A PROJECT ON

MANAGE VALUES IN KAUTILYA’S ARTHASHASTRA

SUBMITTED TO:

UNIVERSITY OF MUMBAI

SUBMITTED BY:

HARIKRISHNAN SREENIVASAN POTTY

SEAT NO: 4582

TYBMS SEMESTER V

PROJECT GUIDE:

MRS. APARNA JAIN

S.K. SOMAIYA COLLEGE OF

ARTS, SCIENCE & COMMERCE.

VIDYAVIHAR (E), MUMBAI 400077

YEAR 2010-11

ACKNOWLEDGEMENTS:

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

Quite often, we get the support we require. When I sat down to

complete this project, I was not sure if I could have managed to

complete even twenty five percent of what I have done now. The truth

is- it wouldn’t have been, but for the priceless support I have received

during the course of the project work. So it is my privilege to mention

them and thank them for their help.

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

Head of Department for BMS course in S.K.Somaiya, for going

through my project several times. She was present every time to help

me out and she solved patiently, all my doubts and queries.

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

with a lot of material using which I could complete the project. It

might have been impossible for me to carry on, without his help.

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

for me and letting me know that I could count on them every single

time. They gave me the will to get on with this project.

According to Chanakya, one must start all important works

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

“Om. Salutations to Sukra and Brihaspati.”

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INDEX:

TOPIC PAGE NO.

EXECUTIVE SUMMARY ......08

OBJECTIVES ......10

METHODOLOGY ......10

LIMITATIONS ......11

1. INTRODUCTION ......12

1.1 PURUSHARTHAS ......13

1.2 MEANING OF ARTHA ......13

1.3 MEANING OF ARTHASHASTRA ......14

1.4 KAUTILYA ......16

1.5 ROLE OF ARTHASHASTRA

IN MODERN WORLD ......17

2. PUBLIC GOVERNANCE ......18

2.1 THE CONTROL OF THE STATE ......18

2.2 ROLE OF THE STATE ......19

2.3 TOWN BUILDING ......21

2.4 LAW MAKING ......23

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2.5 UNFAIR TRADE PRACTISES ......24

2.6 CONSUMER PROTECTION ......25

2.7 MODERN GOVERNANCE ......26

3. TAXATION ......28

3.1 METHODOLOGY ......28

3.2 AMOUNT OF TAXATION ......29

3.3 EXEMPTIONS AND WAIVERS ......30

3.4 THE MODERN METHODOLOGY

OF TAXATION ......31

4. TRADE ......33

4.1 DOMESTIC TRADE ......33

4.1.1 TRADE ROUTES ......33

4.1.2 SAFETY OF GOODS IN TRANSIT ......34

4.2 FOREIGN TRADE ......34

4.2.1 TRADE &REVENUE ......35

4.2.2 IMPORTS ......35

4.2.3 EXPORTS ......36

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4.3 MODERN TRADE PRACTICES ......38

5. BANKING, CO-OPERATIVES

& RISK MANAGEMENT ......39

5.1 RISKS & UNCERTAINITIES ......40

5.2 PRIVATE SECTOR V/S PUBLIC SECTOR ......40

5.3 LOANS & INTEREST RATE ......42

5.4 GUILDS & INSURANCE ......42

5.5 PRESENT SCENARIO ......42

6. AGRICULTURE &IRRIGATION

MANAGEMENT ......45

6.1 THE MAIN ACTIVITY OF STATE ......45

6.2 SUPPORTS TO AGRICULTURE ......45

6.3 METEROLOGY ......46

6.4 CROPPING PATTERN ......48

6.5 IRRIGATION ......49

6.6 AGRICLTURAL TAXATION ......50

6.7 SUSTAINABLE AGRICULTURE ......51

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6.8 PRESENT SCENARIO ......52

7. PUBLIC SECTOR MANAGEMENT ......54

7.1 ROLE OF PUBLIC SECTOR ......54

7.2 INDUSTRIES IN PUBLIC SECTOR ......55

7.3 PUBLIC SECTOR IN INDIA ......56

8. HUMAN RESOURCE MANAGEMENT ......58

8.1 WINNING PEOPLE/LURING PEOPLE ......59

8.2 WAGES &INCENTIVES ......65

8.3 SELECTION & TRAINING ......67

8.4 CURRENT HR POLICIES & MANAGEMENT ......70

9. LEADERSHIP ......71

9.1 PRIMARY GOALS OF THE LEADER ......71

9.2 LEADERSHIP VALUES ......71

9.3 BENEFITSOF A RIGHTEOUS LEADER ......72

9.4 MAKING OF A LEADER ......74

9.5 SPIRITUAL LEADER ......75

9.6 CURRENT SCENARIO IN LEADERSHIP ......76

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10. CORPORATE SOCIAL RESPONSIBILITY

& CORPORATE GOVERNANCE ......78

10.1 CORPORATE SOCIAL RESPONSIBILITY ......78

10.2 CORPORATE GOVERNANCE ......80

10.3 THE MODERN ENVIRONMENT ......82

11. SUGGESTIONS AND RECOMMENDATIONS ......85

12. CONCLUSION ......88

13. ANNEXURES ......89

13.1 CASE STUDIES ......89

13.2 ARTICLES ......97

14. REFERENCES ......100

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EXECUTIVE SUMMARY :

This project is a report of probably the greatest treatise on

management ever written in the world, ‘The Arthashastra’.

Arthashastra, written by Kautilya, also known as Vishnugupta or

Chanakya, surmises all the important aspects or areas of management

that we pursue or study today. It encompasses of a wide array of

ideals and fundamentals that could be put to use in today’s

environment.

It becomes mandatory for every Indian to learn The

Arthashastra because of its all pervasive nature. The Arthashastra had

been lost in oblivion since ages before it was finally resurrected for

the masses. The Arthashastra is indeed a book that is one of its kinds

in the world.

Going through his works, one could see that Kautilya, the

Prime Minister of Chandragupta Maurya has guided the Emperor in

his pursuit of greatness. He possesses a thorough understanding of

economics and all the prevalent economic policies. Kautilya has given

fundamentals of town building and public governance; which, if

implemented properly could change the deplorable condition of

governance in India. Kautilya has also given valuable insights on

trade and commerce. He has even stated the importance of

international trade and gave impetus to such trade.

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The taxation policy and the wages structure of Kautilya can

itself be used as a reference book for the government of any country.

It gives importance to the happiness and welfare of subjects and not

only to the fulfilment of treasury.

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

by The Arthashastra. Human Resources Management and Leadership

are the highlights of Arthashastra. Kautilya has indeed given a great

sermon on leadership.

This project has tried to encompass all the required materials

about Arthashastra and put them to use with a modern perspective. It

has tried to solve all the modern woes of governance through the eyes

of Kautilya.

Case studies have been included at the end to give a better grip

on the subject matter and make it more practical in approach. All this

has been done keeping in mind that no individual or organisation is

hurt or offended with regards to anything written or referred to in this

project.

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

intricacies of the great epic ‘The Arthashastra’ and will pave the way

for future research and studies on this less explored subject of

management.

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OBJECTIVE:

The objectives of this project are to:

Highlight the values in Arthashastra which could have a profound

influence on the management tactics used today.

To arouse interest in wisdom that had been lost for years.

To draw parallels and differences between the methods of

administration and management during the Mauryan Empire and

the present age.

METHODOLOGY:

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

project is more of a compilation of many revered works coupled with

inputs from the researcher. Reference material has come in the form

of books and websites. Meetings with Arthashastra scholar, Mr.

Radhakrishnan Pillai have also helped in collecting secondary data

required for this project. Historical data method is mainly employed in

collection of data. Efforts have been taken to ensure the authenticity

of the data.

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LIMITATIONS:

The project work is not without its own set of limitations

though care has been taken to ensure that they are at a minimum level.

The following limitations have come to the fore during the

compilation of this project:

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

had been in oblivion for ages and much of the manuscripts are said

to have been destroyed or lost. It has been difficult to join the

broken threads.

Secondary data is in the form of websites and books. Hence, it

would be fair enough to say that these may be subject to biasness

or prejudices of the respective authors.

There has been a major shift in the psyche of people since the

Mauryan Era to the present age. Hence, reliability of the

reproduced works cannot be guaranteed. However, on reading the

manuscript, one gets a vivid view of the subject matter and efforts

have been taken to provide an unprejudiced and unbiased report

based solely on facts.

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1. INTRODUCTION:

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

Ved Vyasa or Aryabhatta or more recently, Dr. APJ Abdul Kalam,

India has been a nation basking in the glory of being the birth place of

intellectuals with no equal. The nation has seen it all; from political

turmoil to epochal feats; from relentless struggle for an identity to

being one of the fastest growing economies in the world. Some

believe India’s success is an effect of Indians having vehemently

taken to modernism and the western ideology, while others credit the

success with going back to our roots and developing an Indian

ideology. Both views make sense as the world is beginning to warm

up to Indian ideologies and embrace what is possibly the oldest race in

the world.

India traces its history to the formation of Indus Valley

civilization, some ten thousand years ago. This was followed by

several monarchies and invasions, making this land the envy of many.

This period led to the development of the glorious history of India as

we know it today. Possibly, the seeds of Indianness were sown by the

Aryans who came to India. They started their first colonies and laid

down norms and regulations which they had to abide with. They

prepared the Vedas which gave rise to the Vedic Period in India’s

history. Within the Vedas, were enshrined the doctrines of the

Ashrama system. The Purusharthas followed the Ashrama system of

Vedas.

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1.1 PURUSHARTHAS :

Purusharthas could be defined as the aim or objectives of

human life. They consisted of the following:

Dharma : Dharma stands for Righteousness or Dutifulness.

Dharma was the corner stone of the entire ethos in the human context.

It was the prima doctrina of the ancient Indian values system.

Kama : Kama stands for desire or passion. It is the drive that

motivates a certain course if action. Kama denotes the human attribute

of having a soft spot for worldly desires and a strong will to achieve

those desires.

Moksha : Moksha means Salvation. Moksha aims to let go all

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

Nirvana or eternal freedom from all senses. Thus, Moksha stands for

Renunciation.

The fourth Purusharthas was Artha or Wealth. Artha

significantly symbolized more than just material pleasures or

treasures. It was wealth or power as we know it of today. As days

passed by, the importance of Artha grew in the human minds and

today, it has become the sole motivator or aim in Human life.

1.2 MEANING OF ARTHA:

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

confused as materialistic accumulation or treasures. Artha is wealth in

absolute terms. It covers everything from treasures to knowledge to

courage. Artha is everything that is valuable for human beings.

Indeed, Artha predominantly speaks about economy and not valour or

knowledge. However it is a narrow approach of assessing Artha.

Thus, Artha is complex in nature.

This complexity has propelled many scholars to comprehend the

subjectivity of Artha. Many have succeeded while many have failed to

solve the intrigues of this concept. There have been many approaches

towards learning the concept of Artha. Some have been purely based

on rules or certain set of beliefs like the exhaustive Manusmriti, while

many have been practical treatises on Artha. As one studies Artha and

its complexities, one could wonder at the realms of possibilities that

this subject provides. From the basic economic theory of demand and

supply to the ultra modern theory of environmental and social

accounting, Artha encompasses all.

Even more amazing is the fact that all this was prevalent since

the times of the Vedas. Many scholars have tried to convey the

ancient teachings of the sages in the most modern way possible;

however one must say, none have succeeded, but for one.

1.3 MEANING OF ARTHASHASTRA:

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The study of Artha came to be known as Arthashastra.

Arthashastra literally means “the science of wealth” or “economics”

as we know about it in the modern parlance. However, as one studies

Arthashastra, one gets a feeling that it is not meant to throw light just

on the topic of dealing with materialistic riches, but also on the wealth

that is intangible and cannot be measured. The meaning of “wealth”

takes a completely new paradigm in the words of Arthashastra.

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

of Arthashastra and its author. The Arthashastra contains nearly 6000

sutras divided into 15 books, 150 chapters, and 180 sections.

The 15 books contained in the Arthashastra can be classified in

the following manner: Book 1 on ‘Fundamentals of Management’,

Book 2 dealing with ‘Economics’, Books 3, 4 and 5 on ‘Law’, Books

6, 7 and 8 on Foreign Policies and Books 9 to 14 dealing with ‘war’.

Book 15 deals with the methodology and devices used in writing the

Arthashastra.

Arthashastra is believed to have been written around 4th

Century, B.C. This vast treatise was written by Vishnugupta, who was

also known as Chanakya and Kautilya, the advisor to Emperor

Chandragupta Maurya. There are many contradictions surrounding

this too. Some believe that Vishnugupta was not Kautilya and that

Arthashastra, which was originally written by Vishnugupta, was

rewritten by Kautilya at a later period. However, we assume that all

three were the same person and he was the rightful author of

Arthashastra which was written during the reign of Emperor

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Chandragupta Maurya. Also, there has been enough evidence about

this assumption by reading the manuscripts and comparing the style

with other writings of the same period.

1.4 KAUTILYA:

Having seen what the Arthashastra composes of, one has to

necessarily learn about its author to understand the subtleties in the

treatise. Arthashastra, as mentioned earlier, was written by

Vishnugupta. Vishnugupta was also known as Kautilya or Chanakya.

He got the name “Kautilya” as he was born in the “Kutila Gotra”. The

name “Chanakya” derived from the fact that he was born to a person

named “Chanaka”.

According to the legend, Kautilya was the principal of The

Taxashila University. On a meeting with the erstwhile Emperor,

Dhanananda, Kautilya was dishonoured and humiliated. He vowed

revenge and dethronement of the Nanda Empire. He took a child

named Chandragupta as his disciple and strived hard to make him the

Emperor. He succeeded in doing the same and crowned Chandragupta

Maurya as the new Emperor and this marked the beginning of the

Mauryan Dynasty, a golden age in Indian history. Kautilya was

shrewd and cunning. He had a mind which was faster than that of the

average human being. He guided Chandragupta Maurya and used all

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

ever seen.

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He made rules, dictated them and implemented them to the

fullest to run a highly skilled administrative set up that was unheard of

during those days. All this is compiled by him in a political treatise

called “Arthashastra”.

Kautilya is also credited with stopping the Greek invasion to

conquer the whole world. He was instrumental in the rise of the

Mauryan Empire under Chandragupta Maurya and his son, Bindusara,

who succeeded him.

As per the legend, Kautilya died of voluntary starvation after

Bindusara charged him of sedition. However, Bindusara realised his

mistake and apologised to him; but Kautilya was adamant and let go

his life at a ripe age.

His works were lost near the end of the Gupta dynasty and not

rediscovered until 1905. One of the first translations of Arthashastra

was done by R. Shamasastry in the year 1915. Thereon, we have seen

many translations and depictions of Arthashastra.

1.5 ROLE OF ARTHASHASTRA IN MODERN WORLD:

An ancient saying says that wisdom is never bound by time.

Thus, Arthashastra has many implications which do not alter much

over time.

The various theses in Arthashastra are relevant even today as

the world is looking out for a better future. The best quality of

Arthashastra is that it has not been written keeping in mind a

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particular timeframe or a region. Its attribute of all pervasiveness has

made it omnipotent. At a time when the world is need of a true leader,

Arthashastra does exactly that; carve out excellent world leaders.

The role of Arthashastra will be evident as we proceed further.

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2 PUBLIC GOVERNANCE:

Public governance implies structures and processes for

determining use of available resources for the public good. Good

governance, according to experts, implies the following: Universal

protection of human rights; laws that are implemented in a non-

discriminatory manner; an efficient, impartial, and quick judicial

system; transparent public agencies and official decision-making;

accountability for decisions made about public issues and resources

by public officials; participation and inclusion of all citizens in

debating public policies and choices. It is, of course, possible to add

many more aspects to the definition of good governance.

Public governance is something that emerged out of a

democratic set-up. However, in India, it is not a new concept. This

concept has been put to use very efficiently by the Mauryan Empire

under the rule of Chandragupta Maurya or one could say, under the

guidance of Kautilya. Kautilya believed that the state had a role in the

market as a regulator. He advocated the principle of a mixed economy

at a time when India was ruled by autocrats.

2.1 THE CONTROL OF THE STATE:

Kautilya has suggested control of the State on almost all

activities of governance. While the individual merchants were free to

continue, they had to comply with the authorities appointed by the

state.

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Kautilya had appointed superintendents for almost every

activity included in governance. They included superintendents for the

State, for weights and measures, for trade and commerce, for

agriculture, for mining, for prostitutes, for gems and jewels, for

animals, for storehouses, for armoury, for weaving, for ships, for

slaughter houses, for liquor, for infantry, for passports, etc.

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

control over the governance. However, it has to be noted that the State

did not interfere in the day to day affairs of the public.

In theory, the State had absolute control over economic

activities; however in practice, it encouraged all types of private

professions too. It was recognized that the wealth of the State was

dependent on the wealth of the public. Kautilya did not feel the need

to interfere in the planning and decision making aspects of commerce.

In the words of Kautilya, “There shall be no restrictions in the sales of

those items with a frequent demand; nor shall they be subject to the

evils of centralization.”

2.2 ROLES OF THE STATE:

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

in an economy:

Role as a facilitator.

Role as a regulator.

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Role as a protector.

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

the duty of the State to facilitate transactions. Kautilya stressed for the

formation of a Welfare State. A Welfare State is a concept of

government where the state plays a key role in the protection and

promotion of the economic and social well-being of its citizens. It is

based on the principles of equality of opportunity, equitable

distribution of wealth, and public responsibility for those unable to

avail themselves of the minimal provisions for a good life. The

general term may cover a variety of forms of economic and social

organization

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

formulated laws and practices which had to be complied with. Even

though the State did not interfere in the working of any commercial

activity, it had to be informed and reported consistently about the

functioning of the business.

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

free trade and believed in created mechanisms that would protect the

commercial interests of traders and artisans. According to Kautilya,

“those who conspire to lower the quality of the work of the artisans, to

hinder their income, or to obstruct their sale or purchase shall be

fined.”

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2.3 TOWN BUILDING:

Kautilya insisted in creation of villages and not on mere

formation of them. According to Kautilya, villages had to be created

at strategic places. Many such villages were built from scratch during

this period. He also laid emphasis on building commercial towns and

trade zones.

This chapter taken from the Book II of Arthashastra translated

by R. Shamasastry explains the formation of villages during the reign

of Chandragupta Maurya:

“ CHAPTER I: FORMATION OF VILLAGES.”

Either by inducing foreigners to immigrate

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

his own kingdom to send forth the excessive population, the king may

construct villages either on new sites or on old ruins (bhútapúrvama

vá). Villages consisting each of not less than a hundred families and

of not more than five-hundred families of agricultural people of súdra

caste, with boundaries extending as far as a krósa (2250 yds.) or two,

and capable of protecting each other shall be formed. Boundaries shall

be denoted by a river, a mountain, forests, bulbous plants (grishti),

caves, artificial buildings (sétubandha), or by trees such as sálmali

(silk cotton tree), Sámi (Acacia Suma), and kshíravriksha (milky

trees). There shall be set up a stháníya (a fortress of that name) in the

22

centre of eight-hundred villages, a drónamukha in the centre of four-

hundred villages, a khárvátika in the centre of two-hundred villages

and sangrahana in the midst of a collection of ten villages. There shall

be constructed in the extremities of the kingdom forts manned by

boundary guards (antapála) whose duty shall be to guard the entrances

into the kingdom. The interior of the kingdom shall be watched by

trap-keepers (vágurika), archers (sábara), hunters (pulinda), chandálas,

and wild tribes (aranyachára).

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

and those learned in the Vedas shall be granted Brahmadaya lands

yielding sufficient produce and exempted from taxes and fines

(adandkaráni). Superintendents, Accountants, Gopas, Sthánikas,

Veterinary surgeons (Aníkastha), physicians, horse-trainers, and

messengers shall also be endowed with lands which they shall have no

right to alienate by sale or mortgage. Lands prepared for cultivation

shall be given to tax-payers (karada) only for life (ekapurushikáni).

Unprepared lands shall not be taken away from those who are

preparing them for cultivation. Lands may be confiscated from those

who do not cultivate them; and given to others; or they may be

cultivated by village labourers (grámabhritaka) and traders

(vaidehaka), lest those owners who do not properly cultivate them

might pay less (to the government). The king shall regard with

fatherly kindness those who have passed the period of remission of

taxes. He shall carry on mining operations and manufactures, exploit

timber and elephant forests, offer facilities for cattle breeding and

commerce, construct roads for traffic both by land and water, and set

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up market towns (panyapattana). He shall also construct reservoirs

(sétu) filled with water either perennial or drawn from some other

source. Or he may provide with sites, roads, timber, and other

necessary things those who construct reservoirs of their own accord.

The same was applicable in the construction of places of pilgrimage

(punyasthána) and of groves. Whoever stays away from any kind of

cooperative construction (sambhúya setubhandhát) shall send his

servants and bullocks to carry on his work, shall have a share in the

expenditure, but shall have no claim to the profit. The king shall

exercise his right of ownership (swam yam) with regard to fishing,

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

(sétushu).”

2.4 LAW MAKING:

Kautilya held great reverence to law and order within the state.

The weights and measures were standardized and all merchants had to

comply with the same.

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

agreement”. For him, the element of transparency was the foremost in

an agreement. During this period, oral agreements were valid;

however, there had to be a voluntary witness to these agreements. The

witness had to be of a sound mind. The witness should not act under

provocation, anxiety or intoxication. Also, the witness could not be

those who had a criminal record.

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Kautilya advocated the importance of forming associations. All

contracts within the association were considered legal. He also laid

out laws for joint ventures and partnerships. The Arthashastra also

gives much importance to arbitrations and trials in courts.

An interesting point to be noticed is that Arthashastra had given

due importance to passports. Every citizen had to carry a passport and

this was applicable to the foreigners as well. Non compliance with this

law led to a fine or imprisonment.

2.5 UNFAIR TRADE PRACTICES:

Kautilya stressed on the importance of fair trade practices. He

also laid down fines for adulteration and supply of goods of an

inferior quality. Kautilya emphasised the need for guidelines in case

of professional services.

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

agreement as to time, place, and form of work, fulfil their

engagements. Those who postpone their engagements shall, except in

troubles and calamities, not only forfeit ¼th of their wages, but also

be punished with a fine equal to twice the amount of their wages.

They shall also make good whatever is thus lost or damaged. Those

who carry on their work contrary to orders shall not only forfeit their

wages, but also pay a fine equal to twice the amount of their wages.”

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He also established guidelines for medical practitioners.

According to Kautilya, “Physicians undertaking medical treatment

without intimating (to the government) the dangerous nature of the

disease shall, if the patient dies, be punished with the first

amercement. If the death of a patient under treatment is due to

carelessness in the treatment, the physician shall be punished with the

middle-most amercement. Growth of disease due to negligence or

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

or violence.”

He appointed three commissioners to maintain peace in the State.

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

Mauryan Empire.

2.6 CONSUMER PROTECTION:

Kautilya realised that the role of the State was to ensure that the

consumers were not violated. Standard weights and measuring devices

were used. They were made of materials that were not expandable

under the influence of heat; nor condensable under wet conditions.

Arthashastra prescribed how much to pay the merchants,

artisans, craftsmen and goldsmiths. It also listed the wages to be paid

for metal workers and builders. Kautilya even prohibited beggars and

other entertainers from moving about during the monsoons.

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The policy of consumer protection is evident in the

Arthashastra. According to it, “The Superintendent of Commerce shall

allow the sale or mortgage of any old commodities (purána

bhándanám) only when the seller or mortgagor of such articles proves

his ownership of the same. With a view to prevent deception, he shall

also supervise weights and measures. Difference of half a pala in such

measures as are called parimání and drona is no offence. But

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

Fines for greater differences shall be proportionally increased.”

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

or mortgages inferior as superior commodities, articles of some other

locality, as the produce of a particular locality, adulterated things, or

deceitful mixtures, or when he dexterously substitutes other articles

for those just sold (samutparivartimam), he shall not only be punished

with a fine of 54 panas but also be compelled to make good the loss”

Thus, one can conclude that Kautilya truly believed in the

phrase “Consumer is the King”.

2.7 MODERN GOVERNANCE:

One can see the stark similarities between the governance of the

Mauryan State and the governance that we are being promised today.

During the time of Kautilya, the villages were built from

scratch and not merely formed. In India, we don’ have that kind of a

27

mechanism. There are no towns or cities in India that have been

consciously developed with the exception of Jamshedpur to some

extent. If one compares the same with global cities like Shanghai or

Tokyo, we may find out that we lag behind.

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

clearly mentioned in the Arthashastra that the court would not allow a

person with a criminal background to appear as a witness. However,

in India, we see a lot of criminals not only standing as witnesses, but

also as governors and diplomats. This indeed raises a question mark

over the credibility of our judicial system.

The Consumer Protection Act has been enforced in India.

However, not many are getting access to the benefits of this act.

Unfair trade practices and adulteration is still rampant in India.

Speaking about diversity, one can say that the Indian State is

one of the most secular states in the world. We follow the principle of

Welfare State which was put to use by the British. However, it is

evident that this concept is much older than The Great Britain itself.

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3 TAXATION:

Taxation is an important part of governance. Means by which

governments finance their expenditure by imposing charges on

citizens and corporate entities. Although, principally, taxation should

be neutral in its effects on the different sectors of an economy,

governments use it to encourage or discourage certain economic

decisions. The Kautilyan State had a very adept mechanism for

taxation. Kautilya knew the importance of collecting the right amount

of taxes at the right time from the right people.

3.1 METHODOLOGY:

According to Kautilya, "Taxation should not be a painful

process for the people. There should be leniency and caution while

deciding the tax structure. Ideally, governments should collect taxes

like a honeybee, which sucks just the right amount of honey from the

flower so that both can survive. Taxes should be collected in small

and not in large proportions".

Kautilya advocated taxation on the basis of the income of the

person. The following taxes were identified by Kautilya:

Corporate Taxes : These taxes were collected from the guilds of

artisans and the merchants.

Income Taxes : These taxes were collected by farmers and

agriculturists as a part of their produce.

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Indirect Taxes : These were levied on liquor, slaughter houses,

mining, transportation, etc.

Land and Property Tax : These included taxes on houses,

agricultural or any other material property.

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

Entertainment Taxes : Gambling, entertainment, etc had to part

with a specific amount of taxes.

Special Taxes : These were levied during special occasions such

as wars, famines, draughts, etc.

Kautilya’s method of taxation involved the element of sacrifice

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

tax incentives.

3.2 AMOUNT OF TAXATION:

As discussed earlier, Kautilya believed in collecting minimal

taxes. Taxes had to be collected on the excesses left after expenses.

The income structure during the Mauryan Empire was as follows:

Taxable income has to be calculated on the following:

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

Normally, 1/6th of the income had to be paid in the form of

taxes.

Transferred Income : This is the income which has been

transferred to an individual. For instance, the wealth transferred

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to the son due to the death of his parents comes under

transferred income. 1/4th of this income had to be paid as taxes.

Miscellaneous Income : This category again had three

subdivisions. Which included recovery of previously written off

debts, realisable economies made in investment against planned

budgets any other value added income.

Every individual had to compulsorily maintain an account book

which had to be presented to the superintendent of commerce while

paying the taxes. Every transaction had to be recorded on the date of

transaction in the account book. Not maintaining such a book was

considered fraudulent and was punishable. Also, the accounting

system had to be uniform and as prescribed by the superintendent of

commerce from time to time.

3.3 EXEMPTIONS AND WAIVERS:

The Mauryan Empire had a very strict methodology for

collection of taxes. Though the collection amount was minimal, they

had a very effective mechanism for collection of taxes and this

ensured that the taxes were paid by every person on a timely basis.

However, the Mauryan State offered exemptions and waivers on

taxation. Some of the exemptions and tax waivers are as follows:

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

income due to the death of her husband is exempt from

taxation.

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In case of faulty rainfall or draught, agricultural produce is

exempted from taxation.

Taxes were exempted for soldiers with exemplary record.

Taxes were also exempted in case of serious medical illness.

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

These are a few of the cases where taxes were exempted. This

is indeed a testimony to the fact that Kautilya respected humanity and

acknowledged the efforts and pains of the citizens.

3.4 THE MODERN METHODOLOGY OF TAXATION :

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

structure, comprising the Union Government, the State Governments

and the Urban/Rural Local Bodies. The power to levy taxes and duties

is distributed among the three tiers of Governments, in accordance

with the provisions of the Indian Constitution. The main taxes/duties

that the Union Government is empowered to levy are Income Tax

(except tax on agricultural income, which the State Governments can

levy), Customs duties, Central Excise and Sales Tax and Service Tax.

The principal taxes levied by the State Governments are Sales Tax

(tax on intra-State sale of goods), Stamp Duty (duty on transfer of

property), State Excise (duty on manufacture of alcohol), Land

Revenue (levy on land used for agricultural/non-agricultural

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

The Local Bodies are empowered to levy tax on properties (buildings,

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etc.), Octroi (tax on entry of goods for use/consumption within areas

of the Local Bodies), Tax on Markets and Tax/User Charges for

utilities like water supply, drainage, etc.

Since 1991 tax system in India has under gone a radical change, in

line with liberal economic policy and WTO commitments of the

country. Some of the changes are:

Reduction in customs and excise duties.

Lowering corporate Tax.

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

Personal Income Tax:

Individual income slabs are 0%, 10%, 20%, 30% for annual

incomes up to Rs 50,000, 50,000 - 60,000, 60,000 - 1,50,000 and

above 1,50,000 respectively.

Corporate Income Tax:

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

of 5%, where as for a foreign company (including branch/project

offices), it is @ 40% plus surcharge of 5%. An Indian registered

company, which is a subsidiary of a foreign company, is also

considered an Indian company for this purpose. 

Thus, one can say that the Mauryan system of taxation has been

instrumental in the formation of the modern Indian system of taxation.

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4 TRADE :

Kautilya’s policies of trade and commerce were exemplary to

say the least. Kautilya was of the opinion that trade was the most

important ingredient for a State’s prosperity. He laid emphasis on

foreign trade as well as on domestic trade.

4.1 DOMESTIC TRADE:

Domestic trade consists of trading within the countries amongst

the citizens. After agriculture, trading was considered to be the most

important occupation in the Mauryan Empire.

A] TRADE ROUTES:

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

maintaining trade routes connecting markets and industrial zones.

Apart from promoting trade by improving infrastructure, the state was

required to keep trade routes free of harassment by courtiers, state

officials, thieves and frontier guards. The law on dealings among

private merchants included:

(a) Selling on agency basis.

(b) Revocation of contracts between traders.

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(c) Traders traveling together and pooling their goods.

B] SAFETY OF GOODS IN TRANSIT:

It was also enjoined upon the frontier officers to ensure the safe

passage of the merchandise and to make good any loss incurred.

Responsibility to recompense loss to traders vested with the village

headman barring, of course, goods that were stolen or sent away.

Further if any property of trader was lost or driven away in an area

between villages, the person responsible was the Chief Superintendent

of Pastures, (CSP).

4.2 FOREIGN TRADE:

Kautilya was of the opinion that foreign trade was most

necessary for the growth of national economy. He was probably the

first person to envisage the concept of a ‘nation’.

Kautilya imposed a few restrictions on foreign trade. Foreign

traders had to pay a sum of money in order to carry out business in the

state. The foreign policy of Kautilya was really one of the

distinguishing factors of Arthashastra.

Kautilya considered the foreign businessmen as threats to the

kingdom. According to him, they should not be given the same status

as the local traders. He gave incentives for local traders exporting

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their products. He strongly encouraged foreign trade, basing it on the

premise that for a successful trade contract to be established, it had to

be beneficial to all.

A] TRADE AND REVENUE:

Trade was conducted as a revenue generator in the Kautilyan

era. It was mostly carried out by he State and private trade was

allowed in areas other than the ones in which the State had a

monopoly. The revenues raised through trading went partly to finance

the army and to expand the territories.

Revenue from foreign trade was divided into three sources:

Land Revenue: The land revenue was fixed at 1/6 th of the share

of the produce from the land.

Import Duties: Import duties on foreign goods were roughly

around 20% of their value. These also constituted revenue to

the State.

Miscellaneous Levies: These consisted of tolls, road cess, ferry

charges, etc.

B] IMPORTS:

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

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

countryside.

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Rome was the major trading partner in the Mauryan Empire.

Wine, chemicals, high quality pottery, alloys, gold and silver, spices,

etc were imported from Rome. This trade was very favourable for The

Mauryan Empire.

Traders were given the following incentives:

Local merchants who brought in foreign goods by caravans or

water routes were exempted from taxes so that they could enjoy

profits. Thus, entrepreneurship was encouraged during the Mauryan

Empire.

Foreign merchants were not allowed to be sued by any parties

for a commercial dispute. The local partner was however allowed to

be sued. Thus the liability was always on the citizens to ensure fair

trade practices.

The threshold limit on profit was also indicated. The

permissible profit margin on imported goods was 10%.

C] EXPORTS:

Foreign trade was conducted on a barter basis. Exports were

carried out by the State Trading Office. It determined the level of

expenses for exports. The State also provided for the share of profits

payable to the foreign king. All the expenses were calculated and the

profitability of the trade was determined.

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Arthashastra encouraged profitable trading. It was not

conducive towards trading which resulted in losses. Kautilya

emphasized on the importance of using trade to create alliances with

strong nations. Many Indian crops, spices, fabric were exported to

Rome and other countries.

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

produce as compared with that of foreign produce that can be obtained

in barter, the superintendent will find out (by calculation) whether

there is any margin left for profit after meeting the payments (to the

foreign king) such as the toll (sulka), road-cess (vartaní), conveyance-

cess (átiváhika), tax payable at military stations (gulmadeya), ferry-

charges (taradeya), subsistence to the merchant and his followers

(bhakta), and the portion of merchandise payable to the foreign king

(bhága). If no profit can be realised by selling the local produce in

foreign countries, he has to consider whether any local produce can be

profitably bartered for any foreign produce. Then he may send one

quarter of his valuable merchandise through safe roads to different

markets on land. In view of large profits, he (the deputed merchant)

may make friendship with the forest guards, boundary-guards, and

officers in charge of cities and of country-parts (of the foreign king).

He shall take care to secure his treasure (sára) and life from danger. If

he cannot reach the intended market, he may sell the merchandise (at

any market) free from all dues (sarvadeyavisuddham).”

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4.3 MODERN TRADE POLICIES:

In recent times there has been considerable research about trade

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

Kautilya’s views on trade reflected that he grasped among other things

a point that is extremely relevant even in the present era of globalized

commerce and trade. That is: There is no autonomous mechanism that

will ensure that a nation would benefit from trade in the absence of

certain safeguards and policy measures.

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

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

restoration for any loss caused by its failure. At the same time, traders

were prevented from oppressing people. This clearly shows that the

welfare of the people was uppermost in the mind of the king.

The connotations of harassment and obstacles to trade may

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

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

to be accounted for in certain sectors underscore that safeguards are

essential even in current times and those responsible for managing

these measures should be responsible. Furthermore, Kautilya was

cognizant of the fact that the terms of trade were not just dependent on

the economics but also on other various parameters. The traders had to

keep in mind the political or strategic advantages in exporting or

importing from a particular country. The proliferation of free trade

agreements in recent times underscores this point because there is a

definite political dimension to trade treaties and agreements.

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5 BANKING, CO-OPERATIVES AND RISK

MANAGEMENT:

Banking and insurance sectors have always been the catalysts

of economic development. It was more or less the same during the

reign of Chandragupta Maurya. Arthashastra indicates that the

banking sector was very much developed during the Mauryan Empire.

5.1 RISKS AND UNCERTAINTIES:

Kautilya was of the opinion that higher levels of risk and

uncertainty had to be compensated with higher levels of profits. This

could be seen in the trade policy of Kautilya. He allowed 10% profits

on imports while allowing only 5% on local trade. This was because

imports not only required a high amount of locked-up capital, but also

there was a risk of goods getting stolen or damaged in transit.

Kautilya provides for different rates of interest for different

sections of the society. According to the Arthashastra, “An interest of

a pana and a quarter per month per cent is just. Five panas per month

per cent is commercial interest (vyávaháriki). Ten panas per month

per cent prevails among forests. Twenty panas per month per cent

prevails among sea-traders (sámudránám). Persons exceeding, or

causing to exceed the above rate of interest shall be punished with the

40

first amercement; and hearers of such transactions shall each pay half

of the above fine.”

5.2 PRIVATE SECTORS VERSUS PUBLIC SECTORS:

In case of risk management, Kautilya had a centralized control

over all the transactions. Almost all the transactions relating to

insurance were taken care of by the state. However, this responsibility

was also taken up by landlords. The landlords though had to abide

with the interest rates prevalent in the economy.

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

interests to the state. They were also entitled to a limit on the amount

of money they lent. The private money lenders could also take up the

risk for investments in merchandise. This right to take up money

lending was granted only to people with enough income to dispose off

and they have to be people of good character.

On the other hand, the government treasury also undertook the

work of insuring and managing risks. They gave money only to the

needy and to people of good character. Thus, it has to be said that

Kautilya managed both, the private and the public sector in risk

management ably.

5.3 LOANS AND RATE OF INTEREST:

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Kautilya distinguished six different kinds of interests:

compound interest, periodical interest, stipulated interest, daily

interest, and the use of a pledged article. Indeed the idea of expressing

interest as a percent originated in India.

According to Kautilya, “The nature of the transactions between

creditors and debtors, on which the welfare of the kingdom depends,

shall always be scrutinized. Interest in grains in seasons of good

harvest shall not exceed more than half when valued in money.

Interest on stocks (prakshepa) shall be one-half of the profit and be

regularly paid as each year expires. If it is allowed to accumulate

owing to the intention or to the absence of the receiver or payer, the

amount payable shall be equal to twice the share or principal

(múlyadvigunah). A person claiming interest when it is not due, or

representing as principal the total amount of his original principal and

the interest thereon shall pay a fine of four times the amount under

dispute (bandhachaturgunah).”

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

affecting the rate of interest, methods of calculating interest and

circumstances under which interest may not be calculated by the

lenders. Interest rates varied from 1.25% to 2% per month. The rate of

interest depended upon the risk involved and the potential

productivity of the money borrowed. The highest rate of interest was

20% per month and was charged to those involved in overseas trade as

the risk involved in this transaction was the maximum. It can be said

that the Kautilyan system of lending was very effective and even

modern.

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5.4 GUILDS AND INSURANCE:

Kautilya also attributes a greater rate of interest to debts taken

by a group of individuals. Since the group would share the burden of

interest, it would not be heavy on one individual. Moreover, the group

was in a position of to pay high interest since it was involved in larger

projects with a greater profit margin. However, the creditors could not

charge an interest not approved by the state.

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

misery, who can give instructions to artisans, who can be trusted with

deposits, who can plan artistic work after their own design, and who

can be relied upon by guilds of artisans, may receive the deposits of

the guilds. The guilds (srení) shall receive their deposits back in time

of distress.”

5.5 PRESENT SCENARIO:

Kautilya distinguished six different kinds of interests:

compound interest, periodical interest, stipulated interest, daily

interest, and the use of a pledged article. Prior to liberalization these

two sectors were controlled and regulated by the government.

Nationalized banks and insurance companies had a firm grip over the

market. Because of liberalization, the banking and insurance industry

43

opened up for private participation. The following are the reforms

made in the banking and the insurance sectors respectively in India.

A] Banking Sector:

The three major changes in the banking sector after

liberalization are:

Step to increase the cash outflow through reduction in the statutory

liquidity and cash reserve ratio.

Nationalized banks including SBI were allowed to sell stakes to

private sector and private investors were allowed to enter the

banking domain. Foreign banks were given greater access to the

domestic market, both as subsidiaries and branches, provided

the foreign banks maintained a minimum assigned capital and

would be governed by the same rules and regulations governing

domestic banks.

Banks were given greater freedom to leverage the capital markets

and determine their asset portfolios. The banks were allowed to

provide advances against equity provided as collateral and

provide bank guarantees to the broking community.

B] Insurance sector:

The Insurance Regulatory and Development Authority Act

1999 (IRDA Act) allowed the participation of private insurance

companies in the insurance sector. The primary role of IRDA was to

44

safeguard the interest of insurance policy holders, to regulate, promote

and ensure orderly growth of the insurance industry. Some of the

prominent insurance companies are:

Bajaj Allianz Insurance Corporation

Birla Sun Insurance Co. Ltd.

HDFC Standard Insurance Co. Ltd.

ICICI Prudential Insurance Co. Ltd.

Max New York Insurance Co. Ltd.

Tata AIG Insurance Co Ltd.

C] Future Trends:

Globally outsourcing industry would continue to grow.

Following the success of US and UK, more countries in the

European Union would outsource their business.

Technological power shift from the West to the East as India

and China emerge as major players..

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

management with the modern system, one could see many

similarities. However, the Kautilyan ideology of keeping a threshold

over the amount of lending is the highlight in this section. It shows

that such a system was prevalent in India around 3000 years ago. The

government of U.S.A. would have, in all probability, not fallen into

the economic depression or the sub-prime crisis, had they read the

Arthashastra.

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6. AGRICULTURE AND IRRIGATION

MANAGEMENT:

Agriculture was the most important economic activity. Kautilya

was of the view that cultivable land is better than mines because

mines fill only the treasury while agricultural production fills both

treasury and store houses. Agriculture has always been the backbone

of Indian economy. Agriculture requires irrigation facilities to survive.

This has given rise to the irrigation sector. Hence, both go hand in

hand.

6.1 THE MAIN ACTIVITY OF THE STATE:

According to the Arthashastra, agriculture, cattle-rearing and

commerce were the three main occupations in the State. In fact,

Kautilya was of the opinion that a king must also learn agriculture.

Agriculture was the major constituent of the Mauryan economy.

Kautilya had appointed a minister to look after the agricultural sector

in the economy.

6.2 SUPPORTS TO AGRICULTURE:

Kautilya insisted in developing villages and creating an

agrarian economy. Kautilya supported agriculture at all costs. This is

evident from the following extract:

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“Possessed of the knowledge of the science of agriculture

dealing with the plantation of bushes and trees

(krishitantragulmavrikshsháyurvedajñah), or assisted by those who are

trained in such sciences, the superintendent of agriculture shall in time

collect the seeds of all kinds of grains, flowers, fruits, vegetables,

bulbous roots, roots, fiber producing plants, and cotton. He shall

employ slaves, labourers, and prisoners (dandapratikartri) to sow the

seeds on crown-lands which have been often and satisfactorily

ploughed. The work of the above men shall not suffer on account of

any want in ploughs (karshanayantra) and other necessary instruments

or of bullocks. Nor shall there be any delay in procuring to them the

assistance of blacksmiths, carpenters, borers (medaka), rope makers,

as well as those who catch snakes, and similar persons.”

Thus, one can say that Kautilya indicated that agriculture

should receive policy and administrative support from the government

officials.

6.3 METEOROLOGY:

Weather forecasting was of prime importance in the Mauryan

Empire. The forecast or rain was made by observing the planetary

motion and the rise and appearance of the Sun. In the Mauryan Era, a

good rainy season was when one-third of the annual rainfall occurs in

the beginning and at the end of the season and two-thirds in the

middle.

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

the country of jángala is 16 dronas; half as much more in moist

countries (anúpánám); as to the countries which are fit for agriculture

(désavápánam);--13½ dronas in the country of asmakas; 23 dronas in

avantí; and an immense quantity in western countries (aparántánám),

the borders of the Himalayas, and the countries where water channels

are made use of in agriculture (kulyávápánám). When one-third of the

requisite quantity of rain falls both during the commencement and

closing months of the rainy season and two-thirds in the middle, then

the rainfall is (considered) very even (sushumárúpam). A forecast of

such rainfall can be made by observing the position, motion, and

pregnancy (garbhádána) of the Jupiter (Brihaspati), the rise and set

and motion of the Venus, and the natural or unnatural aspect of the

sun. From the sun, the sprouting of the seeds can be inferred; from

(the position of) the Jupiter, the formation of grains (stambakarita) can

be inferred; and from the movements of the Venus, rainfall can be

inferred. Three are the clouds that continuously rain for seven days;

eighty are they that pour minute drops; and sixty are they that appear

with the sunshine-this is termed rainfall. Where rain, free from wind

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

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

Thus, one ac conclude that there was a very efficient

mechanism for meteorology during the Kautilyan Era. Agriculture

was solely dependent on weather and one had to maintain an alert

forecasting of meteorological conditions.

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6.4 CROPPING PATTERN:

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

less, the superintendent shall sow the seeds which require either more

or less water. Sáli (a kind of rice), vríhi (rice), kodrava (Paspalum

Scrobiculatum), tila (sesame), priyangu (panic seeds), dáraka, and

varaka (Phraseolus Trilobus) are to be sown at the commencement

(púrvávápah) of the rainy season. Mudga (Phraseolus Mungo), másha

(Phraseolus Radiatus), and saibya are to be sown in the middle of the

season. Kusumbha (safflower), masúra (Ervum Hirsute), kuluttha

(Dolichos Uniflorus), yava (barley), godhúma (wheat), kaláya

(leguminous seeds), atasi (linseed), and sarshapa (mustard) are to be

sown last. Or seeds may be sown according to the changes of the

season. Fields that are left unsown (vápátiriktam, i.e., owing to the

inadequacy of hands) may be brought under cultivation by employing

those who cultivate for half the share in the produce (ardhasítiká); or

those who live by their own physical exertion (svavíryopajívinah)

may cultivate such fields for ¼th or 1/5th of the produce grown; or

they may pay (to the king) as much as they can without entailing any

hardship upon themselves (anavasitam bhágam), with the exception of

their own private lands that are difficult to cultivate.”

It also states, “The superintendent shall grow wet crops

(kedára), winter-crops (haimana), or summer crops (graishmika)

according to the supply of workmen and water. Rice-crops and the

like are the best (jyáshtha, i.e., to grow); vegetables (shanda) are of

intermediate nature; and sugarcane crops (ikshu) are the worst

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(pratyavarah, i.e., very difficult to grow), for they are subject to

various evils and require much care and expenditure to reap. Lands

that are beaten by foam (phenághátah, i.e., banks of rivers, etc.) are

suitable for growing vallíphala (pumpkin, gourd and the like); lands

that are frequently over flown by water (paríváhánta) for long pepper,

grapes (mridvíká), and sugarcane; the vicinity of wells for vegetables

and roots; low grounds (hariníparyantáh) for green crops; and

marginal furrows between any two rows of crops are suitable for the

plantation of fragrant plants, medicinal herbs, cuscus roots (usínara),

híra, beraka, and pindáluka (lac) and the like. Such medicinal herbs as

grow in marshy grounds are to be grown not only in grounds suitable

for them, but also in pots (sthályam).”

Thus, the cropping pattern during the Mauryan Empire has been

exhaustively dealt with, in the Arthashastra.

6.5 IRRIGATION:

Kautilya believed that irrigation was the major supporter for

agriculture. He therefore laid stress on the establishment of many

irrigation facilities within the State. He also established rules for

building tanks and dams.

According to the Arthashastra, “Irrigational works (sétubandha)

are the source of crops; the results of a good shower of rain are ever

attained in the case of crops below irrigational works.”

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

the centre of a river, and on a mountain, that which is mentioned later

is of more advantage than the one previously mentioned; of

irrigational works (sétubandha), that which is of perennial water is

better than that which is fed wit water drawn from other sources; and

of works containing perennial water, that which can irrigate an

extensive area is better.”

Any one hiring, leasing or sharing water works could use them

with a pledge to keep it clean and safe. They could also give it to

others for use by holding a part of the produce.

6.6 AGRICULTURAL TAXATION:

Kautilya was against excessive taxation. It held nominal taxes

like 1/6th, 1/8th or 1/10th of the produce. However, it depended on the

annual production and the nature of the produce.

According to Arthashastra, “In case of construction of new

works such as tanks, lakes, etc; taxes on the lands below such tanks)

shall be remitted for five years (Panchavárshikah parihárah). For

repairing neglected or ruined works of similar nature, taxes shall be

remitted for four years. For improving or extending water-works,

taxes shall be remitted for three years. In the case of acquiring such

newly started works by mortgage or purchase, taxes on the lands

below such works shall be remitted for two years. If uncultivated

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tracts are acquired (for cultivation) by mortgage, purchase or in any

other way, remission of taxes shall be for two years. Out of crops

grown by irrigation by means of wind power or bullocks

(vátapravartimanandinibandháyatana) or below tanks, in fields, parks,

flower gardens, or in any other way, so much of the produce as would

not entail hardship on the cultivators may be given to the Government.

Persons, who cultivate the lands below tanks, etc., of others at a

stipulated price (prakraya), or for annual rent (avakraya), or for certain

number of shares of the crops grown (bhága) or persons who are

permitted to enjoy such lands free of rent of any kind, shall keep the

tanks, etc., in good repair; otherwise they shall be punished with a fine

of double the loss. Persons, letting out the water of tanks, etc., at any

other place than their sluice gate (apáre), shall pay a fine of 6 panas;

and persons who recklessly obstruct the flow of water from the sluice-

gate of tanks shall also pay the same fine.”

6.7 SUSTAINABLE AGRICULTURE :

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

to mist and heat (tushárapáyanamushnam cha) for seven nights; the

seeds of kosi are treated similarly for three nights; the seeds of

sugarcane and the like (kándabíjánam) are plastered at the cut end

with the mixture of honey, clarified butter, the fat of hogs, and cow

dung; the seeds of bulbous roots (kanda) with honey and clarified

butter; cotton seeds (asthibíja) with cow dung; and water pits at the

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root of trees are to be burnt and manured with the bones and dung of

cows on proper occasions.”

Apart from being the major income provider, agriculture was also the

livelihood of many during the Mauryan Era. Most of the farmers

carried out subsistence farming and hence, agriculture was the driving

force of the Mauryan Empire. That is why Kautilya laid more

emphasis on agriculture than any other occupation.

6.8 PRESENT SCENARIO:

Government procurement policy, which guarantees a minimum

price for rice and wheat crops to farmers, has created a bias in their

favor and a distortion of cropping pattern, which is not market

determined. At times, these procurement policies result in such

surpluses of food grain that, given inadequate storage facilities for

them, the beneficiaries of food subsidies are Indian rats.

Professionalizing agriculture, especially for large farms, would be

needed with professionally trained managers able to study global

movement of prices, modern farming techniques and use of

technologies such as satellite farming. Courses on farm management

need to be more widespread. Similarly, agriculture is completely out

of the purview of the tax regime in India. The agricultural sector that

has been given a priority status for bank lending gets completely de-

prioritized for taxation. As against this, the Arthashastra has

highlighted the significance of taxes on agriculture and allied

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activities (though it was one of the sole major sectors contributing to

state welfare).

The importance of irrigation and providing amenities could be taken

up on a priority basis. The agricultural economy that has to compete

with the international market continues to be at the mercy of the

vagaries of the monsoon. Although India had the second largest

irrigated area in the world, the area under assured irrigation drainage

is inadequate. Some land, which was fertile earlier, has become fallow

because of inadequacy of fertilizers or the incorrect usage of

fertilizers. Emphasis on organic farming, which obviates the need to

use chemical fertilizers, is an obvious alternative. Given the fact that

India has one of the natural factories for organic manure, one wonders

why organic farming has not yet got the attention it deserves.

Furthermore, this would also help to prevent slaughter of cattle

because if their manure provides a revenue stream to the farmer, he

would be averse to slaughtering them. Systematic cropping pattern

and irrigation system followed by the Kautilya Raj is what experts

need to recognize. Farmers and consumers would benefit if all

agricultural production were produced by ecologically sound and

sustainable means. Pricing and marketing of agro products and

providing adequate infrastructure to the agricultural sector are crucial.

Evidently, as in other spheres, many of the principles enumerated in

the Arthashastra are applicable to the agricultural sector in India.

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7 PUBLIC SECTOR MANAGEMENT:

Kautilya believed in strengthening the public sector. He wanted

the kingdom to follow the dictates of a strong centralized power.

However, Kautilya has warned against the demerits of such

centralization. He was of the belief that people should be given rights

and responsibilities such that they actively participate in the

maintenance of the kingdom. Thus, Kautilya believed in a mixed

economy, though the centre vested some important powers.

7.1 THE ROLE OF PUBLIC SECTOR:

The main role of the public sector was maintaining the well

being of the nation. The public sector was supposed to hold all the

important economic posts in the kingdom. The public sector also

acted as a regulator of all economic activities in the society. It does

not mean that the private sector did not have a role to play. The

private sectors were free to carry out their transactions. However, they

had to intimate the state before any such activity took place. The state

allowed many private sectors to bloom and flourish. This was done

under the surveillance of the public sector which was run by the State.

Also, the public sector did not allow all private players to take

part in the economy. The private players were given permission only

after proper scrutiny of the character and ability of the individual(s).

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7.2 INDUSTRIES IN PUBLIC SECTOR:

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

hence consisted of the public sector. The following activities or

businesses were predominantly under the control of the State:

Land : All barren and unoccupied lands were controlled by the

state. The ownership of unclaimed land was with the state. The

State regularly leased land for peasants and the underprivileged

for farming, for setting up businesses or for building

settlements. He tenants had to pay a nominal sum of money to

the state as fees.

Mining and Fishing : These were predominantly controlled by

the State. However, the State also allowed private sectors to

carry out this trade by paying a trade tax to the State.

Salt Pans : Salt pans worked under the complete authority of the

State. A Salt superintendent was also appointed for controlling

this activity.

Liquor and Gambling : Manufacture and sale of liquor and the

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

Any person involved in this was severely punished

Animal Husbandry : The State allowed Animal Husbandry to

the private sector. However, the State even volunteered to take

care of animals and cattle for a sum or a fee.

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Forestry and Mining : Forestry and mining were monopolies of

the State. Forest superintendents were appointed by the State

who grew and maintained forests. Mining was a major activity

of the State.

Manufacture : Apart from weapon making and liquor brewing,

all other manufacturing activities were handed over to private

sectors, though the State regulated and controlled the working

of these manufacturing activities.

7.3 PUBLIC SECTOR IN INDIA:

India is a mixed economy where the public and the private

sectors go hand in hand. Public sectors were a monopoly in many

activities. However, as an effect of liberalization, the power is divided

among the private sectors as well.

Integration of Indian economy with global markets has thrown

up new opportunities and challenges. Some of the public sector

enterprises with strategic vision are actively exploring new avenues

and have increased their activities to go in for mergers, acquisitions,

amalgamations, takeovers and for creating new joint ventures. The

Navratna CPSEs, which enjoy greater autonomy to incur capital

expenditure and enter into joint ventures in India and abroad should

avail of these opportunities for rapid growth overseas. Acquisitions,

JVs and green field projects in Petroleum Sector have already taken

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place and are under active consideration in Power, Coal and Mining

Sectors.

Another important initiative towards re-structuring of pubic sector

enterprises is ‘Disinvestment’ in select CPSEs. The Statement of

Industrial Policy of 1991 stated that in the case of selected enterprises,

part of Government holdings in the equity share capital of these

enterprises will be disinvested in order to provide further market

discipline to the performance of public enterprises.

Some CPSEs have been such as Videsh Sanchar Nigam Ltd. (VSNL),

Indian Petrochemicals Corporation Ltd. (IPCL), Maruti Udyog

Limited (MUL), CMC Ltd., etc. have been privatized. In addition,

there are CPSEs which have been acquired by other CPSEs by way of

disinvestment and open bidding such as acquisition of IBP by Indian

Oil Corporation Limited. There are also instances of acquisition of

private firms by CPSEs as in the case of MRPL, which was a joint

sector company and became a CPSE subsequent to acquisition of its

majority shares by ONGC.

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8. HUMAN RESOURCES MANAGEMENT:

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

his theories on managing Human Resources. Arthashastra boasts of

having a well defined Human Resource Management structure written

around 2400 years ago. Human resource is a term used to describe the

individuals who comprise the workforce of an organization, although

it is also applied in labour economics too; for example, business

sectors or even whole nations.

In simple terms, an organization's human resource management

strategy should maximize return on investment. Human Resources

seeks to achieve this by aligning the supply of skilled and qualified

individuals and the capabilities of the current workforce, with the

organization's ongoing and future business plans and requirements to

maximize return on investment and secure future survival and success.

In ensuring such objectives are achieved, the human resource function

purpose in this context is to implement the organization's human

resource requirements not only effectively but also pragmatically;

taking account of legal, ethical and is practical in a manner that retains

the support and respect of the workforce.

Key functions:

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Human Resources may set strategies and develop policies, standards,

systems, and processes that implement these strategies in a whole

range of areas. The following are typical of a wide range of

organizations:

Recruitment and selection.

Organizational design and development.

Business transformation and change management.

Performance, conduct and behaviour management.

Industrial and employee relations.

Human resources (workforce) analysis and workforce personnel

data management.

Compensation, rewards, and benefits management.

Training and development (learning management).

Implementation of such policies, processes or standards may be

directly managed by the HR function itself, or the function may

indirectly supervise the implementation of such activities by

managers, other business functions or via third-party external partner

organizations. Applicable legal issues, such as the potential for

disparate treatment and disparate impact, are also extremely important

to HR managers.

8.1: WINNING PEOPLE / LURING PEOPLE:

Arthashastra identifies four kinds of people who could be lured;

the angry, the timid, the greedy and the proud. Kautilya believes that

these are the four basic behaviours which could lead to one’s

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downfall. The body of an individual is controlled by his mind. It takes

many forms like anger, fear, greed and pride. To fulfill its desires, the

mind succumbs to illusions and temptations posed by the

surroundings. Thus, these four are the primary vices of the senses

which have to be exploited by the King.

To exploit these behaviours, the King has to identify these

behaviours.

A] The group of the enraged:

This group includes the following people:

The one who is cheated/denied after being promised certain

rewards (increment in pay, status etc).

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

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

challenged to a particular assignment. This will particularly

happen in the organizations, which have a focus just on the

results and not on the efforts that a person puts.

The one who is distressed after being transferred to a far-flung

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

person is willing to take on the transfer but is not remunerated

properly, and another possibility is that the person is not willing

to take on such a transfer but is forced to do so.

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The one who is on an assignment not by his choice and not of his

choice. That is, being put on an assignment without even being

motivated for it. It could be something, which is away from the

promised career path of an employee - something that definitely

adds value to the organization but not to the employee.

The one who has not achieved his objective in the organization

even after trying hard and giving his best service. This could be

because of a fault in the culture of that organization. For

example at times we see that even after being trained for a

purpose the employee is not able to add enough to his function -

the answer could lie with the fact that the employee hasn't learnt

much, his fault. But what concerns us here is that even though

willingness is there to perform but the culture hinders that

performance.

The one who is hindered from doing his duty. It may be because of

paucity of time, or because responsibility given is not

complemented with required authority.

The one whose remuneration (financial and non-financial) is

incommensurate with the efforts he puts in.

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

especially happen if there is delayed or no promotion (job

enrichment), and/or delayed or no inter-functional or to that

extent even intra-functional movement (job enlargement).

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B] The group of the frightened:

They are because they have the fear of loosing something. The

people under this category are as follows:

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

pushed himself up by pulling other(s) down.

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

detrimental to the organization.

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

might be done in a personal capacity and not a professional one.

The one frightened by the punishment meted out to another for

a like offence.

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

The one who is subdued by authority.

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

expense of the organization.

The one disliked by his superiors.

The one who entertains hostility towards superiors or the

organization itself.

C] The group of greedy:

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

are as follows:

The one who is impoverished (for

money/respect/opportunities). Such people want to grow really

fast in their organizations.

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

recurring actions.

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

and professional.

The one indulging in rash transactions. Rashness of transactions

apparently involves a financial loss or expectation of a great

gain. Such a fellow will accept challenges rashly - without even

thinking whether they are achievable or not, greedy of being

noticed.

D] The group of proud:

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

category are as follows:

The one who is filled with self-conceit (self-importance, pride,

vanity, snobbery, arrogance).

The one who is desirous of honor.

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

is perceived a competitor or rival).

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

capable of being at a higher position in the hierarchy.

The one fiery in temper.

The one given to violence (physical, verbal or non verbal in

nature).

The one dissatisfied with his emoluments i.e. the one who

thinks that he is getting much less than what he deserves.

Now that we have identified such people who can be targeted

for the purpose of head hunting, following is the manner prescribed by

"Kautilya" to approach them.

A] To lure the enraged :

Reinforce perceptions that such people hold about their

organization by telling them, how their organization & managers lack

the eye of knowledge, commonsense and also the experience to see

what one is worth. Also explain to them the 'detrimental effects' that

such a behavior of their organization & managers can have on the

organization. Invite them then to join another organization to realize

their potential.

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B] To lure the frightened:

These people already have a sense of insecurity. Reinforce this

sentiment by warning them of a possible 'harm' that they stand from

their organization due to its own (incorrect) apprehension of being

harmed from them. Show them a safer haven where they can grow.

C] To lure the greedy:

Reinforce their desire by amplifying the fact that their

organization rewards those who are devoid of spirit, intelligence, and

eloquence, but not those endowed with qualities of the self, reinforce

the 'fact' that our organization has a culture of acknowledging &

rewarding persons of distinction, join us.

D] To lure the proud:

These people need to get their ego massaged. Approach them

by impressing upon them that their organization is fit for and is of

benefit to only people with lower qualities and people of little or no

intelligence or conviction or abilities; not for people of their standing.

Invite them to join an organization that 'knows' how to honor persons

of distinction, come to us. Professionals with years of experience can

build on the knowledge provided and use it to their good.

It however goes without saying that a lot of networking is

required to identify such people who display the behaviors described

above.

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8.2 WAGES AND INCENTIVES:

Kautilya recommended that the total amount of wages should

not exceed 1/4th of the State revenue. He used three criteria for

prescribing wages. He indicated that the wage should be high enough

to maintain the loyalty of the officials, to evoke the needed efficiency

and to reflect the relative importance of their occupation. He believed

in prescribing wages on the basis of skill and efficiency. The

following extracts from the Arthashastra explains the wage policy

during the Mauryan Empire:

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

and in time. When they spoil the work, they shall not only forfeit their

wages, but also pay a fine of twice the amount of their wages. When

they postpone work, they shall forfeit one-fourth the amount of their

wages and pay a fine of twice the amount of the forfeited wages.

Those women who can present themselves at the weaving house shall

at dawn be enabled to exchange their spinning for wages

(bhándavetanavinimayam).”

“Delay in paying the wages shall be punished with the middlemost

amercement. The same would be the case when wages are paid for

work that is not completed.”

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“Disputes regarding wages shall be decided on the strength of

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

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

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

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

wages shall be punished with a fine of 12 panas or of five times the

amount of the wages (panchabandho vá).”

“A servant neglecting or unreasonably putting off work for which

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

till the work is done. He who is incapable to turn out work, or is

engaged to do a mean job, or is suffering from disease, or is involved

in calamities shall be shown some concession or allowed to get the

work done by a substitute. The loss incurred by his master or

employer owing to such delay shall be made good by extra work.”

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

will not cause him to do the rest for which the latter may certainly be

ready, then also the unfinished portion of the work has to be regarded

as finished. But owing to consideration of changes that have occurred

in time and place or owing to bad workmanship of the labourer, the

employer may not be pleased with what has already been turned out

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by the labourer. Also the workman may, if unrestrained, do more than

agreed upon and thereby cause loss to the employer.”

8.3 SELECTION AND TRAINING:

Kautilya always believed in training and selecting people with

care. Kautilya was very keen in maintaining the level of efficiency

and loyalty among the employees. He selected employees with not

only expertise, but also exemplary discipline and character. The

following are Kautilya’ views on training and selection of people:

A] TRAINING:

Kautilya says, a large number of effete persons are better,

inasmuch as they can be employed to do other kinds of works in the

camp: to serve the soldiers fighting in battlefields, and to terrify the

enemy by its number. It is also possible to infuse spirit and

enthusiasm in the timid by means of discipline and training.

That army which is vast and is composed of various kinds of

men and is so enthusiastic as to rise even without provision and wages

for plunder when told or untold; that which is capable of applying its

own remedies against unfavourable rains; that which can be disbanded

and which is invincible for enemies; and that, of which all the men are

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of the same country, same caste, and same training, is (to be

considered as) a compact body of vast power. Such are the periods of

time for recruiting the army.

B] SELECTION:

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

king shall, by offering temptations, examine the character of ministers

(amátya) appointed in government departments of ordinary nature. Of

these tried ministers, those whose character has been tested under

religious allurements shall be employed in civil and criminal courts

(dharmasthaníyakantaka sodhaneshu); those whose purity has been

tested under monetary allurements shall be employed in the work of a

revenue collector and chamberlain; those who have been tried under

love-allurements shall be appointed to superintend the pleasure-

grounds (vihára) both external and internal; those who have been

tested by allurements under fear shall be appointed to immediate

service; and those whose character has been tested under all kinds of

allurements shall be employed as prime ministers (mantrinah), while

those who are proved impure under one or all of these allurements

shall be appointed in mines, timber and elephant forests, and

manufactories.”

“Teachers have decided that in accordance with ascertained

purity, the king shall employ in corresponding works those ministers

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whose character has been tested under the three pursuits of life,

religion, wealth and love, and under fear.”

8.4 CURRENT HR POLICIES AND MANAGEMENT:

Everybody in the professional life is affected in one way or the

other. The economic scenario because of US recession looks very

gloomy. The export market is under pressure due to low dollar rate.

Industries bogged down by strict Social Compliance/Human Rights

implementation strictly enforced by the buyers. Find lot of

retrenchments around the industry at one end and at the other end

there is lot of attrition. This is a challenging period of HR people.

In the current economic scenario every company is facing the

challenge of cost cutting to survive in the market, most of the well

known giants have already decided to lay off or retrench their human

capital like never before and the people from the companies who

don’t have taken this ultimate decision yet, living their days with an

anxiety that tomorrow they may get their pink slip, they are frequently

meeting the HR manager, if he has any shocked news for them, as a

result their performance is suffering.

So in that serious economic meltdown situation HR has a

crucial role to play. First, when the company has brought any heart

breaking news for its employee because HR has to declare the worst

decision to it's most valuable assets, that means there are so many

71

issues like legal and union (if any) which HR manager has to manage

tactfully and compensation part also need to be taken care of.

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9. LEADERSHIP:

Arthashastra has been summoned to the King by Kautilya.

Therefore, it gives more values on leadership than any other subject. It

how a king should behave and how he should not. It teaches a person

to become a king.

9.1 PRIMARY GOAL OF THE LEADER:

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

the philosophy of the organization. In the words of Kautilya, "In the

happiness of the subjects lays the happiness of the king and in what is

beneficial to the subjects his own benefit." Thus the king was a

constitutionalist who promoted the people's welfare at all times, in all

places and at all costs.

9.2 LEADERSHIP VALUES:

In order to achieve the primary goal of the organization,

Kautilya gives a list of values the leader has to possess which among

others include: (a) Piety; (b) Truthfulness; (c) Reliability; (d)

Gratefulness; (e) Liberality; (f) Promptness; (g) Freedom from vices;

(h) Long term vision; (i) Conduct in conformity with the advice of

elders. Apart from the above list of values Kautilya also gives

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reference to the values of the leader throughout his treatise. These

include:

‘The leader with his senses under control must avoid doing

injury to others, sloth, capriciousness, association with harmful

persons and any transaction associated with unrighteousness or harm.”

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

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

happiness.”

“The king should avoid even a big profit that would be

injurious to the subjects.”

9.3 BENEFITS OF A RIGHTEOUS LEADER:

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

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

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

to his special duties finds joy in this life". Further, "the king

who protects the subjects according to law earns spiritual

merit".

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Social benefits : The righteous leader establishes an

administration which leads to social benefits. "Administration

when rooted in the self discipline (of the leader) brings security

and wellbeing to all living beings. Such an administration

endows the subjects with spiritual wellbeing, material

wellbeing and happiness"

Management by example : A righteous leader sets an example

for other members of the organization. According to Kautilya,

"whatever character the king has, that character the constituents

come to have, being dependent on him in the matter of

energetic activity and remissness".

Loyalty of dependent members : A righteous leader gains the

loyalty and love of dependent members. According to Kautilya

"the subjects’ help the king who behaves justly but suffering

from a serious calamity" and "subjects support in every way the

weak but just king when attacked". Further "any king attacking

a righteous king is hated by his own people and by others".

Attraction of right talent and support : A righteous leader not

only passes on his qualities to others, but also attracts right

talent to further his mission.

Effects of an unrighteous leader : According to Kautilya, an

unrighteous leader not only ruins himself but ruins all his

constituent elements

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9.4 MAKING OF A LEADER:

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

of emphasis on the training of such a leader. Some of the methods of

value training included:

Study of scriptures

Association with elders

Advice of ministers

Formal instructions

The main areas of training in values included:

Self control

Removal of vices and developing a good character

Specific guidelines regarding the making of a good leader are given

throughout the Arthashastra. These include:

“Study of philosophy confers benefit on the people, keeps

the mind steady in adversity and prosperity and brings about

proficiency in thought, speech and action.”

“The prince should have constant association with elders in

learning for the sake of improving his training.”

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

the sciences, should be secured by giving up the six vices (lust, greed,

infatuation, pride, jealousy and foolhardiness). Absence of improper

sense indulgence gives such a control.”

“The king should set the preceptors or ministers as the

bounds of proper conduct for himself, who should restrain him from

occasions of harm or when the king is erring in private, should prick

him to do his duty.”

“The young price should be diverted from all evil and

should be instructed in what is conducive to spiritual wellbeing and

material wellbeing.”

9.5 SPIRITUAL LEADER:

The final aim of Kautilya was to provide the organization with

a leader who was ultimately guided by a spiritual way of life. Kangle

puts this as, "the fact that the king would be brought up to regard the

vedic (spiritual) way of life as sacred and the performance of his own

duties in accordance with that scheme of life as a means of achieving

spiritual ends would serve to make the king behave with moderation".

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9.6: CURRENT SCENARIO IN LEADERSHIP:

Kurt Lewin and colleagues identified different styles of

leadership. They are:

A. Autocratic.

B. Participative.

C. Laissez-Faire.

A] Autocratic or authoritarian style:

Under the autocratic leadership style, all decision-making

powers are centralized in the leader, as with dictator leaders. They do

not entertain any suggestions or initiatives from subordinates. It

provides strong motivation to the manager. It permits quick decision-

making, as only one person decides for the whole group and keeps

each decision to himself until he feels it is needed to be shared with

the rest of the group.

B] Participative or democratic style.

The democratic leadership style favours decision-making by the

group. They can win the co-operation of their group and can motivate

them effectively and positively. The decisions of the democratic

leader are not unilateral as with the autocrat because they arise from

consultation with the group members and participation by them.

C] Laissez-faire or free rein style:

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A free-rein leader does not lead, but leaves the group entirely to

itself. Such a leader allows maximum freedom to subordinates, i.e.,

they are given a free hand in deciding their own policies and methods.

Different situations call for different leadership styles. In an

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

where a designated authority has significantly more experience or

expertise than the rest of the team, an autocratic leadership style may

be most effective; however, in a highly motivated and aligned team

with a homogeneous level of expertise, a more democratic or laissez-

faire style may be more effective.

According to Dr. APJ Abdul Kalam, India requires

efficient leaders and not just managers of politicians. He believes that

leadership is a tool which could influence the population to act wisely.

A great leader is the need of the hour.

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10 CORPORATE SOCIAL RESPONSIBILITIES

AND CORPORATE GOVERNANCE:

10.1 CORPORATE SOCIAL RESPONSIBILITY:

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

the importance of working for the welfare of the whole society. This

concept was already followed by Kautilya. Corporate Social

Responsibility is the continuing commitment by business to behave

ethically and contribute to economic development while improving

the quality of life of the workforce and their families as well as of the

local community and society at large.

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

his happiness; in their welfare his welfare; whatever pleases himself

he shall not consider as good, but whatever pleases his subjects he

shall consider as good. Hence the king shall ever be active and

discharge his duties; the root of wealth is activity, and of evil its

reverse.”

Kautilya thus believed that the king has a responsibility towards

his subjects. This responsibility had to be fulfilled by the king to

ensure that the subjects are happy and prosperous. According to

Kautilya, “All activities proceed from the minister, activities such as

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the successful accomplishment of the works of the people, security of

person and property from internal and external enemies, remedial

measures against calamities, colonization and improvement of wild

tracts of land, recruiting the army, collection of revenue, and bestowal

of favour. Forts, finance, and the army depend upon the people;

likewise buildings, trade, agricu1ture, cattle-rearing, bravery, stability,

power, and abundance (of things). In countries inhabited by people,

there are mountains and islands (as natural forts); in the absence of an

expansive country, forts are resorted to. When a country consists

purely of cultivators, troubles due to the absence of fortifications (are

apparent); while in a country which consists purely of warlike people,

troubles that may appear are due to the absence of (an expansive and

cultivated) territory.”

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

appointing ministers, priests, and other servants, including the

superintendents of several departments, the application of remedies

against the troubles of his people, and of his kingdom, and the

adoption of progressive measures; when his ministers fall into

troubles, he employs others; he is ever ready to bestow rewards on the

worthy and inflict punishments on the wicked; when the king is well

off, by his welfare and prosperity, he pleases the people; of what kind

the king's character is, of the same kind will be the character of his

people; for their progress or downfall, the people depend upon the

king; the king is, as it were, the aggregate of the people.”

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10.2 CORPORATE GOVERNANCE:

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

processes, or laws by which businesses are operated, regulated, and

controlled. The term can refer to internal factors defined by the

officers, stockholders or constitution of a corporation, as well as to

external forces such as consumer groups, clients, and government

regulations.

Well-defined and enforced corporate governance provides a

structure that, at least in theory, works for the benefit of everyone

concerned by ensuring that the enterprise adheres to accepted ethical

standards and best practices as well as to formal laws. To that end,

organizations have been formed at the regional, national, and global

levels.

In recent years, corporate governance has received increased

attention because of high-profile scandals involving abuse of

corporate power and, in some cases, alleged criminal activity by

corporate officers. An integral part of an effective corporate

governance regime includes provisions for civil or criminal

prosecution of individuals who conduct unethical or illegal acts in the

name of the enterprise. It comes as no surprise that corporate

governance was first practiced by Kautilya. Attainment of good

governance entails that the objectives of the state are fulfilled and

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realized. This is possible through properly organized and guided

administration.

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

it is administered well. Kautilya suggests that good governance should

avoid extreme decisions and extreme actions. Soft actions (Sam,

Dam) and harsh actions (Dand, Bhed) should be taken accordingly.

Kautilya opines in a most modern way - ‘Sovereignty is practicable

only with the cooperation of others and all administrative measures

are to be taken after proper deliberations.’ The King and ministers

were supposed to observe strict discipline. Kautilya recommended a

strict code of conduct for himself and his administrators. Kautilya has

seriously considered the problem of corruption. He has listed, in the

Arthashastra, about forty ways of embezzling government funds.

However, Kautilya is very practical about the problem of corruption.

Kautilya feels that it is as difficult to discover the honesty or

otherwise of an officer as it is to find out whether or not it was the fish

that drank the water.

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

Even two and a half thousand years ago, Kautilya laid stress on

capping at a quarter of the revenue, the salaries of the King and his

officials. For good governance, all administrators, including the King,

were considered servants of the people. They were paid for the service

rendered and not for their ownership of anything. Compare this to the

expenses on salary of Government employees today which constitutes

over 50% of the revenue. Kautilya understood the link between the

salaries paid to government functionaries and their productivity.

83

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

of Kautilya equates political governance with economic governance.

The end is economic governance while political governance is a

means. Good governance is basic to the Kautilyan idea of

administration. Good governance and stability are inextricably linked.

If rulers are responsive, accountable, removable, recallable, there is

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

present democratic set up. Kautilya’s precepts may have been in the

context of the monarchical set up. However, present rulers and

administrators should be endowed with similar qualities. In countries

where they are, the progress has been meteoric

He gave emphasis on maintaining relationships between all the

parties in a transaction. He says, “The nature of the transactions

between creditors and debtors, on which the welfare of the kingdom

depends, shall always be scrutinized.”

10.3 THE MODERN ENVIRONMENT:

Corporate governance reform in India has focused primarily on

the "role and composition of the board of directors." (83). Each of the

three sets of recommendations (the CII Code recommendations from

1997, the Kumar Mangalam Birla Committee recommendations from

2000, and the Murthy Committee recommendations from 2003) has

advanced a more nuanced and sophisticated understanding of

corporate governance in this respect. For example, while the CII Code

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was silent on the financial-literacy levels expected of directors, (84)

the Murthy Committee recommended that companies train their

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

risk profile of the business parameters of the company." (85) Another

notable recommendation of the Murthy Committee was that the Audit

Committee be comprised entirely of "financially literate non-

executive members with at least one member having accounting or

related financial expertise.”

An approach for CSR that is becoming more widely accepted is

community-based development approach. In this approach,

corporations work with local communities to better themselves. In

Flower Valley they set up an Early Learning Centre to help educate

the community's children as well as develop new skills for the adults.

Marks and Spencer is also active in this community through the

building of a trade network with the community - guaranteeing regular

fair trade purchases. Often activities companies participate in are

establishing education facilities for adults and HIV/AIDS education

programs. The majority of these CSR projects are established in

Africa. JIDF for You is an attempt to promote these activities in India.

A more common approach of CSR is philanthropy. This

includes monetary donations and aid given to local organizations and

impoverished communities in developing countries. Some

organizations do not like this approach as it does not help build on the

skills of the local people, whereas community-based development

generally leads to more sustainable development.

85

Another approach to CSR is to incorporate the CSR strategy

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

procurement of Fair Trade tea and coffee has been adopted by various

businesses including KPMG. Its CSR manager commented, "Fair

trade fits very strongly into our commitment to our communities."[5]

Another approach is garnering increasing corporate

responsibility interest. This is called Creating Shared Value, or CSV.

The shared value model is based on the idea that corporate success

and social welfare are interdependent. A business needs a healthy,

educated workforce, sustainable resources and adept government to

compete effectively. For society to thrive, profitable and competitive

businesses must be developed and supported to create income, wealth,

tax revenues, and opportunities for philanthropy. CSV received global

attention in the Harvard Business Review article “Strategy & Society:

The Link between Competitive Advantage and Corporate Social

Responsibility” by Michael E. Porter, a leading authority on

competitive strategy and head of the Institute for Strategy and

Competitiveness at Harvard Business School; and Mark R. Kramer,

Senior Fellow at the Kennedy School at Harvard University and co-

founder of FSG Social Impact Advisors. The article provides insights

and relevant examples of companies that have developed deep

linkages between their business strategies and corporate social

responsibility. Many approaches to CSR pit businesses against

society, emphasizing the costs and limitations of compliance with

externally imposed social and environmental standards.

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11. SUGGESTIONS / RECOMMENDATIONS :

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

know the implications of Arthashastra for the future. Arthashastra

offers a wide perspective of seeing things that could still be put to use.

The issues in Arthashastra are relevant even in the modern world of

technology and speed.

One of the core themes of Arthashastra is that Kautilya equates

political governance with economic governance. The end is economic

governance while political governance is a means. Good governance

and stability are inextricably linked. If rulers are responsive,

accountable, removable, recallable, there is stability.

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

people everyday at least for one and a half hours, in India today it

takes a long time even to get a “hearing.”

In Kautilya’s state, the king could severely punish corrupt

officials, however highly they were placed. In India, those in political

office are rarely convicted even if they are corrupt or proved guilty of

committing certain offences.

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The policy suggested in Arthashastra attempts to strike a

balance between the delicate interests of the parties involved. Kautilya

indicates that although the state is in a privileged position of a

monopolist, it should co-operate with the private sector for proper

utilization of resources. Further, a strong private sector is a source of

strength to the State.

It is interesting to note that Kautilya tried to establish guidelines

for professional service providers also, including weavers, washer

men, boatmen, shipping agents, and even prostitutes.

Kautilya recommended an interventionist policy to counter a

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

there is an excessive supply of merchandise, the Superintendent shall

centralize its sale and prohibit the sale of similar merchandise

elsewhere before the centralized supply is disposed of.

Arthashastra’s advocacy to ‘tax the richer farmer maybe

something that needs to be done now when the Finance Minister is

trying to find ways to increase the tax to GDP ratio.

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Kautilya’s views on trade were: There is no autonomous

mechanism that will ensure that a nation would benefit from trade in

the absence of certain safeguards and policy measures. However, the

fact that anti-dumping measures exist or that cartelization has to be

coped with or adverse terms of trade have to be accounted for in

certain sectors underscore that safeguards are essential even in current

times and those responsible for managing these measures should be

responsible.

The political leaders have to set an example by adhering to high

standards of conduct and functioning. In contemporary times there

have been frequent reminders that it is not positions which sustain an

individual however powerful he/she maybe but the person concerned

that has to sustain power conferred not by abusing it but by using it in

a constructive manner for the people concerned.

Upward mobility in the hierarchy was based on merit,

suitability and fulfilling other qualifications laid down for these posts.

In a conflict between meritocracy and the political economy of

appointments, if the latter continues to be given precedence India’s

potential of becoming an economic superpower will remain untapped.

Arthashastra thus is very much relevant even today. It’s just a matter

of time before one embraces the ancient wisdom of Arthashastra and

starts to build a society which is self-sufficient and well developed.

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12 CONCLUSIONS:

According to Swami Vivekananda,

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

Where knowledge is free

Where the world has not been broken up into fragments

By narrow domestic walls

Where words come out from the depth of truth

Where tireless striving stretches its arms towards perfection

Where the clear stream of reason has not lost its way

Into the dreary desert sand of dead habit

Where the mind is led forward by thee

Into ever-widening thought and action

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

After learning the Arthashastra, one could see that the dream of a self

sufficient and magical nation was not lost on Kautilya too. The words may

be different, the style might be unorthodox, but the dream was the same, the

motive was only one- to build a nation that was truly a heaven.

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13. CASE STUDIES:

1) Flying Low:

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

an image of a monopoly gone berserk with the absolute power it had

over the market. Continual losses over the years, frequent human

resource problems and gross mismanagement were just some of the

few problems plagued the company. Widespread media coverage

regarding the frequent strikes by IA pilots not only reflected the

adamant attitude of the pilots, but also resulted in increased public

resentment towards the airline.

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

proper manpower planning and underutilization of existing

manpower. The recruitment and creation of posts in IA was done

without proper scientific analysis of the manpower requirements of

the organization. IA's employee unions were rather infamous for

resorting to industrial action on the slightest pretext and their arm-

twisting tactics to get their demands accepted by the management.

During the 1990s, the Government took various steps to turn around

IA and initiated talks for its disinvestment. Amidst strong opposition

by the employees, the disinvestment plans dragged on endlessly well

into mid 2001. The IA story shows how poor management, especially

in the human resources area, could spell doom even for Rs. 40 billion

monopoly. IA could blame many of its problems on competitive

91

pressures or political interference; but it could not deny responsibility

for its human resource problems.

Frequent agitations were not the only problem that IA faced in the

area of human resources. There were issues that had been either

neglected or mismanaged. For instance, the rates of highly subsidized

canteen items were not revised even once in three decades and there

was no policy on fixing rates. Various allowances such as out-of-

pocket expenses, experience allowance, simulator allowance etc. was

paid to those who were not strictly eligible for these. Excessive

expenditure was incurred on benefits given to senior executives such

as retention of company car, and room air-conditioners even after

retirement. All these problems had a negative impact on divestment

procedure. This did not augur well for any of the parties involved, as

privatization was expected to give the IA management an opportunity

to make the venture a commercially viable one. Freed from its

political and social obligations, the carrier would be in a much better

position to handle its labor problems. The biggest beneficiaries would

be perhaps the passengers, who would get better services from the

airline.

SUGGESTIONS FOR IMPROVEMENT FROM THE POINT

OF VIEW OF ARTHASHATRA:-

According to Kautilya, one must keep one’s employees happy all the

time. The employees who have discontent may show the four

characteristics:

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Anger : Kautilya says that angry people could be lured by

pacifying. They must be given new avenues to unlock their potential.

They must be explained about the detrimental effects, their behaviour

could have on the organization and on themselves. Their anger must

be channelised by making them produce better results.

Fear : The fearful are easy to lure. One has to tell them about the

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

then be given a feel of security so that they are willing to bend

themselves and work accordingly.

Pride : One must soothe the egos of the proud. More than

money, they care about their position and esteem. They could be

given new posts and could be a sense of respect. The proud people

would yield in once their egos are massaged.

Greed : The greedy people must be given what they don’t desire.

By doing this, their greed would be controlled. For instance, a person

who seeks increase in salary could be given more incentives. This

would help the person to forget about the salary and focus on

productivity.

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

unrest. However, it does not mean that the employees should not be

given fair wages. Kautilya has always stressed the importance of

paying fair wages to all employees. The wages should be in

proportion to the work done. Kautilya believes in respecting the

elders; but states that wages should be administered purely on the

basis of merit and experience. Seniority must be respected; not

rewarded.

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2) Mexican Telecom Industry: Unwanted

Monopoly?

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

by wire-line operator Telmex and mobile operator Telcel. Both belong

to Carlos Slim. Telmex provides local, domestic long-distance and

international fixed-line voice services, Internet and data

communications, while Telcel provides wireless services. Both

Telmex and Telcel hold a mammoth portion of the market share in the

Mexican telecommunication industry. In this context, these companies

have been constantly criticized that they take undue advantage of their

dominance and thwart competition in the industry. It is also said that

the weak regulatory authorities and flaws in regulations abetted the

Mexican telecom giants in ensuring low competition. However, these

companies defend themselves by arguing that they invest more than

their competitors and provide good services throughout the country

including low-margined rural areas.

While Telmex got natural monopoly through privatisation, Slim

implemented ‘Gillette Plan’ to establish Telcel’s dominance in the

mobile market. Following this strategy, mobile phones were sold at

cheaper prices, as once the customer bought a mobile phone they

needed prepaid phone cards to use it constantly. The strategy worked

well and the company made huge profits. According to a report in

2008, “America Movil, the largest cell phone operator in Latin

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

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Mexico, well ahead of the No. 2 operator, Movistar, the brand of

Spain’s Telefonica.”

In Mexico “high telephone and electricity costs, blamed on

monopolies, are driving many factories to countries like China.”

Felipe Calderón, who became the President of Mexico in December

2006, vowed to make Mexico more competitive by dismantling

monopolies. But, till mid 2008, there were not any significant move

against big companies. Some say that the telecom investigations

which are ongoing will be a big test of whether President Calderón

and CFC are up to the task.

SUGGESTIONS FOR IMPROVEMENT FROM THE POINT

OF VIEW OF ARTHASHATRA:-

Kautilya always encouraged fair trade and competition. It is

thus seen that the importance of the trader was recognized by Kautilya

as also the importance of the rule of law, by making restoration for

any loss caused by its failure. At the same time, traders were

prevented from oppressing people. This clearly shows that the welfare

of the people was uppermost in the mind of the king.

Kautilya believed that monopoly was not suitable for an

economy to flourish. He believed in competition and that it was not

only beneficial to the people, but also conducive to the national

economy.

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3) PUBLIC GOVERNANCE:

Software icon N R Narayana Murthy today blamed poor public

governance for major ills faced by the country such as illiteracy,

malnourishment, lack of sanitation facilities and dismal food and

power management.

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

read and write, and the country has the largest mass of malnourished

children. Twenty-five crore people do not have access to safe drinking

water, while 75 crore have no access to sanitation facilities.

"35 per cent of (total production of) grains are allowed to rot", the

Chief Mentor of Infosys Technologies Ltd said at the inaugural

function of first year BE/B.Arch classes at the BMS College of

Engineering here.

He said India has an installed electricity generation capacity of 145

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

shame".

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

about it", Murthy said. "Unfortunately, whatever, our public

governance is in charge of, whatever our public governance has

touched, has not made as good a progress as that happened in a

significant percentage of private governance".

While he would not say that all of private governance is good, private

governance institutions have by and large done better because of

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competition, entry of multinational companies and the need to

compete at the global level.

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

country. We are like this because we are not a disciplined set of

people. And that discipline has to start right in classrooms".

He said information technology industry has earned India "a little bit

of recognition" in the world, first time in 300 years.

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

worthwhile. This was not so some 25 years ago. Indians (till three

decades ago) were seen as people incapable of doing anything

worthwhile. Wherever you went, you were looked down upon as

people worthy of pity. But that scenario has changed a little bit thanks

to at least one (IT) industry", Murthy added.

SUGGESTIONS FOR IMPROVEMENT FROM THE POINT

OF VIEW OF ARTHASHATRA:-

According to Arthashastra, public governance is an issue of

utmost importance. Kautilya gave a lot of importance in maintaining

the standards of public governance in the Mauryan Empire. Kautilya

believed that the happiness of a king lied in the happiness of the

subjects. If the subjects were unhappy, the king could never attain

happiness.

According to Kautilya, attainment of good governance entails

that the objectives of the state are fulfilled and realized. This is

97

possible through properly organized and guided administration. This

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

administered well. Kautilya suggests that good governance should

avoid extreme decisions and extreme actions. Soft actions (Sam,

Dam) and harsh actions (Dand, Bhed) should be taken accordingly.

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

others and all administrative measures are to be taken after proper

deliberations.’ The King and ministers were supposed to observe strict

discipline. Kautilya recommended a strict code of conduct for himself

and his administrators. Kautilya has seriously considered the problem

of corruption. He has listed, in the Arthashastra, about forty ways of

embezzling government funds. However, Kautilya is very practical

about the problem of corruption. Kautilya feels that it is as difficult to

discover the honesty or otherwise of an officer as it is to find out

whether or not it was the fish that drank the water.

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

promises are made which could be fulfilled and those promises which

are made are certainly delivered. India requires politicians of actions

and not promises.

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14. AN ARTICLE ON ARTHASHASTRA:

Name of paper: MUMBAI MIROR (Times of India)

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

DON’T NEGOTIATE SAFETY AND SECURITY

-Radhakrishnan Pillai

The days of conventional wars are gone when kingdoms or nations

were warning with the weapons like swords and later with

sophisticated and more disastrous mass destruction weapons. Now the

wars are being played between democracies and terrorism. And hence,

the nature of these wars is more complex. This is the time when

aspects of security cannot be undermined.

Now, the terrorists targets are common men, battlefields are at public

places and aims are of disrupting economies. Corporate setups are the

soft targets and the only weapon that we have is the vigilance to fight

back any such unanticipated disaster.

Chanakya says,

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

committed during the night whether by the animate of the inanimate,

the punishment shall be in conformity with the offence, also in case of

negligence” (2.36.42)

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This means, how an alert security person should be. He has to report

He has to report every single offence committed to his superiors. He

cannot take any seen or unseen movements for granted. If security

official does not do that even the security personal shall be punished.

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

following manner:

EXTRA TRAINING :

The guards, watchmen and other security people in your organisation

have to be given extra training and information about the current

scenario. They should be oriented about the changing threats in the

mega city like Mumbai. You can also take the help of local police or

even intelligence agencies to give them latest updates on security

measure taken by the local, state and union government.

SUPPORT THE SECURITY MEN:

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

into. They should cooperate with security officials. Being checked up

your bags and personal belongings should not be taken as a mean to

offend you. Do not feel insulted or ashamed. The security personal is

doing his duty. Be a part of the system and help the system to protect

us.

WORK AS A TEAM :

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

Each one has to play his role. Even security men are human beings

working round the clock to ensure safety. Understand their problems

as well. Note that we have to work as a team.

Today the nation, its economy, corporate houses and our lives is under

threat. And we have to rise and fight for it.

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REFERENCES:

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

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

sources.

1 BOOKS:

‘Kautilya’s Arthashastra’ by Jaico Publications.

‘Corporate Chanakya’ by Radhakrishnan Pillai.

‘Arthashastra’ by R. Shamasastry.

2 WEBSITES :

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

http://economictimes.indiatimes.com/

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

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

http://www.businessdictionary.com/

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

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

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

chanakya/

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

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