So, the shloka in which vasudhaiva kutumbkam appears is as follows: -
अयं निजः परोवेति गणना लघुचेतसां
उदार चरितानां तु वसुधैव कुटुम्बकम ॥
This is translated as :
"In ancient India the liberal perspective was defined by the concept of Vasudhaiva Kutumbakam… in contradiction to the ‘Clash of Civilizations’… the theory I don’t agree with. We have to reclaim that liberal space.” : Dr. Manmohan Singh, The Prime Minister of India, Address to the Harvard Alumni Association, March 25, 2006 at New Delhi.
“…India that once, 2000 years ago, had proclaimed vasudeva(sic) kutumbakam – the world is one family…”: Ms. Sonia Gandhi in her acceptance speech on occasion of being conferred the “Grand Officer of the Order of Leopold” by Belgian government for her “constructive nationalism and efforts to foster a multicultural, tolerant society in India”, on November 11, 2006 at Brussels / Bozar.
"...Vasudhaiva Kutumbkam is our foreign policy." Pranab Mukherjee in his Rajya Sabha speech on Dec. 5 2007.
But so far, the shloka has only been found (as untill 2008 by Bharatendu) in the hitopadesha, panchatantra, certain summaries of works of Chanakya and Bharatrihari, Maha Upanishadam, certain recensions of vikrama charitra and in the works of Bhatta Udbhata and it is not at all part of a sermon directing people to believe that "the whole world is my family". I am quoting one of the stories mentioned by Bharatendu while demolishing the shloka for our purpose here to understand one instance of the use of the shloka, and the reader is requested to follow the rest of the posts linked in the references section.
subuddhi the Crow, chitrA~Nga the Deer, and ksudrabuddhi the Jackal
“Long long ago, in the champakavaTI forest of magadha, there lived two friends – a Deer called chitrA~Nga and a Crow named subuddhi. It so happened that a Jackal named kshudra-buddhi, (the proposer of vasudhaiva kuTumbakam, as we shall soon see), was passing by and his eyes caught hold of the healthy Deer as he was grazing nearby. The lust to devour him immediately arose in the Jackal’s mind, but knowing Deer to be too swift in a chase, he decided to fall back on his cunning – to win first the confidence of the Deer. The VK-preacher therefore approached the Deer, saluted him, and introduced himself as a lonely newcomer with friendly intentions, and proposed a friendship and brotherhood with the Deer. The naive Deer fell for the sweet words of kshudra-buddhi, and not knowing his true intentions, invited him to his own dwellings.
So, they started towards the Deer’s place, and on their way sitting on the branches of a champaka tree was Deer’s old and wise friend subuddhi the Crow. Seeing them passing by, the Crow asked the Deer, ‘O chitrA~Nga, who is this second fellow with you? ‘ ‘A Jackal, my new friend’, answered the Deer. To this, the Crow asked: ‘But, do you know him well enough? One should never extend friendship and shelter to anyone without knowing their real nature and intentions, learning the history of their ilk and giving them a test of time.’ The Deer lightly shrugged this aside, saying, ‘But this Jackal is very friendly’.
Seeing his friend in delusions, the Crow began relating to him a story about how jaradgava a Vulture was killed by unwisely trusting an impostor (that story reproduced later below). He warned the Deer against trusting the Jackal without learning more about him.
So far the Jackal had kept quiet, and it is at this juncture that he opened his argument with the famous shloka of vasudhaiva kuTumbakam, demanding the Deer to not be of a narrow mind by considering the Crow a friend and himself an alien. The vasudhaiva-kuTumbakam discourse successfully put to rest all doubts that had arisen in the Deer’s mind, and dismissing the Crow’s wise council he went ahead in bringing the VK-preacher into his home.”
The remainder of the story can be summed up in two sentences. The cunning VK-reciting Jackal started dwelling with the naive Deer, and as soon as the opportunity arose, pushed him into a deadly trap. However before he could kill the Deer, our wise hero subuddhi the Crow devised a clever trick by which not only the Deer was rescued but also the VK-reciting Jackal was slain.
Now, that is the context in which VK is recorded in the hitopadesha by the great paNDita of politics nArAyaNa, and he is unambiguously clear about its application when he assigns this shloka to come from a brotherhood-preaching shrewd subversionist. It gives a clear warning against blindly welcoming any idea, individual or group without due diligence of studying their history, nature and intent.
However, let us also read the other story, in response to which the VK is uttered in hitopadesha, which would leave absolutely no room for any doubts in this matter of how hitopadesha treats vasudhaiva kuTumbakam:
jaradgava the Vulture and dIrghakarNa the Cat
While warning his friend against trusting the Jackal, subuddhi the Crow thus addressed the Deer:
“There, on the banks of the mighty bhAgIrathI is a cliff called gR^idharakUTa, and upon it grew a great fig-tree. In the shelter of its hollow lived an old Vulture named jaradgava, who due to old age had neither any eyesight left in his eyes nor nails in his claws. The other birds that lived on that tree were friendly to him, and out of pity used to donate from their own food small portions to him, and this way the poor fellow was passing his days. In return, jaradgava used to guard the little offspring of the birds when the parent birds were away.
One day, when the older birds were gone, a Cat called dIrghakarNa (‘Long Eared’) came there to make a meal out of the nestlings; and those tiny birds alarmed at seeing him, created noise that roused jaradgava from his slumber. ‘Who comes there?’ demanded jaradgava. Now dIrghakarNa, on noticing the big Vulture, aborted his meal plans, but as a flight was not possible he resolved to trust his destiny and to approach tactfully. ‘Arya,’ he responded, ‘my salutes to you!’ ‘Who is that?’ asked the Vulture. ‘A Cat,’ answered dIrghakarNa. ‘Lay off, Cat, or I shall slay you,’ shouted the Vulture. ‘I am ready to die if I deserve death,’ said the Cat, ‘but first let me be heard.’ ‘OK then, tell me first your purpose of arrival.’ asked jaradgava.
‘I live,’ melodramatically began dIrghakarNa, ‘on the banks of ga~NgA, bathing daily, performing the penance of chandrAyaNa vrata, strictly being a vegetarian like a bramachArI. The birds that come there, speak very highly of you as the one firmly established in dharma and worthy of all respects. So with my curiosity greatly aroused about you, I decided to drop by Sir, to learn from you about nIti and dharma.’
‘You appear like so deep gone in learning,’ he continued, ‘and still Sir, I am surprised that your sense of dharma tells you to be ready to slay a guest! Doesn’t the nIti say unambiguously about what a man’s dharma is towards his guests?’ The Cat then went on delivering an elaborate speech, quoting eloquently from the shAstra-s about the dharma and cut quite an impressive lecture on peace and non-violence.
Shrugging that onslaught of quotations from shAstra-s aside, wise jaradgava interrupted, ‘Listen, I know only this, that you are a cat and the cats eat meat. Since here are young birds that I am given to protect, I warn you one last time – leave immediately.’
Upon this, dIrghakarNa intensified his drama, and touching the ground with his two claws and then his ears, invoking all the Gods, he said, ‘I have overcome all the passions by practicing the chandrAyaNa vrata; I have learnt the shAstra-s; and I am a follower of the religion that is called non-violence itself. And so he went on.
Such prolonged drama of the Cat finally silenced the old Vulture, who at last allowed him to live in the hollow of the tree with himself.
With the passage of days, and having gained more confidence of the Vulture, the Cat slowly began picking the nestlings for his meal. After devouring them one by one, the cunning fellow would drop their bones near the hollow of jaradgava, who being blind did not notice it.
One day, alarmed at their children going missing, the parent birds began investigating. The shrewd cat quickly made his escape, and the birds soon discovered the bones near the hollow of jaradgava. They at once inferred that their children had been eaten away by the old Vulture in whom they had placed their trust. Thus enraged the birds swiftly executed jaradgava in no time. Although being innocent and a true well-wisher of the birds, he paid for the folly of giving shelter to the wrong kind.”
Above story is which evokes the vasudhaiva kuTumbakam from the cunning subversionist in hitopadesha.
: The Hoax called Vasudhaiva Kutumbkam - Part 1
: The Hoax called Vasudhaiva Kutumbkam - Part 2