Economic Sutra: Ancient Indian Antecedents to Economic Thought

Book Summary by Ms. Aishwarya Nagar, Research intern, PIC

Professor at IIM, Ahmedabad and Member, PIC, Prof. Satish Y Deodhar’s Economic Sutra: Ancient Indian Antecedents to Economic Theory offers a thorough view of the aspects of Indian economic thought preceding and following the Arthashastra. The book spans the era from the Saraswati-Sindhu civilisation around 2500 BCE to the early mediaeval period, when the West Asian expedition into India began, in about the 11th century CE.
The author says this book was necessary because Arthashastra is recognised as a stand-alone work in most studies of economic thinking. Furthermore, these analyses do not speculate on why ancient Indian writing on economic thought was neglected until relatively recent times, and how the West was only partially awakened to the “otherworldly” characteristics of Indian philosophy.
According to the author, the prosperity of East Asian countries in the latter part of the twentieth century revealed the prejudice and inadequacy of such research.
This publication provides a detailed overview of the components of Indian economic thinking preceding Kautilya. It also discusses varna as the “proto-economic” concept of division of labour, as well as the lack of ‘Eminent Domain’ in mediaeval India. As such, the goal of this work is to convey components of economic theory that would have driven ancient literature.
To begin, Prof. Deodhar outlines ancient Indian writings in general, focuses on economic literature in particular, and explains why it has gotten so little attention. He further argues that there are both nontheistic and theistic compilations in Indian economic thought that stress on “anwikshiki”, which proves that Indians do not conform to any particular “ism”. He goes on to introduce Arthashastra as a handbook on the ideal operation of the economy, government and ruler behaviour to show the expanse of ancient Indian literature on economic thought.
To demonstrate how ancient Indian economic theory discussed material wants, wealth, pricing and taxes, the book quotes Buddha as encouraging merchants to be aware of market trends and capable of creating trust in their clients, which would eventually result in profits. In the Buddhist literature ‘Anguttara Nikaya,’ the author points out, Buddha encourages householders to earn money as long as they do so in a legal and respectable manner. The author also describes how Buddha’s Dharma, or ethical conduct, forbade a few essential business enterprises. Trading in weaponry, flesh, live beings, alcohol, and poison was among them.
The author has, through his research, found how cows and other goods were used as money, and a barter system may have developed throughout the Vedic period, but actual currency in the form of gold coins or “nishkas” is also not an unknown concept in the Indian economic thought.
The author discusses how ancient Indian authors had a strong natural awareness of rulers’ supply of “public and quasi-public goods, as well as market facilitation”. From Vedic times, many
specialised guilds flourished, with a formalised relationship with the King for smooth operation.
In ancient literature, there is also evidence of Varna having been designed as a theory based on
guna-karma, or capability and actions. The author says that while Varna eventually switched to
Jati, the transition was seamless and over a long period. Manusmriti was eventually imposed  on Indians by the Colonial masters and Jati and Varna’s inherent mobility was locked into countless static caste groupings.
Prof. Deodhar’s research demonstrates the continuity and improvement of conceptions and
organisational forms in society since the pre-Kautilya era. Following that, it emphasises the fundamentals of economic theory and policy as stipulated in the Arthashastra, a politico-economic treatise written in the 4th century BCE. As the author has found, Arthashastra outlines the strategy for providing public goods, merit goods, regulating and using common property and controlling natural monopolies.
Finally, the author observes that Kautilya’s doctrines against working children and preservation of employees’ rights are highly outstanding and deeply advanced in context and time, and therefore, he paraphrases George Santayana to declare that “it was a historical accident of race and rhetoric that ancient Indians were perceived only as religious mystics.”
The book is successful in illustrating, through evidence of economic thought, that ancient India was way ahead of other countries with regard to commerce and economics, and hence makes for an interesting read for anyone, economist or not. The book tickles the audience’s curiosity by drawing attention to the gaps in knowledge that should be investigated further.