Posted on: 20 November 2016

How Chanakya Dealt With Fake Currency And Corruption
By Sumedha Verma Ojha
Swarajya - November 18, 2016

Chanakya ultimately faced the same problems as the current government is facing in the present with corruption, counterfeiting and tax evasions. Flooding the economy with fake coins would have the same deleterious effect as fake currency has today.

The state has to work towards nation building with the help, as imperfect as that may be, of its citizens. It can only be what its citizens want it to be and what they contribute with their hard work; today, as it was in the past.

The demonetisation of 500 and 1000 rupee notes on the 8th of November has unleashed a furious debate in India on taxation, corruption, the informal cash economy, counterfeiting of notes and so on. There are different theoretical views on the pros and cons of this measure.

In this context it will be interesting to see what the most seminal Indic theoretician of politics and economics, Chanakya, has to say on these issues in his magnum opus, the Arthashastra.

While looking for insights from this ancient theoretical work it behooves us to be cautious in drawing parallels as the structure and organization of the economy today is very different from what it was two and a half millennia ago.

As has been pointed out earlier in this column, ‘artha’ is one of the goals of individual human existence— ‘dharma’, ‘artha’, ‘kama’ and ‘moksha’. Understood in the extended sense of the earth where men live and seek well-being, it assumes the goal of the well-being of men, in general. Since it is the state alone which can make such general well-being possible, the protection of the earth and its acquisition, essential parts of state activity, are declared to be the province of the shastra. So says the Arthashastra.

The state manifestly needs resources to fill its ‘kosh’ or treasury to realise the objectives of palan(administration) and labh (acquisition of territory). These resources come from the economic surplus created by the people within the kingdom.

Chanakya advocated oversight and control of economic activity to safeguard and support sources of income for the state.

Incomes were classified as coming from the city, country, mines, irrigation works, forests, cattle-herds and trade routes. Economic activity was state run as well as in private hands and arrangements were made for both sectors.

The ways in which incomes from these sources were appropriated included ‘mulya’ or price at which state goods were sold, ‘bhaga’ or state share of private goods, ‘vyaji’ or sales tax, ‘parigha’ or protective duty to safeguard state goods, ‘klipta’ or port duty, ‘rupika’ or surcharge on manufacture and ‘atyaya’ or penalty.

This practical classification of sources of income was in use during the Mauryan period but has its roots in practices going back into the past. It may be noted that there were certain exceptions made on different bases for different groups of people so the impact of taxation was not as dire as it may seem, Chanakya was anyway of the view that tax should be extracted unobtrusively as the bee extracts honey from flowers and returned in as spectacular a fashion as the rain falls from the skies.

Corruption amongst officials was a persistent worry; Chanakya trusted no one and had an elaborate system of spies in place to keep an eye on the entire official machinery and spies to keep an eye on the spies themselves! As he said, it was as difficult to check how much money royal officials were misappropriating as it was to find out how much water a fish drank as it swam around in the river. There are elaborate shlokas on ways of corruption in the bureaucracy, how to recognise them and deal with them.

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