.11.10)
16. The inference of a reverse statement from a positive
statement is contrary or rejected fact, viparyaya. (ibid, 1.16.12)
17. That by which a sentence is completed is completion.
That portion of a sentence which is omitted, though necessary to
convey a complete sense, is ellipsis, vakyasesha. (ibid, 8.1.9)
18. When the opinion of another person is stated but not refuted,
it is acceptance of that opinion- anumat. For example, Wings, front,
and reserve, is the form of an array of the army according to the
school of Usanaa. (ibid, 10.6.1)
19. The description of a specialty is emphasizing or
explanation, vyakhya. (ibid, 8.3.64)
20. Stating the derivative sense of a word. Deriving the
meaning of a word through its components is derived fact, nirvachan.
(ibid, 8.1.4)
21. Exemplifying by means of an example is illustration. The
mentioning of a fact to illustrate a statement is example,
nidarsana. (ibid, 7.3.3)
22. Taking away from a role of universal application or removal
of an undesired implication from a statement is exception, apavarga.
(ibid, 9.2.6)
23. Statement which is not used by others as inference in
which they are used by the author is his own technical term or own
inference, svasangya. (ibid, 6.2.13-15)
24

24. A given statement that is to be rejected is prima facie view,
purva-paksha. (ibid, 8.1.7)
25. A statement giving the final view on that is the correct
view, uttar-paksha. (ibid, 8.1.17-18)
26. What is applicable everywhere is invariable rule or that
which is universal in its application is conclusion, ekant. (ibid, 1.19.5)
27. Drawing attention to a later chapter is reference to a
subsequent portion or future statement- anagatavekshana. (ibid,
2.13.28)
28. The statement that it has been already spoken before is
reference to a previous portion,atikrantavekshana. (ibid, 6.1.7)
29. Thus and not otherwise is command, niyoga. For example:
Hence he should be taught the laws of righteousness and wealth, but
not unrighteousness and non-wealth. (ibid, 1.17.33)
30. Either in this way or that is an alternative, vikalpa. (ibid,
3.5.10)
31. Both with this and that way are results compounding
together, samuchchaya. (ibid, 3.7.13)
32. That which is to be determined after consideration is
determinable fact, uhya. (ibid,3.16.5)
He has presented examples for each of the methods.
Swasangya method has been explained by Kautilya as follows, 'The
school of Manu says that a king should make his assembly of ministers
with twelve members; the school of Brihaspati says that it should consist
of sixteen members; the school of Usans says it should contain twenty
members; but Kautilya holds the view that it should contain as many
members as the need of the country requires'.
25
Conclusion
The definitions of economics given by Kautilya and Shukra
are production oriented whereas definitions of Marshall and Robbins
are consumption oriented.
The Tantrayukti Chapter of Kautiliya Arthashastra explains
methodological steps used to complete a thesis in ancient times at
Taxila University. Although these methods involved 30-36 steps for
testing a hypothesis but Kautilya has used 32 methods to complete his
treatise.
Notes
1 Examples of different names used in the past by western scholars are
given below-
Catallactics (Introductory Lecture on Political Economy, 1831) by Arch
Bishop R Whatley,
Plutology (Plutology or The Theory of Efforts to Satisfy Wants, 1863)
by William Edward Hearn
Chrematistics (Chrematistics or the Study of Wealth) by Ingram
Political Economy (Principles of Political Economy) by J S Mill
Economics (Principles of Economics, 1890) by Alfred Marshall
2 cfGjLlIfsL, b08gLlt:ts{ljBfy{zf:qof]M.
(Synonyms of Arthshastra are Anviksiki- the Philosophy, Dandanitithe
Science of Law and Order, and Tarksastra- the Science of Logic).
Amarkosh (?), 320
3 The Sanskrit word Artha bears differennt synonyms which are as
followsb|Jo+
ljQ+ :jkft]o+ l/Syd[Sy+ wg+ j;' lx/0o+ + b|lj0f+ B'Dgdy{/}ljejf˜lk .
Money, finance, property, prosperity, wealth, means, material goods,
gold, assets, worth, meaning, power, energy . Ibid, 2586
26

Intorduction
The core subject of Kautiliya Arthshastra, Shukra-niti and
Brihaspati-sutra is Varta- Economics. Which stands for the three pillars
of state prosperity- agriculture, animal farming and commerce. Among
these three pillars they have given high priority to agriculture. In this
chapter we shall examine the policies of the agriculture development,
practices of animal farming and policies of forest conservation applied
by Shukra and Kautlya.
Varta- National Economy
CHAPTER THREE
AGRICULTURE AND ANIMAL FARMING
The common word for the economy in ancient times was
Varta. The word varta is derived from vriti or livelihood (Kautiliya
Arthashastra-3, 2003: 167). But according to Jayasawal vriti is
explained by the following manusyawati. It has therefore to be taken
as vritivartanam. Thus the word Vriti is derived from Vartan- meaning
existence. He opines that Palan has the sense of growth not merely
maintenance. (Jayasawal, 1978: 5n) The word palana which is
employed in classical literature to denote the duty of the king combines
two elements-seeing to the growth and protection in general. The second
27
is a corollary from the first which alone is found in Vedic formula.
Hence policy was directed to keep up and develop the varta or national
Economy. In fact it came first in the division of the ruler’s duty; and
this position is quite in conformity with the coronation declaration-
This state, to thee (is given) for agriculture, for well being, for
prosperity; and for growth. 1 (Shatapath, 5.2, Yaju., 9.22, cited by
Panthi, 2008:103)
Varta or the National Economy, has been described in the
following words by Brihaspati, Shukra and Kautilyaa.
krisigoraksabanijyani...
s[lifuf]/Ifjfl0fHoflg 2 (Brihaspati-sutra, 1929, 2.4)
b. Kusdaikrisivanijyam gorakshabartyochyate..
s';Lbs[lifjfl0fHo+ uf]/Iff jft{of]Rot] 3 ===(Shukranitisar, 2008, 1.156)
c. Arthanartho vartayam…
cyf{gyf]{ jftf{ofd\ 4 === (Kautiliya Arthashastra-1, 1.2.6)
There are various English translations of the word Varta. For
example, Kangle translates it as Economics and State economy
(Kautiliya Arthashastra-2, 2003, 1.2.1 and Kautiliya
Arthashastra 3, 2003: 106), L R Smith translates it as K-M state
(Smith, 2009: 6), Jayasawal translates it as National Economy
(Jayasawal, 1978: 328-29), Wolpert and Basham translate it as Socialist
Monarchical Economy, (Boesche, 2006: 67), and Rangrajan translates
it as Kautilya Economy (Rangrajan, 1992: 73).
Importance of Varta
Kautilya believes that the governance and freedom of the
country depends on economy- varta. It is by means of treasury and
the army obtained solely through varta that the king is able to hold under
28

the control, both his subjects and his enemy.’(Jayasawal, 1972: 327)
Since Varta- the economy supplies grain, cattle, money, and various
kinds of products to the state. It also supplies labor force, necessary
for production in agriculture and commercial sector. From this it may
be surmised that labourers engaged in the various economic fields
could be recruited for similar state enterprises. Thus, the labor force
was also national wealth according to Kautilya. This provides the insight
of Kautilya on the modern non-material wealth concept.
The state is sustained by the revenues it collects form the
subjects. These follow different economic activity from which they
make a living and pay taxes to the state. Three principal economic
activities are recognized as providing men with the means of livelihood,
namely krisi- agriculture, goraksha or pashupalya- animal farming and
Banijya- commerce. We can call it K-G-B sector. In the beginning
National Economy was three sector, later on, money lending and
artisanship were also brought and it became four sector.
(Shukranitisar, 2008, 1.156)
Like all the activities in the state varta too was rooted
(janapadmula) in the country (Kautiliya Arthashastra-2, 2003,
8.1.29). The ideal state is described at length is in Book 6, Chapter 1,
Sutra 8. Among other things it is stated that it should be easy to defend,
should provide easy means of livelihood, such as arable land, mines,
forest, pastures, trade-routes, and so on, and should be inhabited by
hard working farmers and men mostly of the lower varnas. Apart from
considered of defense the emphasis is on facility for the pursuit of
varta. But of course a ruler has to satisfy with such territory as may
have fallen to his lot. A choice is however possible when new settlements
are planned or new conquests attempted. In such a case he is advised
29
to choose land which abound in water, yields crops without much
rain, is suitable for grain crops and so on what is predominantly
good agriculture land. (Kautiliya Arthashastra-3, 2003:167)
Rural Development
Kautilya believed in scientific farming. The state officer-incharge
of agriculture was designated as Sitadhayksha- The
Superintendent or Head of Agriculture. Literally sita stands for plough.
The Superintendent of Agriculture should be qualified in farm technology,
have good understanding of soil characteristics and qualities, plants
and trees, flowers and fruits and different crops.
According to Kautilya- the Superintendent of Agriculture,
should have a good knowledge of Krisitantra- the Science of Agriculture,
Sulvasastra- Geology, and Botany. (Kautiliya Arthashastra-2, 2003,
2.24.1) These references clear that there were developed sciences on
agriculture, forestry, and mines. Parasar and others explained the
Science of Grain, and Agniveshya developed the Science of Herbs.
The Shulvashastra was related with the Science of Mines. (Kautilyako
Arthashastra, 1967, 2.24)
Kautilya allows The Superintendent of Agriculture to take
assistance of experts if he did not have the knowledge of all these
fields. (ibd) This description clears one more thing that the state used
to employ the services of experts in various sectors of production.
The duty of The Superintendent of Agriculture was to collect in the
proper seasons the seeds of all kinds of grains, flowers, fruits,
vegetables, bulbous root, roots, creeper fruits and cotton.He was also
responsible for providing good quality seeds; get the fields ploughed
by workers employed, slaves, and prisoners. (ibid) Since in the K-M
30

economy, the government used to produce grain and other agriculture
products. The agriculture production was considered a major part of
national income. Therefore The Superintendent of Agriculture used to
employ many labourers at the time of cropping and harvesting. (Lallan
Prasad, 2009: 245) If the labour supply was insufficient to crop or
harvest, the prisoners and slaves were also employed. According to
Kautilya, 'He should cause them to be sown in lands suitable for each
which has been ploughed many times, through serfs, labourers and
persons paying off their fines by personal labour
(dandapratikartri)'.(Kautilya’s Arthashastra,1967, 2.24) Kautilya
says further, 'He should cause of delay in (the work of) these on account
of ploughing machines, implements, and bullocks, and on account of
(the work of) artisans, such as smiths, carpenters, basket makers,
rope-makers, snake-catchers, and others’. (Lallan Prasad, ibid)
Thus, The Superintendent of Agriculture was not only
responsible for farming but at the same time he was responsible to
have good connection with blacksmiths, carpenters, rope-makers and
mechanics etc., who are helpful in farming by manufacturing farm
equipments. He was to arrange sowing of different crops in different
seasons. The names of seeds to be sown are listed along with appropriate
seasons. (ibid)
Land Tenure System
It is quite clear that all unoccupied land is supposed to belong
to the king, that is, to the state. It is stated that land which is ready for
agriculture should be given to those who are willing to pay taxes; but
the grants are to be made for life only, implying that the farmers in this
case are not full owners. It is also added that if the grantees fail to till
the fields, these may be taken back from them and given to others or
31
the state may get them tilled by state servants and traders. Land which
is not already arable is to be allowed to be brought under cultivation by
whosoever chooses to do so; in this case the land is not to be taken
away from him. (Kautiliya Arthashastra-2, 2.1.9) This farmer too
must be supposed to be tenant on state land. The state is to help settlers
with seeds, cattle, and even cash so that the land may be reclaimed.
These however, are loans to recovered at the tenants’ conveniences .
Other concessions and remissions in taxes are also recommended at the
time of the first settlement. (Kautiliya Arthsastra-2, 2003, 2.1.13-18)
It may be assumed that though villages in new settlements are
to enjoy certain privileges and concessions in the initial stages, they
would be expected to be treated in course of time in the same way as
the other older villages in the same state. Many of the rules in the latter
part of this chapter sutra 25 onwards appear to be intended for all
villages join the state, not for those in new settlements only.
A question that has exercised the minds of scholars for long is
whether all land belongs to the state or whether there is also private
ownership in land. It seems that opinions were divided on this question
in ancient times. So far as the present work is concerned there be little
doubt that it recognizes private ownership in land, though it presupposes
at the same time the existence of state owned or crown lands. (Kautiliya
Arthashastra-3, 2003: 169)
The view of Megasthenes, the Greek ambassador to
Chandragupta’s court, is different. He says that all lands are owned by
the king. (Boesche, 2006: 678) Modern scholars have struggled and
disagreed over the question of whether Megasthenes was wrong in
contending that the king owned all of the land. The K-M economy was
so large that it is practically difficult to have a state control over the
total arable lands. The other lands which were not under state
32

supervision were clearly to be supposed to belong to private owners.
There are clear indications in Arthashastra about private ownership of
land. The owner of the field is distinguished from the tenant.(Kautiliya
Arthashastra-2, 2003, 2.1.17 and 3.1.10) In connection with the
disputes regarding boundaries between two fields it is stated that if
neither party can prove its claim, the disputed portion goes to the king;
similarly land, the owner of which cannot traced, is also to go to the
state. (Chamola, 2009: 25-26)
According to Boesche, Kautilya sometimes gives the
impression that the crown owned all lands in the country. But the
distinction that is made between a tenant and a landlord and references
of farm land sell and purchase given in the Kautiliya Arthashastra makes
it clear that there was private land ownership system in ancient times.
Therefore following conclusions may be drawn about land ownership
in Kautilya economy (Boesche, 2002: 68)-
1. There was a considerable amount of crown land or at least
controlled land.
2. Most farmers have the taxpaying lands.
3. Crown land was not owned by individual farmers because
the state could seize the land if farmers were not productive.
4. Kautilya clearly thought in terms of incentives, therefore to
encourage production he thought it fair to vary tax rate
according to the fertility of land.
An important state activity frequently referred in Arthashastra
is about settlement of unoccupied land. This is not transformation of
pasture land into agricultural fields, but the occupation and settlement
for the first tie of new virgin territory. Mention has also been made of
the relative merits of different types of land that may be selected for
33
reclamation and settlement. The king was considered owner of all land
and water in the country. Farmers were to pay for irrigating the fields.
Those having own wells were supposed to pay higher than those
bringing water from a distance. (Chamola, ibid, 25)
When new settlements were planned, people from crowded
villages and outside were allotted these lands. A village should normally
had 500 people, majority of whom should be lower varna farmers.
The distance between two villages should not be more than 3-6
kilometers so that people can protect themselves from outside invasions
by coming together. The village boundaries were demarcated by rivers,
hills, forests, thorny buses, bridges and banyan trees etc. A city in the
midst of 800 villages a town for 400 and a sub town for 200 villages
were built. Ten villages used to constitute a big village (mahagram)
fort were built for protection of janapadas. Saints, teachers, priests
were allotted land free of cost so were the people employed for security,
record keeping, looking after cows, physicians and trainers of horses
etc. the land so allotted could not be sold to others. Fertile land was
allotted for farming to the family. According to Kautilya, the state …
should grant lands to priests, preceptors, chaplains, and Brahmins
learned in the Vedas as gifts to Brahmins, exempt from fines and taxes
with inheritance passing on to corresponding heirs, and to heads of
department, accountants and others, and to gopas, sthanikas, elephant
trainers, physicians, horse trainers and courtiers, land without the right
of sale or mortgage. (Kautiliya Arthashastra-2, 2003, 2.1.7)
Wages for Farm-workers
Farmers and farm workers were paid 25 percent to 50 percent
of the farm products. In case of crops destroyed due to natural
calamities, no share in crop was asked by the state.The minimum
34

wage in Kautiliya Arthashastra is given as 60 pana annual. The pana in
Katuilya has the same place as of rupee in present economy. According
to Rangrajan, this wage was supposed to be sufficient to get one prastha
(approximately 4 kgs.) grain daily. (Rangrajan, 1992: 110) This was
considered a sufficient diet for four times daily for an Aryan. (Kautiliya
Arthashastra-2, 2006: 2.15.43) For the dependents of workers 15
pana annual was paid separately. In festivals extra money (with leave)
was given to workers and their families. (Rangrajan, ibid)
Requirement of Rain
Arthashastra describes types of rains, rain forecasting, and
measurement of rain, timings and intensity of rain in different parts of
the country. Kautilya believed that the rise and set of some stars and
planets the rainfall influences. Therefore Kautilya has suggested to
keep in mind these planets while sowing the seeds.
Kautilya has described different types of soil and water
necessary for the harvest according to the feature of the soil, distance
from rivers and ponds, situation of land- highland or lowland. According
to Kautilya 16 drona is the amount of rain in dry lands, one and half
times that in water lands, where sowings are in conformity with the
nature of the region, 13 dronas and a half in the Asmak, 23 dronas in
Table 3.1.The Requirement of Rain
Kinds of land Requirements Transformation in
inches
Not irrigated land 16 drona 25
Wet land 24 drona 37 ½
Asmak land 13 ½ drona 21
Avanti, Malwas,
Source: Rangrajan, 1992: 249
the Avantis, unlimited in the snowy other regions regions, and unlimited
as to time in lands where sowings are made with the help of canals.
(Kautiliya Arthashastra-2, 2003, 2.24.7) The requirement of rain
and its conversion in inches is given in th table 3.1. 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. (Kautilya’s Arthashastra, 1967, 2.24)
Crops
Kautilya suggests The Superintendent of Agriculture to sow
the seeds according to the rainfall. Kautilya describes three types of
crops according to rainfallm these are as follows-
1. Summer crops
2. Wet crops
3. Winter crops
According to the amount of water availability for the work,
The Superintendent of Agriculture should decide on wet crops, winter
crops, or summer crops. The superintendent shall grow wet, winter
crops, or summer crops according to supply of workmen and worker.
(ibid, 2.24.24) Kautilya gives direction to the Superintendent to keep
in mind not only the season and irrigation facility for a crop but also
work force needed to sow and to collect the grain. At the same time he
suggests to have regular relations with carpenters and iron smiths who
help directly or indirectly in the work of production. On the basis of
production Kautilya has divided the crops in three parts, these are as follows-
1. Highest return crops
2. Intermediate return crops
3. Lowest return crops
35 36

He opines that Shali (winter season paddy) and other paddy
breeds provide the maximum return, vegetables’ return is intermediate
in nature, and sugar-cane provides the least return. For sugarcanes are
fraught with many dangers and require much expenditure. Thus paddy
farming was considered to be least expensive and farming of sugarcane
most expensive. Here Kautilya compares the agriculture production
with the cost for sowing and the return provided by them. This analysis
provides the information that ancient economists used, though implicit,
cost benefit analysis and cost recovery analysis in agriculture
production.
What should be sown near canals, rivers and other sources of
water and what should be sown on the land away from these sources
were also specified on the basis of Science of Agriculture. He says,
'Vegetables should be grown near rivers, canals, wells etc'. Different
herbal plants were grown on different places according to suitability
of different types of land.
According to Kautilya, lands that are near the banks of rivers
and ponds are suitable for growing pumpkin, gourd and other same
species of creeper plants. He suggests that lands that are frequently
over flown by water for long are beneficial for pepper, grapes, and
sugarcane. According to him, vegetables and root crops should be
sown near wells and low grounds because these places are useful for
green crops. For the maximum utilization of farm lands he again
suggests that marginal spaces between any two rows of crops are
suitable for the plantation of perfumed plants, and medical herbs like
usira grass, hribera, pindaluka and other same species. He clearly
states that The Superintendent of Agriculture should grow
recommended plants on dry lands and wet lands to get maximum
agriculture production.(ibid)
37
Preparation for seed bed has been discussed in Kautiliya
Arthashastra in detail. He suggests to put seeds for paddy farms in wet
climate for seven moon-lit nights and then for seven days in sun-light.
Pulses should be kept for three days and nights or five days.
(ibid, 2.24.24)
Kautilya has given some valuable suggestion for the treatment
of seeds to keep away from crop diseases. He suggests getting good
harvest sugarcane should be smeared at the cut with honey, ghee and
pig’s fat, and mixed with cow dung in the stalks before sowing. He
opines that smearing with honey and ghee in the case of bulbous roots,
smearing with cow-dung in the case of stone like seeds, and in the
case of trees, burning in the pit and fulfillment of the longing with
cow-bones and cow dung at the proper time will yield better and more
yield. (ibid)
It is a well known fact that whatever the manual labour be,
agriculture production is affected by the nature. Therefore, good crops
are possible only when nature is suitable. Whatever the efforts of
farmers be, if nature is against him, the crops will suffer. Therefore,
prayer of nature was performed before cropping. Kautilya suggested
the farmer that, the first sowing of all kinds of seeds, he should sow
the first handful (after it is) immersed in water containing gold and
should recite a mantra. This beautiful mantra is given in Arthashastra
as follows-
Prajapataye Kasyapayadevaya namah sada,
Sita me radhyatam devi bijesu ch dhaneu ch5 .
(Kautilya’s Arthashastra,1967, 2.24)
(We salute to Prajapita, Kasyapa and God of rains. May Goddess
Sita bless not only the seeds to grow but also to grow our wealth.)
Obviously, without the support of nature good harvest is not
possible. Nepalese farmers are still using this customry function in
38

cropping and harvesting. In modern times the close relationship of
environment, natural resource and its uses in rural areas has been
analyzed by Nobel prize winner Economist Elinor Ostrom.
The Superintendent of Agricutltire was also responsible to
provide food and salary for workers engaged to farming, dairying,
wood work etc. Fruits and grains fallen automatically could be picked
up by saints and needy without charges. The storage of grain after
harvesting was to be done in a manner that it could not be blown away
by wind and damaged by fire.
Land records were kept by the relevant officer appointed by
the state. Farm lands were classified into fertile and barren, useful for
plantation paddy cultivation fruit orchards and sugarcane growing.In
brief, rotation of crops, intensive and extensive farming use of fertilizers,
crop diseases and their eradication, irrigation by rivers and tanks, laws
of water distribution, seed selection, evils of fragmentation of land
holdings etc. has been discussed by Kautilya in scientefic way.
The agriculture development has been taken as the
responsibility of state. Necessary facilities were provided to the farmers
in the forms of seeds, irrigation, bullocks and other agriculture inputs.
For the remedies of bad season (draught and flood), Kautilya suggested
the natural methods weather forecasting.
The state and the community were responsible for the
development of agriculture for which waste agriculture lands were to
be cultivated, and jungle lands were to be cleared. The lands which
were neglected by absentee landlords were to be taken away and given
to those who could cultivate them with greater advantages. When land
values were assessed, fertility was a major factor to be taken into
account. Fair prices of agricultural products were fixed by the state to
save cultivators from the clutches of traders.
39
Animal Farming
The second pillar of the national econmy in ancient times was
animal farming. The state was the owner of large herds of cattle and
other animals, with The Superintendent of Cattle in charge. It needs
hardly be added that cattle are owned privately. In other words, animal
farming was state level production as well as private production.This
becomes clear from the reference to cattle entering royal herds in
times of danger, when a fee of one tenth of their produce was charged
for the protection given. (Kautiliya Arthashastra-3, 2003:175) That
is also shown by the punishment prescribed for owners of cattle as
distinguished from herdsmen, when damage is caused to crops by
cattle.
Although animal farming is done for milk, for riding, for
carrying luggage, for chariots, for meat, for leathers, feathers and
other products but mainly it was cattle farming. Cattle were of
importance of two reasons. The males were necessary for draught
purposes in agriculture and transport whereas the females supplied
milk, which with its products was a valuable source of food. The
6
hides too were useful for the manufacture of leather goods. The text
refers meat, fresh and dried, as an item of food. Amrkosh and Shukraniti
provides various items of milk. But it nowhere creates the impression
that animal herds were to be reared for their meat. The production of
meat is presented in brief in the contexts of hotels and lodge.
Two ways in which herds may be got tended are mentioned.
According to what is called the vetnopagrahika system, a herd of one
hundred milch-cows is given for tending to a group of cowherds and
their assistants each of whom is paid a wage in cash, the entire produce
of the herd is to be handed over to the state. According to the
karpratikara system a herd of 100 cows of all ages but containing
40

only 20 milch cows is given to one cowherd who pays to the state a
fixed amount of ghee per year. (Kautiliya Arthashastra-2, 2003,
2.29.4-5) The cowherds are held entirely responsible for the care and
protection of the cattle in their charge. Very detailed rules are laid down
about this as also about the proper time for milking cows and
buffaloes, the quantum of fodder for them and so on. (Kautiliya
Arthashastra-3, 2003: 176)
Classification
When The Superintendent of Cattle used to classify cattle as
calves, steers, tamable ones, draught oxen, bulls that were to trained
to yoke, bulls kept of crossing cows, cattle that were fit only for the
supply of flesh, buffaloes and draught buffaloes, female calves, female
steer, heifer, pregnant, milch cattle, barren cattle…either cows or
buffaloes, calves that were a month or two old as well as those which
are still younger and when as he ought to be brands them all inclusive
of their calves of one or two months old along with those stray cattle
which had remained unclaimed in the herds for a month or two and
when he registered the branded marks, natural marks, colour and the
distance from the horn to another of each of the cattle, that system
was known as class of herds. (Kautilyako Arthashastra, 1967, 2.29)
Quality of Milk
Kautiliya Arthashastra provides an interesting information and
measures of the quality milk in ancient times. Kautilya says that the
quality of milk is influenced by fodder and the place where cattle are
kept.The measurement of quality milk is given in the following words,
41
'The quantity of fat in one drona (approximately 64 liters) of milk is
one prastha (approximately 4 kgs.). The fat in buffalo is one fifth
times greater than that of cow. Thus there would be 62.5 grams fat in
one liter of cow-milk. In buffalo milk the quantity of fat would be 75.0
grams.The present day quality of fat on an average is 40-50 grams.
(Gewali, 2011 b:74)
Fodder
The fodder for horses has been described in following words
for bulls which are provided with nose rings, and which equal horses
in speed and in carrying loads, half a bhar 6 (approximately 35 kgms) of
meadows grass twice the above quantity of ordinary grass, one tula
(approximately 3.5 kgms) of oil cakes, 10 adhakas (approximately 16
kgms) of bran, five palas (200 gms) of salt, one kuduba (one liters) of
oil for rubbing over the nose, one prastha of drink, one tula of flesh,
one adhaka of curis, one drona of barley or of cooked masha, one
drona of milk, or half an Adhaka of liquor, one prastha of oil or
ghee 10 palas of sugar or jaggery, one pala of the fruit of ginger
may be suitable. (Kautilyako Arthashastra, 1967, 2.9.46, 2.29)
Types of Forests
Quality has described various methods to develop forests. The
objectives to develop forest are as follows:
1. To get forest produce
2. To preserve wild animals
3. To preserve game animals
4. Tor Asrams and Vedic performing
42

Kautilya describes about forests in chapter 17 and 18 of the
second book. While making new settlements Katuilya gives much
importance for the preservation of different types of forest by
forestation. He has developed different types of forests with new
settlement in the country that are given in the table. Kautilya has managed
all these lands to keep tax free. From the point of view of wild animals
and forest production Kautilya has managed various types of forests.
Kautilya has suggested to plant trees in uncultivable and pasture lands.
He divides these forest as shown in table 3.2.
Table 3.2. Types of Forests
Name Particulars
Gochar pasture
Brahmaranya forest for religious learning
Somaranya soma plantation
Tapovan forest for the performance
Mrigvana Animal forest
Source: Kautilyako Arthashastra, 1967, 2.17
He suggests, Brahmans shall be provided with forests for soma
plantation, for religious learning, and for the performance of penance,
such forests being rendered safe from the dangers from animate or
inanimate objects, and being named after the tribal name- gotra of the
Brahmins resident therein. (Kautilyako Arthashastra, 1967, 2.18)
A forest as extensive as the above, provided with only one
entrance rendered inaccessible by the construction of ditches all round,
with plantations of delicious fruit trees, bushes, bowers, and thorn
less trees, with an expansive lake of water full of harmless animals,
43
and with tigers, vyala, beasts of prey- mrigayuka, male and female
elephants, young elephants, and bisons all deprived of their claws and
teeth shall be formed for the king’s sports. (ibid) On the extreme limit
of the country or in any other suitable locality, another game-forest
with game-beasts; open to all, shall also be made. In view of procuring
all kinds of forest-produce described elsewhere, one or several forests
shall be especially reserved.
Kautilya also gives equal emphasis for economic forest for
forest produce.’ Manufacturies to prepare commodities from forest
produce shall also be set up’. (ibid) He calls it dravya-vana- forest of
wealth. According to him, ‘Wild tracts shall be separated from timberforests.
In the extreme limit of the country, elephant forests, separated
from wild tracts, shall be formed.’ (ibid) Different types of reserved
forest managed in Kautiliya Arthashastra is presented in table 3.3.
Table 3.3. Reserved Forest
Forest Use
Dravya vana economic forest
Abhayvan wild life reserves
Mrigvana animal forest
Atithimrigvan guest animal forest
Hastivan elephant forest
Source: Kautilyako Arthashastra, 1967, 2.17
It is to note that Brihasapati is of the view that all the economic
system whether agriculture, or protection of cows, or commerce and
trade all depend on stable political system. Primary requisite for
sustainable economic system is a firm and centralized economic
system. (Mahabharata, Shanti Parva, 2003, 68.10-12) if the central
power of a country is weak, the public will suffer like a crowd of
44

fishes in a very small pond or the flocks of birds in a reserved forest.
(ibid, 68.8-10) Not only agriculture but business, education, ritual
offerings all depend on strong political system. (ibid, 68. 23-27)
The Superintendent of Forests with his retinue of forest guards
shall not only maintain the upkeep of the forests, but also acquaint
himself with all passages for entrance into, or exit from such of them
as are mountainous or boggy or contain rivers or lakes. Kautilya can
be said as the propounder of reserve forest because he has suggested
to preserve wild animals. He has managed fines and punishments to
the person who violates the laws and kills the animals.
Conclusion
The system of agriculture, animal farming and forest resource
in ancient times can be summarized as follows-
1. The economy described in these treatises is three sector economy.
The main three pillars of economy were- agriculture, cattle farming,
and commerce.
2. The main source of government revenue were arable land,
economic forest, and animal husbandry.
3. The ownership of land was of three types- Government owned,
farmer owned, and tax free land given to high ranked people of
the country.
4. The government farming was done by the Superintendent of
Agriculture. Services of technicians were taken if necessary.
5. Agriculture labourers were given wages according to their
standard of living.
6. Kautilya has given the concept of economic forest and reserve
forest.
7. The status of farmers was legally high.
45
Notes
1 Oo+ t] /f6\ === oGtfl; odgf] w| |jf]˜l; ' j?0fM . s[io} Tjf If]dfo Tjf /o\o} Tjf
kf]iffo Tjf . Shatapath, 5.2, Yaju., 9.2, cited by Panthi, 2008.
2
Agriculture, cattle-rearing, and trade and commerce (are the bases of
economy). Agriculture, cattle culture and commerce and trade comprise
the (science of) varta. (Success in that leads through Exchequer and
Army to the control of one’s own state as well as one’s enemies.)
Brihaspati-sutra, 1929, 2.4
3 Receiving interest, doing farming, rearing cows, commercial activities
comprises the varta- economy. (He, who knows the science of varta,
has no fear for livelihood.) Shukranitisara, 2008, 1.15
4 In Economics lies Politics as well as the reverse of Politics.Kautiliya
Arthashastra-1, 1.2.6
5 k|hfkto] sfZokfo b]jfo r gdM ;bf . ;Ltf d] CWotf+ b]jL aLh]if' r
wg]if' r . Kautilya’s Arthashastra, 2.2
6
1 bhar = 20 tula =2000 pala = 70 kgs.
1 drona= 4 adhak= 16 prastha=64 kuduba (1 kudub = app. 1 kg)
This conversion is based on Nepalese traslation and Rangrajan's
book.
46

Inroduction
Trade and commerce was the third important pillar of ancient
economy. According to Kautilya, public prosperity (Pracharsmridhi),
reward for good conduct (Charitranugraha), capture of thieves
dispensing with (the service of too many) government servants,
abundance of harvest, prosperity of commerce, absence of troubles
and calamities (Upasargapramoshah), diminution of remission of taxes,
and income in gold (Hirarnaayam) are all conducive to financial
prosperity. (Kautilya’s Arthashastra,1967, 8.2)
In this chapter we shall examine the state’s role to promote
trade and commerce for the economic prosperity as described by
Kautilya and Shukra. At the same time we shall analyze their policies
of trader’s security and consumer’s protection.
Economic Prosperity
CHAPTER FOUR
TRADE AND COMMERCE
Economic prosperity has been regarded as the equally
indispensable element of life by all the thinkers. Not only Kautilya but
Shukra and Brihasapti also have given much importance to economic
47
resource. They say that the first 25 years of life should be devoted to
study books and exercise sports and then acquisition of wealth should
be started. But at the same time they suggest that regular rites should
not be neglected when the time is devoted to earn money.
Brihaspti gives greatest importance to economic prosperity
by saying that the person, who is prosperous, has friends, righteousness,
knowledge, merit,prowess and intelligence. (Brihaspati-sutra,1929
6.6). He says.' As an elephant is caught by other elephant similarly
wealth is acquired by wealth'. (ibid, 6.9)
He gives emphasis to possess advantages because sovereignty
belongs to the person (ruler) who possesses the advantages of
knowledge, wealth, and friends. (ibid, 2.1-3) To earn public wealth
ancinet scholars have suggested to develop the three sectors of the
economy- agriculture, cattle farming, and commerce. (Brihaspatisutra,
1929, 2.4, Shukranitisar, 2008, 1.156, Kautiliya
Arthashastra, 2003, 1.4.1)
Role of State in the Development of Trade and Commerce
Ancient thinkers were of the view that state should perform
for the economic prosperity of the general public. This will strengthen
the central authority. The political unity without economic prosperity
is meaningless and will not keep for long. For this Kautilya has suggested
the state to build rest houses and store houses for the caravans of
traders for whom police escorts were recommended.
There was free trade in those days in the country. Tolls, duties
and customs were realized for revenue purposes and not to control
foreign trade. The state was also advised to undertake the manufacture
of those commodities for which a monopoly was desirable and to sell
them through departmental agencies. It should be remembered in this
48

connection that state had framed trade regulations which show that
commerce was in developed stage in ancient times. Internal trade was
divided in three parts- retail, whole and state trade. Regarding peoples
welfare the foreign trade was also in practice.
The state had an important role to play in industrial development
in ancient times. Some industries, like mining, armaments, shipping,
etc., were state monopoly in Shukra-niti and Kautiliya economy.
Akaradhyaksa (The Superintendent of Mines) was responsible for
appointments, selection of mining equipments, examining old and new
mines, and operations and preservations of mines in Kautiliya economy.
Kautilya provides the qualities of lands where gold, silver, copper and
other mines could be found. According to him the quality of minerals
underground could be ascertained by soil characteristics. He also
suggest techniques to soften or harden a metal, purify it by using
liquids prepared out of natural products, like plants, milk, oil, honey,
urine etc.
Lakshnadhyaksa (Mint Master) was responsible for setting
up factories to manufacture and sell iron and steel copper and other
metals. He looked after manufacturing coins for the state, the mints of
the metals for coins were specified. Silver and copper were major
ingredients. Coins could not be manufactured by any other person,
except the state officer. (Kautiliya Arthashastram, 2009, 2.13)
Mining of precious metals was also a state monopoly. The
Superintendent of Mines was appointed to arrange for mining, cutting,
polishing, etc. of diamond. Sources were identified from where diamond
could be obtained and shapes sizes and quality of diamonds were
described. Manufacturing storing and selling of salt was looked after
by Lavanadhyaksa (The Superintendent of Salts). Imported salt was
heavily taxed. If there was enough salt domestically available importers
49
were penalized to compensate the state. Since salt industry was one of
the important sector therefore production, sale and purchase has been
described in detail. For selling price of salt Kautilya used following
method (Kautilyako Arthashastra, 1967, 2.12)-
Salt price = cost price + 5 percent transaction tax + quarantine fee
Business Management
For the best management following conditions are explained
by modern entrepreneurs. Kautilya and Shukra have stipulated these
conditions clearly in their treatises. These conditions are as follows
(Joshi, 2006 :181)-
1. Have confidence in and devotion to work
2. Get fully absorbed in the task entrusted
3. Production must be the primary aim
4. Drawing up a plan of working to avoid obstruction in the
smooth running of the enterprise
5. Proper arrangement should be the eternal watchword
6. Create awareness about the enterprise in the total population
of the country
7. Aiming at success in the international competitive business world
Explaining the qualities of an entrepreneur, Kautilya states,
'Since it is proper to ask for advice, the desire to seek obedience is
Susrusa. When advice is tendered, naturally one has to listen to it and
understand what one has listened to. Understanding what one has
listened to is grasping- Grahana,. Not forgetting such awareness is
preservation or Dhyana. Trying to derive proper understanding of the
subjects which one has preserved is knowledge- Vigyan. Things, which
are not explained by words but understanding such things by other
means, is known as inference- Uhya. Rejecting that which is
50

meaningless is Apaha. Proper understanding of things is known as
Tattwabhinivesh. A proper understanding of all these points of merit
will make one an efficient entrepreneur. Maintaining proper practice
during one’s study time is known as polite conduct- Vinaya. This Vinaya
is the Be all and End all of all entrepreneurs. With the help of
this quality one can get rid of all his deficiencies'. (Joshi, ibid)
The structure of business organization as estimated by Rangrajan is
given in the fig. 4.1.
Thread Industry
Fig. 4.1. Business Organization
Superintendent
(uttaradhyaksha)
Clerk Coin inspector Accountant Store-keeper
(Lekhak) (Rupadarshak) (Samkhyayaka) (Nivigraha)
Source: Rangranjan, 1992 : 363
Taxtile industry was managed by the state officer called
Sutradhyaksha (The Superintendent of Threads). Cotton and woolen
threads, clothes, ropes, army dresses ad garments were manufactured
under his supervision by qualified and experienced workers. Services
of widows handicapped monks, old aged prostitutes, and devadasis
could be utilized for preparing threads. Centers for preparing threads
and weaving clothes were set up, where training facilities were also
available. Ladies working in these centers were protected from sexual
harassment of any type. If the The Superintendent of Threads looked
at the face of a woman and talked something other than her work he
51
was liable to be punished. Stealing anything from the factory was treated
as an offense. The employee found stealing could even loose her fingers.
Production of Liquors
For the production and control of wines a separate department
is formed by Kautilya- Suradhyaksa (The Controller of Liquors).
According to Kautilya, the Controller of Liquors should cause trade in
wines and ferments to be carried on in the fort, the country or the
camp, through persons dealing in wines and ferments, being born to
that work, either in one place or in many places or according to
(convenience for) purchase and sale. (Kautiliya Arthashastra-2,
2003, 2.23.1) Special drinks were prepared for the king and nobles.
Manufacturing wines without state permission was punishable and
taxable. (Chamola, ibid) Six types of liquors were identified and the
process of manufacturing and control of quality is also described in
Arthashastra. The names of described liquors are- Medak, Prasanna,
Asava, Arista, Maireya, and Madhu. Grape wine was called Madhu. In
Bhagwat Puran the reference of liquor Maireya has been described as
most hard drink, which was popular among Yadavas. Different qualities
were sold by the controller of liquors directly through bars and depots
set up by him and also through experienced traders born into business
family dealing into these products. Drinking at places and time which
may harm society was prohibited. Wealth acquired or sold by persons
under influence of drink could be seized. The Controller of Liquors
should set up bars with pleasant atmosphere inside by providing
fragrance, flowers, and other items of luxury. The visitors in bars
were closely watched. Spies could keep eye on foreigners and also
undesirable elements in the bar. Drinks were allowed in public on special
occasions only otherwise the drinking in open places was strictly prohibited.
52

Regulation of Trade and Protection of Consumers
Trade and commerce were regulated in public interest.
Panyadhyaksa (The Superintendent of Commerce), who was state
officer, appointed to promote and regulate trade had to control prices
and profit so that common man was not hurt. Commodities which
were freely available and essential for day-to-day use were allowed to
be freely traded. Consumers were protected against cornering and
hoarding of goods. Traders found cheating or deceiving consumers
were heavily punished. Market hours were regulated. Weighs and
measures were standardized. Wages were prescribed for different types
of jobs. Good workers given incentives while those not performing
well were penalized. (Kautilya's Arthashastra, 1967, 2.26)
International Trade
Kautilya advocated the promotion of international trade and
commerce. Imported goods were allowed to be sold in the market
through distribution centers under control of the Superintendent of
Market. The margin of profit was kept reasonable as it was thought
that high margins would be determined to the people. Foreign traders
we rot to be harassed. In case of a dispute between a local and a
foreign businessman, it was not advisable for the later to go to court.
Mutual settlements were preferred.
The Superintendent of Commerce was required to protect the
interest of businessman going abroad to sell the goods produced in the
country. In case of emergency he was supposed to help them. Most
of the trade during those days was through roadways. Waterwaysrivers
and seas was second important transportation. Traders were
supposed to have fair knowledge of the routes and the people with
53
whom they had to deal in foreign markets.(Ibid) Export of the items
banned was punishable with fine and seizure of goods. Such items
include selected armaments, chariots, precious metals, food grains,
and livestock. Foreign goods useful to the country were allowed without
any restrictions. But the entry of goods harmful to people was strictly
prohibited. (Shukranitisar, 2008, 1.128) The traders required to
disclose full identity of goods at the entry gate. Customs certification
was a must. Spies were appointed to collect details about the goods
entering into the borders. Concealment of facts was reported by them.
If traders failed to pay the duty asked for goods were seized. Customs duty
on important goods was called pravesya. One fifth of the value of the
products was charged as pravesya.(Kautiliya Arthashastram, 2009, 2.22)
Transportation
Development of transport was state responsibility. Road
transport developement was responsibiity of village heads, mayors and
The Superintedent of New settlements. Different types of roads and
their width as recomended by Shukra and Kautilya is presented in the
table 4.1.
Table 4.1. Road width in Kautiliya Arthashastra and Shukra-niti
Road Shukra-niti Kautiliya Arthashastra
High way 45 ft. 48 ft
Link road 30 ft. 48 ft.
City road 22 ½ ft. 24 ft.
City-village link road 15 ft. 13 ½ ft.
Source: (a) Shukranitisar, 2008,1.262-64
(b) Kautilya's Arthashastra, 1967, 2.4
54

Well managed water transportation system is found in Kautiliya
Arthashastra.Navadhyaksa (The Superintendent of Water
Transportation) was appointed to plan, develop, supervise and control
transport through rivers, lakes, sea etc. He had to collect taxes from
the owners of boats and ships from the traders and passangers. The
superintendent was supposed to help sailors caught in storm or other
calamities like a father. Entry into ports was regulated and taxed. Monks
and saints, children and old aged were except from paying to cross the
river on boats run by the state. Carrying goods on boats without paying
fare due was punishable, so was taking explosives, weapons and other
doubtful objects. Road blockade and disturbance by any means was
serious offense and therefore was punishable.
Mines
One of the important sources of government revenue, as stated
by Kautilya and Shukra, is mines and mineral products. The importance
of mines is stressed in the statement that the treasury depends on
mines, that the army is sustained by treasury and that the earth is
conquered by member of the treasury and the army. The starting of
new mines and the renewal of old discarded one was thus an important
state activity under the charge of The Superintendent of Mines.
(Kautilyako Arthashastra, 1967, 2.12) He has to be an expert in
Geology and Metallurgy. He is to make a survey of all regions where
mineral deposits are likely to be found and start new mines and renovate
old ones.(Sharma, 2001: 67-70) All mines were considered clearly
state property but all of them were to be worked directly by the state.
In fact, it is stated that a mine costly in its working should be leased to
for a fixed share of the output, or for a fixed rent, and that only a light
mine should be worked by the state directly. So far as salt mines are
55
concerned, these seen to be all intended to be leased out for a share or
on hire.(Shukranitisar, 2008, 4.2.116)
Table 4.2. Revenues from Mine
Headings Details
Mulya value
Bhag share
Vyaji
Parigh
sort of sales tax
the exact nature is not clear but appears to be
a kind of protective duty
Atyaya duty in the case for example of imported salt or
excise duty
Shulk compensation for transfer of state rights of sale
to private individual
Danda fines to be determined in proportion to the
gravity of crimes
Roop coinage fee- which appears to be a charge for
manufacture in 8 percent of the price
Khani metals
Dhatu panya mineral products
Source: Kautiliya Arthashastra-2, 2003, 2.12.35-36.
Twelve types of minerals and products made to them were
under control of The Superintendent of Mines presented. There is a
list of twelve sources of income which is said to be derived from the
mines 1 . These are presented in the table 4.2. He had to make substantial
contribution to the same treasury which must row to develop armed
forces to acquire new lands and kingdoms.
Gold and silver ornaments were produced in manufacturing
units called Akshashala (The Department of Gold and Silver Products),
specially built for it, where trained and experienced goldsmiths were
employed. Five types of Gold were identified with their color and
characteristics. Process of refining gold and the liquids to be used for
the purpose are described in Arthashastra. The purity of gold could be
56

judged through the process prescribed. Unauthorized entry into
Akshashala was punishable. All worker were checked thoroughly while
entering and leaving the factory. Any body found stealing gold was
severely punished.(Kautiliya Arthashastram, ibid)
Armaments were manufactured in the factories set up by the
state. Te officer-in-charge of armors was responsible for state. The
officer in charge of armours was responsible for manufacturing and
safe custody of all types of weapons list of the equipments and
instruments to be stored at one place is given. This is to facilitate the
use of these items without losing time to search. Manufacturing process
and details about raw materials are also described. (ibid) Kautilya
gives much importance to mines by saying that the revenue obtained
from mines is the basis of territory and army organization. Therefore
treasury is the ornament of a country. 2 In the words of Kautilya- The
treasury has its source in the mines; from the treasury the army comes
into being. With treasury and the army the earth is obtained with the
treasury ornament. (Kautiliya Arthashastra-2, 2003, 2.12.36)
Physical Features used for Mineral Identification
Kautiliya Arthashastra deals with examination of the precious
articles to be received into the treasury in detail. The Superintendent of
Treasury is entrusted with the responsibility of receiving jewels, articles
of high value, articles of small value, forest produce etc. The said
official is also required to preside over the bureau of experts in various
lines and hence is expected to be well versed in the qualitative characters
trading techniques assessment valuation etc. of the materials to be
taken in the treasury as the wealth of the ruler. The sutras 2-5, 28-42
and sutras 17 of chapter 12 of second book elucidate the characters,
properties sources identification purity acceptability and values of the
57
gems- mainly pearl, diamond, ruby, beryl, sapphire and coral and semi
precious stones. Sutras 7-27 are devoted to the description of different
types of strong made up of pearl and often studded with gems. Nuber
of enumerative sutras are presented in the table 4.3.
Table 4.3. Enumerative Sutras Related with Metallurgy
Process and Method Enumerative Sutras
Concentration Book 2 chapter 12 sutra 2,3
Book 2 chapter 12 sutra 20 - 24
Pyrometallurgy Book 2 chapter 12 sutra 5, 6 and 11
Book 2 chapter 1,2, 7,9,10,13,49
Hydrometallurgy Book 2 chapter 12 sutra 8-11
Refining Book 2 chapter 12 sutra 8 9 10 11
Alloys and Book 2 chapter 12 sutra 23, 24
metal working Book 2 chapter 13 sutra 4, 5 25-27, 37
Book 2 chapter 14 sutra 17, 20-43
Source: Sharma, 2000 : 70-71
The above introduction about various gems has been classified
with respect to the following parameters.
1.Identification of minerals/gems based on colour, luster, shape
and hardness
2.Defects which reduce the value of gems
3.Source-origin and place of occurrence
Prospecting, Mining and Metallurgy
Mining industry belongs to three fundamental stepsprospecting,
mining and metallurgy. All steps have been expalined in
Kautiliya Arthashastra. In the treatise use of metals is seen mostly in
crafts of ornament making mining coins, weapons (Book 2 chapter
19). With other minerals the shilajit (bitumen) also has been described
58

with its medical importance in Arthshastra.The word Shilajit means
the sweat of the rock. Therefore this mineral is also known as Dhunga
ko pasina in Nepal. This mineral is mainly found throughout the lower,
central, and upper mountainous region of Nepal. (Sharma, 2001: 70)
Nepalese Product
Katuilya has described about different valuable goods of low
price and high price under the title- Examination of Precious Articles
received in the treasury. He has praised the Nepalese woolen clothes
in the following words4- Suddham suddharaktam chavikam, khachitam vanchitam
khandasamghttyam tantuvichhinnam ch.
Kambalah kauchapakh kulmitika saumitika turagastaranam
varnakam talichhakam voravanah paristomah samntabhadrakam
chavikam. Pichhilamardramiva ch sukshamam mridum ch
shreshtham.
Astaprautisamghatya krishna bhingisi varsavarnam apsaraka iti
Nepalakam3 .(Kautiliya Arthashastra, 2003, 2.11.97-100)
Woolen cloth is white, all red and part red, with threads laid in
with the needle variegated in weaving with pieces joined together and
with broke off threads. The blanket, the Kauchalaka, the kalaminika,
the sautnitika, the horses saddle cloth, the colored blanket, the tallichka,
the armour, the paristroma nad samantabhadra are (varietes of) woolen
clothes. Slippery and wet as it were fine and soft is best. After describing
various brands and designs Kautilya says, the black bhingisi, made ourt
of collection of eight woven strands (and) the apasaraka, which keeps
off rain,- that is (woolen cloth) from Nepal. (ibid, 2.11.97-100)
59
Nepalese Places
The Brihaspati-sutra mentions various geographical places
and their distances. It seems that these places were famous for religious
tourism in ancient period. Geographical names cited in Brihaspati sutra
are Himvanta, Salgram, Shaiva, Shivakshetra. Kirata region also has
been written there. Perhaps it indicates Kirata kingdom in Kathmandu
Valley. The description is as follows-
Conclusion
• North of it is Nepal. 5 (Brihaspati-sutra,1926, 3.70)
• Nepal one hundred and four. 6 (ibid, 3.87)
• The Kirata, Sauvira, Chola, and Pandya countries, situated on
north and south are of one hundred increased by sixty. 7 (ibid, 3.120)
• Badarika, Shalgrama, Purushottama, Dvaraka, Bilvacala,
Ananta, Simha, Shriranga. 8
• Eight the Shaiva. 9 (ibid, 3.121)
• Avimuktaka (Benaras), Ganga-dvara, Shiva- kshetra, Rameyamuna
(?), Shiva-sarasvati, Maya (Hardwar), Shardula, and
Gaja-kshetras. 10 (ibid, 3.123)
The analysis above can be summarized as follows-
1.Kautilya, Brihasapti and Shukra have given high importance
to nation’s economic prosperity.
2.Kautiliya Arthashastra explains the best management in
business enterprises owned by the government.
3.Kautilya Arthashastra and Shukraniti clearly explain for market
development and regulation.
4.Traders were given government security.
5.For consumer’s security and price stability The
60

Notes
Superintendent of Market was responsible.
6.Nepalese woolen clothes and bitumen were famous in
Magadha.
1 Kautiliya Arthashastra, 2003, 2.12.35-36.
2 ibid, 2.12.36
3 z'4+ z'4/Qm+kIF/Qm+ rfljsd\, vlrt+ jfglrq+ v08;+3fTo+ tGt'ljlR5Gg+ r .
sDanM sf}rksM s'nldltsf, ;f}ldltsf, t'/uf:t/0f+ j0f{s+ tlnR5s+ jf]/jf0fM
kl/:tf]dM ;dGteb|s+ rfljsd\ . lklR5ndfb{ |ldj r ;'Id+ d[b' r >]i7d\ .
ci6k|f}lt;+3fTof s[i0ff lelª\u;L jif{jf/0fd ck;f/s Olt g}kfnsd\ . ibid,
2.11.97-100
4 In Matsya Purana 22.86 the following description of Nepalese woolen
mat is found-
dWofx\g+ v8\ukfq+r tyf g}kfnsDanM .
/f}Ko+bef{l:tnf ufjf]bf}xt[ZrZtfdx:t[tM ..
(It says that eight things are necessary for holy offerings-)1. madhyanhaafternoon,
2. kahdgapatra- khag, 3. Nepalkambal- Nepalese woolen
mat, 4. Raupyam - silver pot, 5. darbha- kush, 6. tila- sesama seed, 7.gawocow,
8. dauhitra- grandson (daughter's son) of deceased
5 tqf]Q/] lxdjfg\ .. Brihaspati-sutra, 1929, 3.70
Note- On the north- this cannot mean on the north of Meru or of
Jambu dvipa, which would be contrary to the ordinary view; it must,
therefore, mean starting with the north of Aryawarta. (ibid: 20 )
6 g]kfn+ rt'Mztd\ .. ibid, 3.87
7 ls/ft;f}jL/rf]nkf08\of pQ/] blIf0f] l:ytfM ztft\ k/+ ifli6dfqfM .. ibid, 3.104
8 abl/sf;fnu|fdk'?if]Qdåf/sflanjfrnfgGtl;+x >L/ª\ufM .. ibid, 3.120
9 ci6f] z}jfM .. ibid, 3.121
10 cljd'QmQuª\ufåf/lzjIf]q/fd]od'gflzj;/:jtLdfofzfb' {nuhIf]qfM.. ibid, 3. 123
61

Introduction
CHAPTER FIVE
PRICING POLICY
Price as theory is central part of modern economics. The
supplementary part is the price policy. Theory of price is the main
subject matter of microeconomics. Although theory of price is not the
direct subject matter of macroeconomics but it is implicit in its income
theory. Since the level of national income is determined by the total
value of output and total value is caculated on the basis of the market
price of the commodity, therefore the price is the foundation of income
theory. In short the core subject of economics is theory of price. In
this chapter we shall compare briefly the theory of pricing developed
by Kautilya and Shukra with the classical and neo-classical theories.
Foundations of Theory of Value
The primary foundations of the theory of value are as follows-
1. Well defined weights and measures of commodity
2. Well defined wage rate of labor
3. Transaction of capital on the basis of interest rate
62
If these foundations are not clearly defined then price of a
commodity can not be determined in the society. Plato's economic
ideas reveal that he was unable to distinguish between value and price.
Aristotle was of the view that the price of a commodity was
determined by the cost of labour used in the production. Adam Smith
followed this concept. Cantillian put the modern foundation of price
by saying that the commodity which is scarce prices high.Karl Menger
and Austrian economists developed utility theory of pricing on this
foundation.
Therefore, there were two opinions for the theory of price.
one was known as cost of production theory and other was known as
utility theory. Prof. Marshall conbined these oppsite views and presented
the demand and supply theory of price determination. Friedman explains
this contribution as follows, ' A very old puzzle in economics is the
relation between price, value to the consumer and cost of production.
It is tempting to say that the price of a good is determined by its value
to the user. Why, after all would anyone buy a good for more or sell it
for less? But if this is so why are diamonds, which are relatively
unimportant (most of us could told get along quite well if they did not
exist), worth so much more per pound than water, which is essential
for life? If the answer is that diamonds are rare and that it is rarity
rather than usefulness that determines price, I reply that signatures of
mine written in yellow ink are even rarer than original autographs of
Abraham Lincoln but bring a (much) lower price'.
'Perhaps it is cost of production that determines price. When
I was very young I used to amuse myself by shooting stalks of grass
with a BB gun. That is a costly way of mowing the lawn, even
considering that the cost per hour of a nine year-old’s time is not very
63

high. I think it unlikely that anyone would pay a correspondingly high
price to have his lawn mowed in that fashion'.
'This puzzle – the relation between value to the consumer,
cost of production, and price- was solved a little over 100 years ago.
The answer is that price equals both cost of production and value to
the user, both of which must therefore be equal to each other'.
(Friedman,1990, Section 3, Chapter 2)
Price Theory in Wealth of Nations
Initial theories of value were based on labor theory. Adam
Smith used the word value in two senses. Sometimes he used this
word to denote utility and sometimes to denote market price. According
to him, 'The one may be called value in use the other value in exchange.
The things which have the greatest value in use have frequently little
or no value in exchange, and on the contrary those which have the
greatest value in use have frequently little or no value in use. Nothing is
more useful than water but it will purchase scarce anything scarce
anything can be had in exchange for it, a diamond on the contrary has
scarce any value in use but a very greatest quantity of other goods
may frequently be had in exchange for it'. (Wealth of Nations, Book
1, Chapter IV) Value in exchange is the relative proportion with
which the commodity is exchanged for another commodity (in other
words, its price in the case of money). According to Smith, labour is
the real measure of the exchangeable value of all commodities. (ibid,
Book 1, Chapter V)
He argued, 'The real price of everything, what everything really
costs to the man who wants to acquire it, is the toil and trouble of
acquiring it.' (ibid) Smith further stresses in the following words,
64
'However even a person drinking water from a good stream at his
doorstep must spend labour to gain this value, at least if this action is
relevant to economics'.
'In the example of person going to a stream at his doorstep, if
this is a pleasant activity, it is not labor. If it is not pleasant it could be
relevant to economics....' (ibid)
Price Theory in Manu-smriti
Price theory/policy has been explained in Manu-smriti clearly.
Manu’s suggestions for price policy is given as follows-
1.Compare the value of commodities purchased and
commodities sold, estimate its loss of value and then determine the
price of that commodity.
2.The price should be determined in such a way that both side
buyer and seller should be satisfied. After every five nights or in each
fortnight prices should be revised regularly. 1 (Manu-smriti, 8.410-11)
Manu further says that the policy making for price
determination should be done by a market expert- Arghavit. Thus, in
the times of Manu market experts were appointed as economic advisers
of the state.
Price Theory in Shukra-niti
In Shukra-niti foundations of modern cost concepts are found.
The concepts of real cost, alternative cost and money cost have been
explained clearly. Shukra states that the sacrifices, expenses, and causes
used to produce a commodity is its cost. 2 (Shukra-niti, 2000, 2.146)
One can find that this concept is similar to the real cost concept given
by Marshall. Similarly, Shukra defines the total cost of production as
the summation of the following-
65

1. All the expenses in the process of production,
2. All the materials used to produce, and
3. All the efforts involved.
Thus the ratio of the metal prices are as follows-
1 Gold = 16 Silver = 1280 Copper = 7680 Iron5 In Shukra-niti prices of some commodities have been listed in
terms of alternative cost. These are listed in the table 5.1. (Shukra-niti
4.2.71-129)
1 camel = 9 buffalos = 18 goats
Table 5.1. Alternative Prices
Cattle Alternative price
1 buffalo 2 goats
1 goats 2 sheep
1 camel 2 buffaloes
Source: Shukra-niti 4.2.71-129
Not only the alternative price but also the market price of
cattles is given. According to Shukra, the selling price of one young
sheep is one Pala3 , one horse is 500 Nisk4 and one elephant is 2000
Nisk. This schedule of market price reveal that there was a well defined
price theory or price policy in Shukra economy.
Price is determined by the expenditure incurred to produce
the article. This is the cost of production theory of prices. The price
depends upon the abundance or scarcity of the articles in the economy.
This is the supply side of price theory in economics. Further, price is
determined by the intensity of desire to have the commodity. This is
the demand side of the theory of price. This guidance has been defined
by the teacher Shukra 2400 or more years before Adam Smith.
66
Price theory is the anchor of economics. We have now
developed equilibrium price as the concept, when the supply and demand
are equal. The great teacher Shukra has stated that the market
prices move upward only because of the wicked policies of the
king. (Bokare, 2009: 80)
Price Theory/Policy in Kautiliya Arthashastra
In the Kautiliya economy The Superintendent of Commerce
was entrusted with the task of enforcing the pricing policy. The prices
of different commodities were to be fixed by him. He however did not
fix prices arbitrarily. In fact, a uniform rule was followed throughout
the country to determine the just price of each commodity. To quote
from Kautiliya Arthashastra, 'The Superintendent of Commerce should
be conversant with the differences in the prices of commodities of
high value and of low value and the popularity, or unpopularity of
goods of various kinds, whether produced on land, or in water and
whether they have arrived along land routes, or water routes, also
(should know about) suitable times for resorting to dispersal, or
concentration purchase or sale'. (Kautiliya Arthsastra-2, 2003:
2.16.1) 'And that commodity which may be plentiful, he should collect
in one place and raise the price (ibid: 2.16.2) or, when the price is
reached he should fix another price'.
According to him, The Superintendent of Commerce should
establish in one place trade in state commodities that are produced in
his own country, in many places in those produced in foreign lands.
And he should cause both to be sold so as to favour the subjects. And
he should avoid even a big profit that would be injunctions to the
subjects. He should not create a restriction as to time or the evil of a
67

glut in the market in the case of commodities constantly in demand.
(ibid: 2.16.3-8) The merchandise which is widely distributed shall be
centralized and its price enhanced. When the enhanced rate becomes
popular, another rate shall be declared.The merchandise of state which
is of local manufacture shall be centralized; imported merchandise shall
Table 5.2. Elements of Price Determination
Demand side Supply side
Popularity Cost of production in land or
water
or Transportation costs
unpopularity Suitable time for sale
of goods Nature of good- perishable or
durable
Source: Kautiliya Arthshastra-2, 2003: 2.16.1
be distributed in several markets for sale. Both of merchandise shall be
favoirably sold to people.
The elements of commodity pricing as described by Kautilya
is presented in the table 5.2. Time element here means the season of
high demand or low demand. In a next place (Kautiliya Arthshastra-
2, 2003, 4.2.36) Kautilya expresses his views on price determination
as follows, 'In the case of commodities distant in place and time,
however, the superintendent of commerce and trade, market expert in
fixing prices shall fix the price after calculation the investment, the
production of goods, duty, interest, rent and other expense'. 6
Thus the cost of a commodity includes,
1. Investment and interest rate of capital
2. Expenses on raw materials
3. Taxes payable to government
4. Time to produce a commodity
68
5. Rent
6. Profit margin
7. Other expenses
The concept of price determination in Kautiliya Arthashastra
is a concept of Just Price and not simply a price for price determination.
For just price Kautilya says, 'The Superintendent of Markets should
set up the pledging or sale of old wares which are furnished with
proof of ownership in the market place. And he should inspect the
weighs and measures because of likely fraud in the standard of weighs
and measures'. (Kautiliya Arthshastra-2, 4.2.1)
In ancient times the concept of just price was a real world
phenomenon and sprang directly from the ancient Hindu concepts of
balance. Kautilya also did not add anything new to this basic concept
but simply worked out the detail. According to Arthashastra, prices
are to be so determined as to strike a balance between the interests of
the buyers and that of the sellers. To fulfill this objective, the following
guidelines were recommended- (Basu, 2006: 202-219)
1. Goods were to be sold at places specified by the state and
prices had to be aounced (for approval by the state and knowledge of
the buyers) by the businessmen. They (the merchants shall make a
report of those who sell merchandise in forbidden place or time. The
merchandise being placed near the flag of the toll house the merchandise
being placed near the flag of the toll house the merchants shall declare
its quantity and price. (Kautilya's Arthashastra,1967, 2.21)
2. Goods had to bear official seal and properly weighed
measured and numbered. Violation of this rule was subject to
punishment. Those whose merchandise has not been stamped with seal
mark shall pay twice the amount of toll. Hence commodities shall be sold
only after they are precisely weighted measured or numbered. (ibid)
69

3. The state use to discourage enhancement of price by bidding.
When purchasers happen to bid for it the enhanced amount of the
price together with the toll on the merchandise shall be paid into the
king’s treasury. (ibid)
Kautilya also provided detailed guidelines for determination of
various components of price. Guidelines for wage determination are
scattered in 3.13 and 14, 4.2 and 5.3 of the book. The basic principles
was that wages should be so determined by contract between the
employer and the employee which once settled would be binding on
both the parties that the employer is not cheated and at the same time
the employee is not exploited.There were also specific guidelines for
ascertaining transport, storage and other associated expenses. Rigid
and simplified rules were prescribed for determining tolls and taxes on
all the commodities. In Kautiliya Arthashastra and Shukra-niti the
following foundation of price determination has been taken-
Price = average cost of production + tolls and taxes + transport
and associated costs + profit margin
Where average cost of production = cost of raw materials +
wages + interest
Thus according to Shukra and Katuilya,
Price = value of the commodity
Where price denotes market price and value denotes normal
price. The normal price, according to Kautilya and Shukra, is average
cost of production.
Availability and Non-availability Effect
According to Shukra there is always price fluctuation (around
normal price). The causes, according to him, are as follows-
70
1. If the commodity is scarce its price rises.
2. If the supply of the commodity is sufficient the price falls.
3. According to the goal of seller price may be high or low.
4. According to the quality of a commodity price may be high or
low.
Kautilya has used two different words for normal price and
market price. He uses Mulya (Value) for normal price and Arghya (Price )
for market rate. The concept of high and low price as described in
Shukra-niti is slightly different from that of Marshallian price theory.
Marshallian price is determined at the point where demand and supply
are equal. Shukra uses two terms for the explanation of price
determination- mulya or value and argha or price. According to Shukra
price is determined at the point where value equals the price. He was
aware of availability effect and non-availability effect in the price. In
non-availability condition price will be high in comparison to value but
in availability condition price will be low in comparison to value. The
effect of avalability and non-availbility is explained in table 5.3.
Table 5.3. Availability and Non-availbility Effect in Shukra-niti
Price Relation Cost Tendency
Price equals value no tendency to change
Price greater than value falls
Price smaller than value rises
Source: Shukra-niti, 2000, 2.146
Fig. 5.1 explains the equilibrium when value and price are
equal. Fig. 5.2 explains the availability effect. In this situation, Market
Price = Normal price - availability effect or Market price < Normal
price. Fig.5.3 explains the non-availability or scarcity effect. In this
71

situation, Market Price = Normal price + non-availability effect or
Market price > Normal price.
Value/Price
Value/Price
Value/Price
Fig.5.1. Equilibrium in the Market
Value=Price
o Demand
Fig.5.2. Availability Effect
Value
Price
o Demand
Fig.5.3.Non-Availability Effect
Price
Value
o Demand
This theory is similar to cost of production theory propunded
by classicists. Universaliness of this theory is beyond doubt but it is
unfortunate that this reference is not included in the text-books in the
universities to be read by the scholars. It is also has been neglected in
the history of economic thought.
72
Limitations of Marshallian Price Theory
Although Marshallian theory of price is considered the most
satisfactory price theory. But the limitations of this are as follows-
1. According to demand and supply theory a consumer tries
to purchase goods in minimum price. But this assumption may be
criticized on two grwoundsa)
It is not possible to purchase a commodity in low price
than its cost of production in normal situation.
b) It will be unjust to a seller if any consumer gets the
commodity in less than cost price.
2. A producer can charge high price than its cost price but
this will be unjust to consumer.
Factor Pricing in Kautiliya Arthashastra and Shukra-niti
In Neo-classical Theory of Distribution Euler's Theorem 7 is
applied. According to this theory if factors are paid according to their
contribution, total production is exhausted. The Factor Price that is
determined by Kautilya, Shukra and Manu theoretically and practically
can be compared with the Neo-classical Theory of Distribution.
They have fixed the rent 16.67 percent of the produce on an
average.They are of the view that interest rates were to be rigidly
fixed by the state (considering the degree of risk involved) so as to
prevent usury and exploitation of the weak borrowers. Maximum
limitation of total payment was fixed as the double of the principle
amount. Kautilya has fixed interest rates on the basis of risks as follows,
'Five Panas per month percent is commercial interest, 10 Panas per
month percent prevails among forest, 20 Panas per month percent
prevails among sea traders. Persons exceeding or causing to exceed
the above rate of interest shall be punished'.
73

Profit rates were also to be rigidly fixed by the state so as to
avoid uncertainty and to prevent traders from profiteering. The
Superintendent of Commerce was to fix a profit of 5 percent over and
above the fixed price of local commodities and 10 percent on foreign
produce. Merchants who enhance the price or raise profit even to the
extent of half a Pana more than the above in the sale or purchase of
commodities shall be punished. (Kautilya's Arthashastra, 1967, 4.2)
Kautilya directs to The Superintendent of Commerce to control traders
by taking large profits because it can harm the consumers. In short,
according to Kautilya and Shukra shares of land, labour, capital and
entrepreneur are 16.67 percent, 58.33 percent, 15.00 percent, and
10.00 percent respectively. They were of the view that 16.67 percent
regular saving should be gone to state treasury. The table 5.4. presents
the share of different factors of production fixed by Kautilya and Shukra.
Table 5.4. Shares of Factors of Production
Factors Kautiliya Arthashastra Shukra-niti
Land 16.67 percent 16.67 percent
Capital 15.00 percent …
Entrepreneur 10.00 percent …
Labour 58.33 percent …
Land, Capital, Entrepreneur … 66.67 percent
Saving … 16.67 percent
Source: Gewali, 2011 b : 139
Conclusion
The analysis above can be summarized as follows-
1. Cost of production was the basis of long run price determination.
2. In short run market price and value of the commodity may be
different. The difference depends on availability and non-availability
effect.
74
3. The share of land, labour, capital and entrepreneur in the national
income was considered 16.67, 58.33, 15, and 10 percent. 16.67
percent of National income was considered the subject of national
saving.
Notes
1 cfud+ lgu{d+ :yfg+ tyf j[l4Ifofj'ef} .
ljrfo{ ;j{k0ofgf+ sf/o]Tqmoljqmof} ..
k+r/fq] k+r/fq] kIf] kIf] cyjf ut] .
s'jL{t r}if+ k|ToIfdwd{ ;+:yfkg+ g[kM ..
(Compare the value of commodities purchased and commodities sold,
estimate its loss of value and then determine the price. The price should
be determined in such a way that both side buyer and seller should be
satisfied. After every five nights or in each fortnight prices should be
revised regularly.) Manu-smriti, 1991, 8.410-02)
2 sf/0fflb ;dfof]ufTkbfy{:t' ej]b\e'lj .
o]g Joo]g ;+l;4:tb\Joo:t:o d"Nosd .. Shukra-niti, 2000. 2.146
3 One Pala = 10 dharana and one dharana = 10 seeds of bean
4 Nisk = Gold coins in Vedic period
5 The price of per 10 grams of gold is Rs. 32000 and silver was Rs. 620
on an average for the year 2010 in Kathmandu. Thus the present
proportion of these two metals is 1 gold : 52 silver. Gewali, 2011 b: 120
6 k|If]k+ k0olgiklQ+ z'Ns+j[l4djqmod\ .
JoofgGof+Zr ;+Vofo :yfko]b3{d3{ljt\ .. Kautiliya Arthashastra, 2003, 4.2.36
7 Euler's Theorem is a mathematical concept expressed in terms of
derivative. If land, labour and capital are paid according to
their contribution the total production will be exhuasted, or
u = f d + f d + f d , where f , f and f are marginal productions (shares)
x x y y z z x y z
of land, labour and captial; d , d and d are change in respective factors
x y z
and u is total derivative.
75

Introduction
CHAPTER SIX
GOVERNMENT FINANACE
The government finance has been discussed by Kautilya,
Shukra and Brihasapti in detail. According to Kautilya his treatise
presents basic principles for mobilizing resources from the earth1- natural resources, agriculture, trade and commerce etc., which are
related with people. The meaning of word palan in the Kautiliya
definition is related with manusyawati that denotes the land with people
should be developed by taking returns- labha from that earth. The
return is obtained by mobilizing natural resources and manpower.
Kautilya uses the word kosa-danda frequently that refers peace and
order and the government income go parallel to each other. In this
background the science of government finance as visualized by Kautilya
deals with resource mobilization and resource use for the purpose of
the smooth functioning of the state. (Panchmukhi, 2006: 260) In
Shukra's definition the word Political Economy has been used clearly.
In this chapter we shall evaluate the primciples and practices
of government finance in Kautiliya Arthashastra and Shukra-niti. The
76
relevancy of their theorues shall also be analyzed. Measures to raise
government fund applied by Kautilya and Shukra also should be
compared with classical and modern views of government finance.
Treasury
It becomes clear after the study of Kautiliya Arthashastra,
Shukra-niti and Brihaspati-sutra that they had paid supreme importance
for a rich treasury- the kosa. In ancient times the word treasury has
been used in two senses. In narrow sense treasury means wealth,
fund, and income and in wider sense treasury means the economy or
the economic prosperity of the country. The narrow meaning has been
clearly defined by Shukra in the following words- the collection of
same article or thing is kosa and the kosa is of different types. (Shukraniti,
4.2.1.1) The definition given by Shukra is similar to the modern
word bank. We use commercial bank, book bank, or blood bank in
this sense. In wider sense the kosa is used to denote the efficiency of
national economy, for example the income generation capacity of
agriculture, animal husbandry, trade, and mines in the country. Modern
economists also agree with the concept that one important function of
state is to acquire public goods and to develop agriculture, animal
husbandry and commerce.
Sources of Revenue
In Mahabharata five sources of government revenue have been
traced. These are- mine, salt, grain market, water route and elephant
forest. In Shukra-niti the classification of revenue sources is as follows-
1. Tax
2. Fee
3. Labour tax
77

4. Other sources
In Kautiliya Arthashastra Samhartri- The Commissioner of
Revenue was responsible for the protection of government revenues.
In Upanisad times the Samahrtri was known as Bhagduh. (Jayasawal,
1978: 193) Kautilya suggests the Commissioner of Revenue to collect
revenue from these seven sources.
The main sources of government revenue in Kautiliya
Arthashastra are expalined as below-
1. Income from State Agriculture- Government raised revenue
both by direct cultivation and by leasing out land to tenants.
The crops grown on these lands constituted a major part of
the revenue and were accounted for separately. net revenue to
state was equal to value of production less expenditure on
seeds, labour etc. On leased land state’s share was three fourth
to four fifith if lessee provided only labour, and half if lessee
provided seeds and implements as well as labour.
2. Revenue from Mining- Kautilya gives much importance to
mining because there are 12 sources of revenue in the mining.
(Kautiliya Arthashastra-2, 4.2.1.1)
3. Revenue from Animal Farming- Animal farming was another
source of revnue to the state.
4. Income from Manufacturing Industry-Textiles, salts
5. Leisure Activity
6. Taxes, from Country-side- Rastra and from the city
7. Trade Routes
8. Service Charges
9. Miscellaneous Revenues- Irrigation works or Setu, forest
produce or Vana
10. Fines- Sahas danda and other fines
78
Rangrajan had tried to identify all the sources of income in
Kautiliya Arthashastra. (Rangrajan, 1992: 256) According to him
sources of income are scattered throughout the book. These sources are-
1. Income from Crown Property
a. Direct cultivation
b. Leased cultivation
2. Revenue from Mining and Metallurgy
a. Mines owned by state
b. Leased mines
3. Revenue from Animal Farming
4. Revenue from Irrigation Works
5. Revenue from Forests
6. Income from State-controlled Activities
a. Manufacturing industry- textile
b. Manufacturing industry- salt
c. Manufacturing/leisure industry- alcoholic liquor
d. Leisure activity- courtesans, prostitutes and
entertainers
e. Leisure activity- betting and gambling
7. Taxes- In cash and in kind
a. Custom duty- (i) Import duty, (ii) Export duty
b.Transaction tax
c. Share of production- sixth share
d.Tax in cash
e. Taxes in kind- pratikar
i. Labour tax
ii. Supply of soldiers- ayudhiya
f. Countervailing duties
g. Roadcess
79

h. Monopoly tax
i. Royalty
j. Taxes paid in kind by villages- panda kara
k. Army maintenance tax
l. Surcharge
Revenue collector in village level used to deposit income
regularly to central officer known as Samahrtri.
A comparison of revenue sources and rate of taxes is presented
in the table 6.1.
Items of Expenditure
The items of expenditure are also mentioned clearly. These are
expenditures on worship of gods and for charity and for gifts, royal
kitchen, the employment of envoys, the magazines the armory, the
warehouse, the store for forest produce, factories, laborers, maintenance
of infantry, horses, chariots and elephants, herds of cattle, enclosures
for beasts, deer, birds and wild animals, and stores of fuels and grasses.
Government expenditure was divided in following main topics-
1. Consumption expenditure
2. Assets expenditure
3. Deposit expenditure
4. Exchange expenditure
Kautilya suggests to divide the income account in three parts-
1. Current
2. Last balance
3. Anyajatah- received from external source
80
Table 6.1. Revenue Sources in Shukra-niti and Kautiliya Arthashastra
Revenue source Shukra-niti Kautiliya Arthashastra
Land revenue 17-50 percent of 17-33 percent of
net produce net produce
Trade 2 percent 20 percent
Mines 50 percent Determined by the
of profit Superintendent
Salt 50 percent 5 percent from native
of profit and 17 percent from
foreign trader
Animal herds 13 percent 10 percent
Metals 16-33 percent 2-3 percent
of profit
Bankers 3 percent 3 percent
of profit of profit
Sandal and velvet … 10-15 percent
Animal produce 6 percent 16-23 percent
Beverige … 3 percent
Retailer of grains,
ghee, and other
consumption goods … 20 percent
Skill workers 2 days labour 5 percent
per month
Contractors … 10 percent
Recreation tax … 10 percent
Gate toll … 20 percent of custom duty
Gambling … 5 percent on winning
Shepherd,flesh, hide 13 percent 16 percent
Fruits, bamboo, grass … 20-25 percent
Earthen pots, stones … 5 percent
food, green grocer
Source: (a) Shukranitisar, 2007, 4.2.116-129
(b) Rajendran, 2006: 259-60
What is received day by day is termed as current.Whatever
has been brought forward from year before last, whatever is in the
hands of others, and whatever has changed hands is termed last balance.
81

For different jobs working days also have been fixed. Thirty
two make a month for the army. For maintenance of horses the number
of days is 35 and 40 days for maintenance of elephants. The system of
working days expresses a unique system of remuneration distribution
in Kautiliya Economy which does not match in the present context.
This payment system is explained in the table 6.2.
The corpus of expenditures in K-M Economy has been
described as follows (Kautiliya Arthashastra-2, 2003, 2.6.11)-
1. Expenditures on worship of gods and for charity
2. Gifts for benedictions received
3. The royal palace
4. The kitchen- Mahanas
5. The employment of envoys (Embassies)
6. The magazine
7. The armory
8. The ware house
9. The store for the forest produces
10. Factories
11. Laborers
Table 6.2. Working Days
Job Working day
Government servant 32
Horse maintenance 35
Elephants maintenance 40
Source: Kautilyako Arthashastra, 1967, 2.20
82
12. Maintenances of foot soldiers
13. Horses
14. Chariots and elephants
15. Herds of cattle
16. Enclosures for beasts, deer, birds and wild animals
17. Stores of fuel and grass
Classification of Expenditure
According to the Arthashastra what comes in from day to day
is current income. What belongs to the preceding year or what is
transferred from another sphere of activity is outstanding income. What
is lost or forgotten, fines imposed on employees, extra income,
compensation for loss, gifts, property of a person involved in riot,
prosperity of an issueless person and treasure trove is income derived
from other sources.
Expenditure has been put under four heads,
1. What is spent from day to day is current expenditure
2. Receipts after a fortnight, a month or a year
3. That arising to of current, and
4. Expenditure arising out of gain
Fiscal Year and Possible Accounting System
It is interesting to note that number of days in Kautiliyan fiscal
year is less than 360 days. He says although one year has 30 fortnights
but the total 354 number of days and nights constitute the year of
work. Why the working days are only 354, he clears in the following
83

words, 'Fifteen days and nights make a fortnight. That in which the
moon waxes is bright (fortnight). That in which the moon wanes is
the dark. Two fortnights make a month. Thirty days and nights make
a works month. A half day less makes a lunar month. Twenty seven
(days and nights) make a month of constellations. Since in every month
of a day is less than 30, therefore in twelve months the number of
days are less than 360'. (Kautiliya Arthashastra-2, 2.20.43-50)
Modern accounting system was intorduced by the western
philosophers. But the description of accounting in Kautiliya Arthashastra
abd Shukran-niti provides the information of a well defined system of
accounting done by oriental statesmen. Not only the accountomg but
also a well defined filing and index system is explained in Kautiliya
Arthashastra. The resopnsibility of government accounting was on
The Superintendent of Accounts. According to Kautilya,' The
Superintendent of Accounts shall have the accountant’s office
constructed with its door facing either the north or the east, with seats
(for clerks) kept apart and with shelves of account-books well arranged'.
Cost of production can be estimated with the help of
expenditures and quantity of the goods produced. This is how
accountancy is converted into the cost accounting. Modern techniques
of cost accounting have progressed. However, it can be asserted that
rudiments of accountancy and the conversions of accounting entries
into unit cost was known to the merchants as well as the teachers of
ancient times.
Possible expenditure and income accounting is presented in
the table 6.3 and 6.4.
84
Table 6.3. Possible Expenditure Account
Details Sravana Asadha Total
1 2 ... 15 1 ... 30 1 ... 30 354
Place
Time of
accounting
Date and time
of receipt
Accounting
officer
Value when
received at
counter
Occasion
Commodity
paid
Paid by
Ordered by
Received
from store
Who paid
from counter
Received by
Note- 1= First day of bright fortnight, 1 = First day of dark fortnight,
15= Full moon day, 30= Blue moon day
Source: Rangrajan, 1992 : 277
85

Details Sravana Asadha Total
1 2 ... 15 1 ... 30 1 ... 30 354
Place
Time of
accounting
Date and time
of receipt
Accounting
officer
Details of
current year
Amount
received
Paid by
Ordered by
Received by
Accountant
Table 6.4.Possible Income Account
Note- 1= First day of bright fortnight, 1 = First day of dark
fortnight, 15= Full moon day, 30= Blue moon day
Source: Rangrajan, 1992 : 277
86
Taxation Principles
The theory that the taxes were wages for protection was so in
gained in the constitution that even partial failure of protection was
deemed to entitle the subject claim refund of wages in proportion to
the loss and those claims as we have actual payment. The subject
through that the servant king was not fulfilling his obligation. He thought
that the compact was not fully kept and he threatened as the Arthashastra
says to migrate to the enemy country, in other words, the subject
threatened to transfer allegiance. The Mahabharata says the same thing
when it sanctions the abandonment of the king who fails to protect.
According to Mahbharata, 'He is like a ship which leaks that is
dangerous to remain with and he is like the barber who wishes to go to
the forest evidently to become an ascetic. The barber has left his clientele
and master and broken his contract of service. He is fit to be given up
and another barber is to be appointed to the household'. (Jayasawal,
1978:319-21) Similarly the king who failed in his duty was worthless
fit to be given up. The relation between the king and the subject is
proved to have ended by the very fact of the formers incapacity. The
ties of allegiance is deemed dissolved the moment the king failed to
fulfill this duty of protect action and the subject was free to employ
another servant master instead. This was a natural corollary to the
theory of taxation and the king’s legal position.(ibid)
The mainstay of revenue was the kings’ fixed bhaga or the
share of produce of agriculture. His share in merchandise sold in
the market was one tenth or so according to circumstances.(Manusmriti,
7.130-132, Gautam-smriti 10, 24-27. Vasistha-smriti, 21.26-
27, Apastamba 2.20,26-29, Vishnu-smriti 3, 20-25, Boudhayana,
1.1018.1 cited in Jayasawal, 1978)
87

There were however some other sources of revenue which
are at present called excise and customs; these are called in ancient
books as shulk. In the regulation of these the king had a somewhat
free hand. The later law books attempted even to regulate these by
fixed laws. Yet they could not exhaust the list ad a greedy or needy
sovereign could find some loop hole. The Nandas are accused to have
taxed hides or furs. Evidently these articles had not been taxed before.
There was a vast trade in skins or furs between the Magadha Empire
and the Himalayan countries as the Arthashastra (Kautilya's
Arthashastra, 11.2) proves.
These imports when taxed by the predecessors of
Chandragupta gave rise to accusations of greed. Evidently it was with
reference to such occasions and opportunities and the realization of
the bhaga in general that cannons of taxation were evolved and settled.
The general principles of taxation in ancient books are-
1. In taxation the king should not by greediness destroy his own
foundations as well as those of others. 2 (Mahabharata, Shanti Parva 87.18)
2. Subjects may be taxed in a way that they may remain strong
to heart future burdens and if necessary heavier ones. If the calf is
permitted to suck it grows strong. O bharata, and can bear heavy
weight and pain. The king should milch taxes keeping the above
principle in view. Over milching is to weaken the calf and consequently
harms the milcher himself. (ibid, 87.20-21)
3. It is not the heavily taxed realm which executes great deeds
but the moderately taxed one, whose ruler not sacrificing the power of
defense manages administration economically. The subjects opposed that
king who is extravagant in administration (eating too much). (ibid, 41.22)
88
4. The great principle emphasized is that taxation should be
such that it may not be felt by the subject. The ruler should act like a
bee which collects honey without causing pain to the plant. (ibid,87.89)
5. In raising taxes higher it should be done little by little when
the realm’s prosperity is increasing. The process must be mild so that
the realm might not turn restive. 3 (ibid, 88.4)
6. Taxes should be levied in proper form. They should never
be realized by a proper form. They should never be realized by a
painful mode, milch the cow but do not bore the udders4 . (ibid,88.4)
In Taxing Imports
For imports ancient economists have propounded some
fundamental principles. These principles are described as follows-
1. Sales (price realized), purchases (capital employed), distance
traveled cost of importing, and the total cost also the risks incurred by
the merchant should be fully considered. 5 (Manu-smriti, 7.127)
2. Imports harmful to the state and luxuries (fruitless) are to
be discouraged by taxation. 6 (Kautilya's Arthashastra, 1967, 2.21)
3. Beneficial imports should be made free of imports duties.
4. These articles which are rare in the country and those which
would be seen for future production should be allowed in free.
5. Certain commodities should not be exported while their
imports are to be encouraged by not being taxed at all. They were for
instance-
(a). Weapons and armours
(b). Metals
(c). Chariots
89

(d). Rare things
(e). Grains and cattle
6. Foreign favourites and private manufactures in wines and
liquors were taxed on the principle of compensation with reference to
the state manufactures.
Conclusion
The analyais above can be summarized as follows-
1. Righteously earned wealth facilitates creation of a sound
set of instrumentalities for state administration. Such state
administration may not need any ruler to impose his stern
controls on subjects for peaceful living. In contrast the
righteously earned wealth would facilitate disciplined and
peaceful self administration of the state by the people
themselves. This is the core message of the theory of treasury
propounded by Kautilya, Shukra, and Brihaspati.
2. Tax was one of the source of government revenue other
sources being revenue from government land and industry.
3. Public welfare was the main objective of tax collection and
utilization.
4. The guiding principles of tax collection were like a bee
collecting honey, like milking a cow, like flower picking.
5. The behavior of tax officials was given high importance.
They should be honest for their duty and humble towards tax
payers.
90
Notes
1 t:of nfekfngf]kfoM zf:qdy{zf:qldlt ..(The science explaining acquisition
and growth of the wealth is Arthashastra.) Kautiliya Arthashastra 15.1.2
2 gf]lR5BfbfTdgf] d"n+ k/]iff+ t[i0fof .
(The greediness will destroy the foundations of ruler and public both.)
Mahabharata, 12.87.18
3 dw'bf]x+ b'b|fi6«+ e|d/f Ojkfbkd\ .. (As a bee collects honey from flowers)
ibid, 12.88.4
4 jT;fk]IfL b'x]Rr}j :tgf+Zr g ljs'6\6o]t\ . (Milk the cow, do not bore the
udders.) ibid
5 qmoljqmodWjfg+ eQm+ r ;kl/Jood\ .
of]uIf]d+ r ;+k|]Io jl0fhf] bfko]Ts/fg\ .
(Sales, purchases, cost of imports, and the risks incurred by the merchant
should be fully considered.) Manusmriti, 7.127
6 /fi6« kL8fs/+ ef08fd'lR5GBfkmn+ r ot\ .
dxf]ksf/d[R5'Ns+ s'of{åLh+ t' ;'bn{ed\ . Kautiliya Arthashastra, 2.21
91

CHAPTER SEVEN
CONCLUSION
Kautilya and his predecessors- Shukra and Brihaspati were
farsighted and realist economic thinkers. Their policies are concentrated
towards economic developement, political stability, and social harmony.
They were aware for social welfare in every sense. Therefore their
ideas are relevant in modern setup also.
In the previous chapters we analyzed ideas of Kautilya, Shukra
and Brihaspati on agriculture, animal farming, trade, commerce, price
theory and public finance. We have also compared these ideas with
classical, neo-classical and modern economic ideas.We can now
summarize economic ideas in the following topics.
Material Prosperity
Material prosperity was considered of vital importance from
the view point of state. This view has been expressed by Kautilya,
Brihaspati and Shukra unanimously. The most important element
according to Kautilya, is neither the government nor the army, but
treasury. Spiritual good and sensual pleasures depend upon material
well being. In a sense the good life of the kingdom the well being or
Yogkshem of the people will never occur if the economy is in shambles.
This is one point that Kautilya’s reader cannot miss. (Boesche, 2002:
65) The concept of Yogkshem is deeply rooted in public welfare.
According to Kautilya, every good in political life- peace,
conquest, order, the correct social and class structure, dharma, and
so on- depends on the state acquiring wealth and using it wisely. Men
without wealth do not attain their objectives even with hundreds of
efforts; objects are secured through objects, as elephants are through
elephants set to catch them. (Kautilya’s Arthashastra, 1967, 9.4)
After declaring early in Book One that material well being
alone is supreme, he continued later by saying that the king will be
happy only when his subjects are happy, and therefore being ever
active the king should carry out the management of material well being.
(ibid, 1.7, 19.35) In this statement we find the key to understanding
the importance of the economy for Kautilya. According to him the
treasury ensuring (the success of) all endeavors is the means of deeds
of piety and sensual pleasure. (Kautiliya Arthashastra-2, 2003,
8.1.49) the goals are always well being and security from enemies
from both within and without. (Boesche, 2002: 66)
Whereas many thinkers in both the European and Asian
traditions might declare that religion is most important, or that the
political constitution is central to achieving peace and justice, or whereas
some such as Machiavelli might see a disciplined army as central to
political well being. Kautilya singled out the treasury. Without a treasury
there is no effective army. (ibid)
92 93

No wonder Kautilya stressed the importance of wealth. From
the treasury obtained with the treasury as its ornament..., with money,
troops… are obtained. Roger Boesche compares Kautilya’s compares
Machiavelli in the following words- Kautilya said something that
Machiavelli would never agree with that- is that a king with money can
conquer an enemy by hiring or purchasing heroic men. (Boesche,
2002: 66)
Because the treasury enables a king to pay soldiers and make
military equipment, the army needs the treasury and the treasury must
be protected by the army, so they will always be interrelated but the
treasury is ultimately more important. For the army is the means of
acquiring and protecting the treasury, the treasury that of treasury and
army because it brings into being all objects, the calamity of the treasury
is more serious. (ibid, 8.1.51-52)
Rajdharmanushasana Parva or the Book on Political Discipline
of Mahabharata deals in material prosperity. It explains that proper use
of wealth is more important than the sacrifice of wealth. Every person
and every part of society should perform its proper functions which
are predetermined by scriptures.
Importance of Agriculture
The economy of Kautilya, Shukra and Brihaspati was a three
sector economy. Among the three pillars of economy they have given
high importance to agriculture, the other two pillars being animal farming
and commerce. Shukra and Kautilya were 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.
Specialization of agriculture was done with the help of
professionally trained managers of farming and animal husbandry.
Techniques of animal farming, practical and theoretical measures to
raise farmers’ status suggested by Kautilya and Shukra are relevant in
modern agro based economy. A farmer busy in farming activity could
not be arrested by the state. The farmer was protected by the law.
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 Shukra-niti and
Kautiliya Arthashastra are applicable to the modern agricultural sector.
In stark contrast to the emphasis that Kautilya, Shukra and
Brihaspati assigned to rural development, agriculture, and the animal
husbandry, the present status is that these spheres have been neglected
in present economic policies.
Pricing Policy
Kautilya and Shukra are of the view that normal price of goods
should be equal to the cost of production in long run. Market price
fluctuates around this price. They have given a fair discussion on the
price of inputs. According to their evaluation the share of land, labour,
capital and entrepreneur should be 16.67, 41.67, 15, and 10 percent of
total national income. They are in favour of regular national saving and
the rate of this saving should be 16.67 percent. (Gewali, 2011b : 139)
Kautilya envisaged a role for the state to ensure that excessive
price fluctuation to commercial activities did not occur. This view
94 95

follows the price policy explained by Manu. (Manu-smriti,
1991, 8.410-13)
Kautilya showed a highly refined understanding of the law of
demand and supply and the influence of surpluses that occur due to
imperfections of the market. He recommended an interventionist policy
to situation of glut in the market. In this context he stated that whenever
there is an excessive supply of merchandise The Superintendent of
Market shall centralize its sale and prohibit the sale of similar
merchandise elsewhere before the centralized supply is disposed of
Kautilya realized that the role of the state was to ensure that commercial
activities do not violate laws and if the state did not establish and enforce
codes of conduct it would in fact raise transaction costs. The lack of
trust and guarantee of quality would diminish commerce and increase
search and verification costs for agents undertaking commercial
transactions.
From the view point of commodity price determination their
views are similar to classical views. At the same time Kautilya and
Manu have suggested to have a government control on price fluctuation.
Which is similar to socialist view.
Consumer’s Protection
There are many legal provisions for the consumer’s protection
in Kautiliya Arthashastra and Shukra-niti. In K-M economy two
authorities were responsible for consumer’s protection- The
Superintendent of Market and The Superintendent of Commerce.
The consumer buyer is provided safeguards by the law in
ancient economy. The sale or mortgage of articles such as timber,
96
iron, brilliant stones, tropes, skins, earthenware, threads, fibrous
garments, and woolen clothes as superior, although they are really
inferior, was to be punished with a fine.
Adulteration of grains, oils, alkalis, salts, scents, and medical
articles with similar articles of no quality was considered a serious
offense.
It is interesting to note that Kautilya tried to establish guidelines
for professional service providers also, including medical practitioners,
weavers, washer-men, boatmen, shipping agents and even prostitutes.
System of Four Varnas and Asharams
Varna and Asharam system was the basis of economic
progress, personality development and social harmony in ancient times.
The word Varna stands for colour and Asharam stands for institution.
Initial Varna system was based on the function and not on caste. Later
it was converted as caste system .
These Four Varnas are-
1, Brahman or the intelligent class
2. Kshtriya or the warrior class
3. Vaishya or the business class
4. Shudra or the labour class
Intelligent class was responsible for the advancement of
knowledge and regular research for the benefit of the society. The
warrior was responsible for the protection of the country. Vaishya
was the basis of economic system because the developemnt of
K-G-B sectors was the responsibility of this class. The responsiblity
of labour class was to serve the country as a whole. All four classes
were like four organs of a body and therefore complementary to
each other.
97

The system of four stages of personal life was mingled with
Varna system. Ashram system was a social technique constructed for
the personailty developemnt of an individual. The Gurukul system of
education was the foundation of these stages. These stages are as follows-
1. Brahmacharya or the stage of learning
2. Grihastha or the household life
3. Vanaprastha or the retired life
4. Samnyas or the wandering ascetic.
For socio-economic progress Kautilya, Shukra and Brihaspti
supported Varnasharam system strogly. According to Kautilya the ruler
who manages this systm, rules successfully. This is the basis of social
welfare. (Kautiliya Arthashastram,2009, 1.3, 3.1)
Tri-varga Balance
Ancient thinkers have propounded the general equilibrium
theory which was known as Trivarga-sewa or Tri-varga Balance, that
is, the balance of three divisions. Actually it is an example of general
equilibrium. In modern times the general equilibrium theory expalained
with the help of Edgeworth box is the economic general equilibrium
theory only. It is not a 'general' equilibrium of life.
Tri-varga Balance Theory explains the unique equilibrium of
the three divisions or goals of life, three divisions being, dharma- the
right conduct, artha- wealth, and kam- pleasure. Thus, Tri-varga
Balance may be called as D-A-K equilibrum.
They have suggested to make ingenious balancing among
these three. This ideal point was known as Tri-varga Sewa. This
word has been mentioned repeatedly and clearly by the ancient
thinkers. L R Smith calls this balance as Hindu equilibrium. (Smith,
2006: 58-63) According to him this Hindu equilibrium was the basis of
social, political and economic action in those times.
Dharma as described in oriental economics has two
characteristics- purity in action and general welfare in the goal.
According to this view purity denotes purity in earning and spending
both. General welfare means the situation when one’s action for his/
her welfare supports the welfare of others. In technical terms it may
be called Pareto optimality.
Artha as economic resource has two main characteristicsscarcity,
and utility. Resources are useful to satisfy our wants, therefore,
we need it. But resources we need not only scarce but they have
alternative uses. It means the degree of scarcity is very high. Due to
these characteristics we are forced to economize available resources
while satisfying our wants.
Kam means desire to satisfy wants. It becomes pleasure if
satisfied. Desires are not only unlimited, they are competitive also.
From competitive and unlimited wants it is very hard to select and
satisfy wants. Since, their intensity is not the same, it becomes easier
to select some important wants and put them in priority. Thus, we
start from most intense wants. This maximizes our satisfaction.
If we take any two out of the three divisions there will be
three separate equilibrium positions- equilibrium of dharma and artha,
equilibrium of artha and kam and equilibrium of kam and dharma.
The equilibrium of dharma and artha determines the best
individual economic action in social life. The equilibrium of dharma
98 99

and kam helps in selecting the best goals of a social person. The
equilibrium of artha and kam helps in the maximization of satisfaction.
Because, it determines the optimum combination of wants and
resources. Thus, Tri-varga Balance determines the unique balance of
goals, actions and satisfaction. The propunders of this balance have
warned the people not to be biased towards any one of them.
Figure 7.1 explains this unique situation of Tri-varga Balance.
Fig.7.1. Tri-varga Balance or The General Equilibrium
(Dharma)
Right conduct
Action
Balance
Goals Satisfation
(Kam)
Pleasure
Nepalese Products and Places
(Artha)
Wealth
In Kirata period Nepalese woolen clothes were famous in
Magadha This fact is expressed in Kautiliya Arthashastra. One of the
mineral products described in Kautiliya Arthashastra is bitumen- Shilajit
without mentioning the place of origin. Bitumen is found mainly in
100
Nepal. It is a rich source of various medicinal minerals and therefore
used in Ayurveda.
The Brihaspati-sutra mentions half a dozen names which are
related with Nepalese geographical location, such as- Nepal, Kirat,
Himvanta, Shalgram, Sivakshetra etc. Matsya Purana, Garuda Purana,
and Agni Purana support the facts of Kautiliya Arthashastra and
Brihaspati-sutra. (Agni Purana, Chapter 46) Garuda Purana also has
a clear description of Shalgram domain. This description is based on
the famous Kali Gandaki, Muktikshetra and Damodar Kunda.
The misunderstandings that Sanskrit literature leads to people
in an imaginary world of mokhsa- the ultimate freedom becomes untrue
after studying the ideas of Kautilya, Shukra and Brihaspati. Its therefore
Roger Boesche calls Kautilya, the Great Political Realist. Their policies
are equally useful in war and peace, for economic progress, for national
integration, sovereignty and social harmony.
Bokare opines that the first available book on economic thoughts
is Rig-Veda and the first definitions of Economics were presented by
Kautilya and Shukra. According to him, if Adam Smith is the founder
of Modern Economics then Kautilya is the founder of Oriental
Economics. (Bokare, 2009: 79, 93)
We become astonished while studying the deep insight into
the economic problem and their practical solutions given Kautilya and
Shukra.Theories propunded by these teachers were tested, revised
and applied by the society for long. In the context of agriculture
development, price stability and goverment finanace, ideas of Kautilya
and Shukra are more practical than those of mercantilist, physiocrats
and classical.
Every student of Economics, today knows it very well that
this subject was evolved in Europe, the first economic thinker was
101

Plato and first economist is Adam Smith but very few of them have
any knowledge about the contribution of oriental economic thinkers.
In this study economic ideas of Brihasapti, Shukra and Kautilya have
been discussed briefly, in fact, too briefly. But this small study is the
evidence that discussions were held in those times on economic issues
widely and intensely. These ideas reveal that socio-economic
advancement is not a monopoly of any particular race. Rather it is a
wealth of mankind.
�
102
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108

Accounting 83-86
Adam Smith 13, 63, 64
Adulteration 96
Agriculture 27,30
Alternative price 66
Animal farming 39
Apastamb 3
Artha 17,22
Arthashastra 16-18, 87
Aristotle 12,13,63
Ashoka 88
Balance 97
Bhingisi 58
Boesche 93,100
Boudha 12
Boudhayana 16, 87
Brihasapti 1,5,28,48,73
Brihasapti-sutra 5-9
Business management 49
Chanakya 9, 10
Chandeshwor 12
Classical 13,62
Coins 49
Consumer’s protection
53,96
Cost 70
Crops 35
D-A-K equilibrium 98
Dand-niti 16
Demand 68
Economic prosperity 47
Equilibrium 71, 98
Fine 79
INDEX
Fiscal year 83
Four stages of life 97
Four varnas 97
General equilibrium 98
Government revenue 54
Hindu equilibrium 99
Importance of agriculture 94
Imports 89
International trade 53
Items of expenditure 80
Jainism 12
Jayasawal 12,27
Kali Gandaki 100
Kautilya 9,17,28,73
Keynes 13,20
K-G-B sector 29, 97
Kirata 59,60,100
K-M economy 28,30,32
Land tenure system 31
Machiavelli 93
Mahabharata 4,16, 87
Manu-smriti 3, 65
Market 71
Marshall 13,18,63,73
Marxian 13
Material prosperity 92
Megasthenes 32
Mercantilists 27
Metallurgy 54,58,78
Methodology 21
Mines 55-57
Mining 49,58,78
Mint master 49
Moksha 100
Monopoly tax 80
National economy 28
Neo-classical 13, 64
Nepal 59,60,101
Nepalese product 59,101
Non-availability effect 70-71
Oppert 8
Ostrom, Elinor 38
Pana 34
Prosperity 19,47, 92
Prostitutes 79
Paitamaha-tantra 5
Philosophy 16
Physiocarats 13, 27
Price 67, 70-73, 95
Price policy 67, 95
Price theory,
foundations 62
in Kautiliya Arthashastra 67
in Manu-smriti 65
in Shukra-niti 65
in Wealth of Nations 64
limitations 73
Production of liquors 52
Profit 74
Political economy 13
Purana 2-3
Quality of milk 41
Ramayana 4
Rent 74
Requirement of rain 35
Reserved forest 44
Rig-Veda 2,100
Road transport 54
Robbins 19
Role of state 48
Rural development 30
Shalgram 60,101
Shivaksetra 60,101
Superintendent of Market 53,69
Supply 69
Superintendent of Salt 49
Shukra 7-8,18, 28,49,86
Shukra-niti 7-8,54,65,73
Scarcity 19,69
Shyamashastry 10
Sources of revenue 10
Taxation principles 87
Thread industry 50
Trade 47,53
Transportation 54
Treasury 56,73, 77
Tri-varga balance 98
Types of forests 43
Varta 27
Value 71-72
Veda 2
Vritti 17
Wage 64
Wages for farm workers 34
Waterways 53
Wealth 16,17
Wealth of nations 13,64
Wine 52
Yagyawalkya 3
Yogkshema 93
Zimmer 16
109 110

ECONOMICS OF KAUTILYA
SHUKRA AND
BRIHASPATI
Dr. B R Gewali
Associate Professor
Butwal Multiple Campus, Butwal
Publisher
Gyanjyoti Prakashan
Rundhati Trust,
Jyotinagar, Manigram
2012
˜
Subject- Economics, Oriental
Title- Economics of Kautilya, Shukra and Brihaspati
ISBN- 2-4888-4
Copyright author
Contact- 9847038095
Email- brgewali_2008@yahoo.com
First edition 2012
Price- 120 NRs
Fast Print Publications, Butwal, 9847244745

cy{zf:q+ ej]b\ uf}/+ ;fl/sfjbg+ z'ed\ .
cIf;"q+ kmn+ lae|bGgfxf/+ sd08n'd\ ..
(The God) Economics has the fruit of hard labour in one hand,
Rudraksh (eleocarpus) in second, food in third, and water pot in fourth
hand. His face is bright and voice is like myna.
- Rajeswarshastry Drawid’s Kautiliyam Arthashastram (Second Chapter)
PREFACE
The definition given by Kautilya- manusyanam vrittirarthah...
always attracted me. To analyze the oriental economic thoughts I studied
economic ideas of Kautilya. In connection I studied Shukra-niti and
Brihaspati Artha-sutra. It is to be noted that thoughts of Kautiliya,
Ausanas, and Barhasptya school are generally common and all claim
that their schools have borrowed ideas from the long tradition of
Arthashastra- Political Economy.
I found four different editions of Kautilya's treatise useful for
my study- Kautilya’s Arthashastra (internet edition) by Shyamashastry,
the Kautiliya Arthshastra Part 1,2,3 (reprint, 2003) edited and translated
by R P Kangle, Kautilyako Arthashastra (1967) translated by K R Aryal,
and Kautilya- the Arthashastra (1992) rearranged and explained by L N
Rangrajan. For Brihaspati’s thought I used two sources- Barhaspatya
Arthashastra or Brihaspati Artha-sutra (internet edition) edited and
translated by F W Thomas and scattered thoughts of Brihaspati in
Mahabharata. Although there are various collections of Shukra-niti in
the market but for my study I selected two books- Shukra-niti (1987)
translated by D B Paudyal, and Shukranitisar (2008) translation with
commentary by Jagdiswarananda.
In the present study I have tried to compare the economic
thoughts of Kautilya with Brihaspati and Shukra. The parameter of
comparison being Kautilya’s economic thoughts. The tools and
terminology for comparison have been taken from main stream
Economics.
I have not only tried to examine their modern relevancy but
also find their place in Modern Economic Theory. While starting this
study I was eager to incorporate latest comments on Oriental
Economics. Unfortunately I found no such works in Nepal. Perhaps
doing research in these traditional links is not an interesting job for the
present generation. In research bulletins and in UGC’s reports these
types of studies can hardly make place for themselves. For you, readers
of the future, I hope this book is helpful.
After doing internet searches I came to know the two new
publications on oriental economic thoughts- one from USA and
other from India. My daughter Bhagirathi Gewali Tripathi and son-inlaw
Loknath Tripathi from Ireland helped me to find the book- The
Great Political Realist, from Washington. My former student Tara
Rayamajhi Pokhrel from Butwal, helped me finding the book-
Arthashastra in Economics from New Delhi. Both of the books are on
Kautiliya Arthashastra. But I did not find any new publication or
comment or research on Brihaspati and on Shukra. So, I became
dependent only on traditional sources for the economic ideas of
Brihaspati and Shukra.
There are many people to whom I am grateful. I am indebted to
Prof. D R Pant, Prof. Dr. N R Kanel, Prof. Dr. M R Dahal, Prof. Dr.
Madhavi Singh, Dr. Madhab Raj Panthi, and Dr. Tika Ram Panthi for
their kind suggestions while writing the book. I would like to thank my
friends B P Pokhrel, Prakash Koirala and Prashant Pandeya who helped
me at the time of final proof reading and to D R Ghimire and U K
Parajuli, who always encouraged me to complete my writing.
It will be a mere formality to say that without the help of my
wife I could not have finished the book in time. If this small efforts of
mine encourages my readers to explore new ideas in the field of Oriental
Economics I will feel my effort meaningful. I will welcome the comments
and suggestions of my readers and well wishers.
Jyotinagar, Manigram
Rupandehi, 2012

CONTENT
Chapter 1: Introduction 1
Chapter 2: Definitions and Methodology of
Oriental Economics 15
Chapter 3: Agriculture and Animal Farming 27
Chapter 4: Trade and Commerce 47
Chapter 5: Pricing Policy 62
Chapter 6: Government Finance 76
Chapter 7: Conclusion 92
LIST OF TABLES
Table 1.1. Chapter Divisions in Brihaspati-sutra 7
Table 1.2. Ancient Scholars of Arthashastra 11
Table 2.1. Comparison of the Definitions 19
Table 3.1. The Requirement of Rain 35
Table 3.2. Types of Forests 43
Table 3.3. Reserved Forest 44
Table 4.1. Road width in Kautiliya Arthashastra and Shukra-niti 54
Table 4.2. Revenues from Mine 56
Table 4.3. Enumerative Sutras Related with Metallurgy 58
Table 5.1. Alternative Prices of Cattle 66
Table 5.2. Elements of Price Determination 68
Table 5.3. Availability and Non-availability Effect in Shukra-niti 71
Table 5.4. Shares of Factors of Production 74
Table 6.1. Revenue Sources in Shukra-niti and Kautiliya Arthashastra 81
Table 6.2. Working Days 83
Table 6.3. Possible Expenditure Account 85
Table 6.4. Possible Income Account 86

LIST OF FIGURES
Fig, 4.1. Business Organization 51
Fig. 5.1. Equilibrium in the Market 72
Fig. 5.2. Availability Effect 72
Fig. 5.3. Non-Availability Effect 72
Fig. 7.1. Trivarga-sewa or The General Equilibrium 100
LIST OF ABBREVIATIONS
A C : After Christ
Atharva. : Atharva-Veda
B C : Before Christ
D-A-K Equilibrium : Dharma, Artha and Kam Equilibrium
K-M Economy : Kautilya Maurya Economy
K-G-B : Krisi, Goraksha and Banijya
Rig. : Rig-Veda
Yaju : Yajur-Veda