02-08-2025
Chanakya: The Indian economy savant who first spelt out wealth as the root of power
Two thousand years before Adam Smith's theory of the invisible hand transformed economic thought, an Indian Brahmin with a razor-sharp mind was quietly drawing up the blueprint for a political economy that would support a kingdom.
That man, born in Pataliputra, was Kautilya, more commonly remembered as Chanakya.
History has dubbed him the original kingmaker, the strategist who powered the rise of Chandragupta Maurya. But to those who have read his text, Arthashastra, he was a proto-economist and a policy wonk with a startlingly modern outlook.
Two thousand years before Adam Smith's theory of the invisible hand transformed economic thought, an Indian Brahmin with a razor-sharp mind was quietly drawing up the blueprint for a political economy that would support a kingdom.
That man, born in Pataliputra, was Kautilya, more commonly remembered as Chanakya.
History has dubbed him the original kingmaker, the strategist who powered the rise of Chandragupta Maurya. But to those who have read his text, Arthashastra, he was a proto-economist and a policy wonk with a startlingly modern outlook.
The wartime consigliere bit was important, too, since he did engineer the rise of the Mauryan dynasty, giving India its first pan-subcontinental empire.
The economist
But we must turn to the Arthshastra (literally, treatise on economic science) to recognize his true genius. Composed around the 4th century BC, it is a no-nonsense manual of statecraft and economic management. In it, Chanakya, who has been pictured in popular imagination as a bald-headed, thickset man with sharp, piercing eyes, lays out a meticulously detailed system where the health of the treasury ranks above all else.
'Kosh mulo dandaḥ," he wrote. The language, Sanskrit, is pithy, but the meaning is profound—power rests with the treasury.
It wasn't just empty advice. Under his tutelage, the growing military strength of the Mauryan empire led to political stability, which in turn resulted in increased agricultural output and greater trade. This meant higher revenues and resources for the empire, allowing it to build even better roads, which facilitated more trade. It was a virtuous cycle of economic and military might feeding into and of each other.
His antecedents remain elusive, with the place of his birth and his early years shrouded in mystery. The most authentic version says he was born as Vishnugupta and went to Takshashila, the ancient centre of learning, where he studied economics, politics, war strategies, medicine, and astrology.
He started his career as an advisor to the Nanda king but was exiled from the court following a perceived insult. Chankaya swore revenge. At this time, he came upon Chandragupta, a young outsider with enormous promise, whom he groomed and eventually helped take over as emperor of the Mauryan Empire, overthrowing the Nanda dynasty.
But Chanakya's influence went far beyond battlefield strategy. He placed economics at the heart of governance. In his thinking, the state reigned supreme with control of mines and forests, the trade in salt, liquor and weapons.
It also carefully regulated everything from grain prices to prostitution. Significantly, taxes, while high, were never extortionate. 'Do not squeeze the subjects like milking a dry cow", the Arthshastra warned, a warning that many subsequent governments ignored at their own peril.
His wisdom extended to using economic diplomacy not just as commerce, but as a means to expand influence and preserve national security. Very appropriately, New Delhi's diplomatic enclave that houses foreign embassies is named Chanakyapuri.
The realist
In the world of Chanakya, ideals took a backseat as he prioritized results over rhetoric. For that, like the great Chinese general and military strategist Sun Tzu, who lived 150 years before him and considered espionage a crucial element of warfare, the Arthashastra too stressed the importance of spying, auditing, and surveillance.
Ministers were to be watched by spies disguised as mendicants. Bookkeepers were assumed to be cooking the numbers unless proven otherwise. 'Even trustworthy officials should not be fully trusted," he wrote with dispassionate realism.
Yet, he was not without a social conscience. He encouraged welfare during famine, making it an essential part of a king's duties: 'Kingship requires detailed and expert knowledge of goods and the raw materials from which they are made, for provisioning the palace and the army, as also for distributing food to people in times of famine."
Economist Amartya Sen once noted that Kautilya's sense of public welfare rivalled anything seen in ancient Greece or China. Patrick Olivelle, the Sanskrit scholar, described him as 'Machiavelli before Machiavelli, only more systematic, more ruthless, and perhaps more humane".
Despite his intellectual heft, Chanakya vanished from collective memory for centuries, and it was only in 1905 that the Arthashastra was rediscovered in a South Indian manuscript trove and translated and published by R. Shamasastry, a Sanskrit scholar and librarian at the Oriental Research Institute, Mysore.
Since then, he has found a second life, not just in Indian politics and civil services, but in business schools and military academies. His words, often stripped of context, are now memes on social media. That doesn't distract from the Arthashastra's stature as a seminal work of economic statecraft.
For more such stories, read The Enterprising Indian: Stories From India Inc News.
