The arrest of a bookkeeper at Churachandpur is a telling example as to why the insurgency in Manipur depends on cash rather than guns.The arrest of a bookkeeper at Churachandpur is a case in point that the insurgency in Manipur is not 'armed' with guns but cash.

The security forces of Manipur had a more subdued triumph this week, but perhaps it is more significant than it's given credit for being. A joint team of the Indian Army, Assam Rifles and Manipur Police, on July 23, cordoned off Molnom village in Churachandpur district and arrested S. Palal Thadou alias Lalboi Singson, a 45-year-old who is being described by the authorities as the self-styled Finance Secretary of the United Kuki National Army. He was not found with a gun in his hands. He was arrested with extortion notes and a mobile phone, the paperwork of an insurgency that has become more efficient than ever and is acting like a business.

That distinction matters. This is because for three years the conflict in the state of Manipur has been largely told in terms of numbers killed and images of fire.It is not for nothing that this is the way it has been told for three years already. Official statistics show that at least 260 people have died and over 60,000 have been displaced from their homes, which many are unlikely to return, since the ethnic violence broke out in May 2023. Yet, hidden behind the surface of the conflict is a subtle system of levies, extortion and 'protection money' which has sustained these armed groups beyond ceasefires and Suspension of Operations pacts. Those security agencies going after the economy itself rather than the fighters who spend the money is a rare case of them targeting Thadou.

It's an example of a pattern that has been publicly acknowledged by security officials, albeit not vocalized. Assam Rifles in the same district picked up a senior commander of the UKNA in October last year and arrested and detained SS Lt Jamkhogin Guite Lupho (alias Pepsi), who is alleged to have participated in the killing of four Meiteis in Bishnupur, January 2024. That was a kinetic operation, jungle raid, five accomplices along for the ride. This latest arrest is its financial counterpart: The man who allegedly holds the trigger is being replaced by the man who allegedly signs the receipts. For long, analysts monitoring the underground economy in the state have said that Manipur's myriad armed groups, ranging from the UKNA to the dozens of Kuki, Meitei and Naga groups still in existence, cannot be brought to an end through the arrest of shooters, as a fallen chief is replaced within a week and a broken financial network is rebuilt in years. In that understanding, it's the choking of the money that does more lasting damage than any one raid.

The business logic is very clear. Even before the outbreak of the violence, Manipur was the third poorest state in India, with its per capita income of Rs 7,630 per month in 2022-23 compared with Rs 25,727 per month in Telangana and Rs 25,139 per month in Karnataka during the same period. Three years of closures, curfews and no-go areas between the valley and the hills have depleted that base even more. The sale of goods has dropped substantially at the Ima Keithel market, a women-run commercial hub in Imphal, from Rs 30,000-40,000 daily to less than Rs 4,000 per day. A number of jobs were reduced at FMCG manufacturing units in Imphal. Those businesses that were functioning for both the communities such as sound equipment shops, furniture showrooms and small manufacturing units have either closed down or been burnt and individual losses amounting to tens of lakhs of rupees. As a replacement to that legitimate trade and commerce, extortion has emerged as an alternative form of taxation on transporters, contractors, government employees as well as ordinary shopkeepers in regions where formal law enforcement has failed to assert itself.

Though the ethnic fault lines are unique to Manipur, it is not a unique problem of Manipur. From the FARC in Colombia to the ethnic armed organisations in Myanmar, insurgent and separatist economies have long been on ideas that are more about parallel taxation systems, not ceasefires. The approximately 400-kilometre border with Myanmar, which has been porous since 2021 when thousands of ethnically related Chin-Kuki refugees crossed the border, is another factor, while security forces frequently claim to have detained members of Kuki civil society as foreign insurgents and not local refugees, as has happened in the past.

This one arrest is not very worrisome for Delhi's policymakers or Imphal's. What matters more for them is the durability of the underlying system. The arrest of a finance secretary doesn't affect the flow of cash in one cell, it affects the flow of cash within the cell that made him. Underground organizations under the Suspension of Operations (SoO) vary in size, with 25 outfits operating in the Myanmar border so far, keeping camps, arms and, clearly, active treasuries even if they are ostensibly in peace with the state. Until this financial infrastructure is taken seriously as much as the men who carry rifles, the state will continue to have to deal with this kind of news every few months: another cadre named, another village cordoned off, another commander put on the list, and the deeper economy of fear, which sustains the whole thing, quietly regrows. The real test of the operation will be whether or not investigators pursue the money trail Thadou is alleged to have followed to whomever, or not after the cordon is lifted, and the file closed.