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Using Temple Gold for Shoring up the Economy: Learning from Kautilya’s Arthashastra

April 17, 2015

India’s appetite for gold leads to an annual import of about 800 to 1,000 tonnes of the precious metal. This import of gold is a principal cause for the country’s chronic trade imbalance. Many Indian temples and places of worship and pilgrimage hold large quantities of gold, which they have accumulated from donations of jewelry and gold bars and coins over the centuries. These lie in the security of temple vaults. In addition, there are large personal collections of gold held by individuals and families.

According to media reports, the government is planning to launch a scheme in May 2015 that will encourage temples to deposit their gold with banks in return for interest payments. It is also contemplating the idea of extending this scheme to individuals and families who hold an estimated 17,000 tonnes of gold. The idea is that the consequent reduction in gold imports will relieve pressure on foreign exchange reserves and contribute to correcting the balance of trade.

It is common knowledge that there are two aspects to this issue of India’s demand for gold. First, the Indian penchant for holding gold is linked not so much to religious but socio-economic reasons. Second, a sizeable number of devotees offer gold as offerings to the gods. Both aspects are sensitive in nature. Therefore, it would need a great deal of public education to motivate and convince the people to participate in this scheme. In other words, the government has to think how it can better incentivize temple trusts and citizens to deposit their gold. In the past, a similar scheme was thought of in 1999. But that did not take off because the incentive in the form of interests offered was too low.

It is here that Kautilya’s Arthashastra comes handy. Kautilya’s Arthashastra is an areligious manual that serves as a guide for the internal and external administration of the state. State-making, war-making, protection and resource extraction remain the main activities of the state and Kautilya focused on these core activities. In this regard, he began his discussion first by identifying the elements that make up a state. This is his famous saptanga theory or the seven Prakrits or constituent elements of a state. These seven elements in order of priority are: the svamin (king or ruler), amatya (body of ministers and structure of administration), janapada/rastra (territory including agricultural land, mines, forest, pastures, water resources and communication system for trade), durga/pura (fort), kosha (treasury), danda/bala (army) and mitra (ally). Kautilya further elaborates on the need to take care of these elements. Importantly, in Book Eight, he warns that vyasanas (calamities) may affect these prakrits and details the various calamities in this regard.

Gold has been a measuring rod of the state treasury, then as now. The importance of treasury (kosha) is thus obvious. Kautilya argues that the treasury (kosha) is more important than the army (danda/bala). The latter, he argued, can be raised and maintained only with the help of a well-filled treasury. He explains further in Chapter One, sutras 48-49, in Book 8 that, “In the absence of a treasury, the army goes over to the enemy or kills the kings. And the treasury, ensuring (the success of) all endeavours, is the means of deeds of piety (dharma) and sensual pleasure (kama).” These passages in the Arthashastra demonstrate the importance of the treasury in the state’s scheme of things. In the modern sense, a well-filled treasury translates into a healthy and vibrant economy.

Further, Kautilya has also given a clear structure of power or prabhashakti (might), which flows out of the combination of the treasury and the army in the overall context of state power and its ability to attain its goals and ensure security. Today, these concepts are no different. In the modern discourse, a strong and vibrant economy is a prerequisite for state strength. Maintaining the fiscal balance and a healthy foreign exchange reserve are important in this regard.

In the methods suggested for improving the financial health of the state, Kautilya argues that when the treasury gets depleted, concerted efforts become necessary for its replenishment. He even recommends extraordinary measures in emergency situations. In his study of the Arthashastra of Kautilya, the great translator and commentator Professor R.P. Kangle showed how Book 5 (Secret Conduct), Chapter Two, Section 90 ‘Replenishment of the Treasury’ recommends several measures to recharge the treasury. These include: higher than normal levies and taxes during times of war or calamities; requesting contributions for specific undertakings from the people; asking the rich to pay according to their means and in return conferring titles, decorations and other honours upon them. These are all more or less open demands made by the ruler on his subjects. But in a subsequent part of the same Section 90 (from sutra 37 to 69), Kautilya’s Arthashastra describes a number of not so open and mostly quite dubious ways of replenishing the treasury. The first of these is appropriating the property of heretical samghas or temples in collusion with their trustees who are to justify it by stating that the property has burned down or has been lost (5.2.37-38). Secondly, the miraculous manifestation of a deity should be arranged and fairs and festivals started in its honour to provide a source of income to the state; a number of ways in which the credulity of the people is to be exploited in this manner are described (5.2.39-45). Third, secret agents posing as traders should receive deposits or loans on a large scale and get the whole ‘stolen’ at night’ (5.2.46-51). Other measures recommended are to be employed only against dusyas, i.e. those suspected of treason, and not ordinary citizens. For instance, the property of dusyas may be confiscated after getting them entrapped in some serious crime through state agents (5.2.52-69). It needs to be emphasised that Kangle had correctly argued that “it is certainly impossible to believe that the devious ways of replenishing the treasury described in the latter half of the Chapter (sutras 37 to 69) are recommended as normal sources of state income.”

What do we take away from this rich ancient Indian manual on statecraft? First, the idea of extracting unused temple gold and property is not new. There is a demonstrated utility in such measures for shoring up the state’s reserves, with concepts suitably modified for modern times. The Constitution does not debar the state from requesting gold from citizens during times of crises. Many citizens donated gold voluntarily for the 1962 war.

In this context, the government needs to think how it can better motivate temple trusts and citizens to deposit their gold in banks. While the Arthashastra may not offer ready solutions in this regard, especially given the changed modern context, it does highlight the importance of incentivising/beguiling citizens and institutions to part with their wealth for the larger purposes of strengthening the state. We should not forget that the modern state and even more so the modern democratic state is but the expression of the collective will of the people. The guiding principle should therefore be: will the people be happy with this scheme? For this, proper feedback needs to be taken for the scheme to have any success. Kautilya’s Core Introductory Message in Rules for the King (1.19.34) needs to be the final guide in this regard: “In the happiness of the subjects lies the happiness of the king and in what is beneficial to the subjects his own benefit. What is dear to himself is not beneficial to the king, but what is dear to the subjects is beneficial (to him).”

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India