P.G. Balakrishna Kamath, a former officer with the Intelligence Bureau (IB) who dedicated decades of his career to deep undercover operations, has detailed the internal mechanics of the Naxalite movement and described how the 2016 demonetisation policy delivered a severe blow to its financial reserves and organizational ranks. Kamath shared these observations while recounting his extensive intelligence background during an appearance on The Prakhar Gupta Xperience (PGX): Raw & Real.

The interview, hosted by Prakhar Gupta and released on Friday, 4th September, focused primarily on Kamath’s five decades of undercover service across various intelligence assignments. A dedicated segment of the discussion examined Left-Wing Extremism, with the episode guide listing “How Demonetization Broke The Naxals” among its key subjects.

The Ground Realities of Maoist Networks in Maharashtra

During their exchange, Gupta asked Kamath about the containment of Maoist operations in Maharashtra and what notable shifts had taken place on the ground over time.

The conversation turned to the economic foundation of the insurgency and how armed Maoist units maintained their everyday funding. When Gupta brought up the crackdown on counterfeit currency and asked whether choking fake notes had crippled the insurgents, Kamath pointed out that counterfeit bills were not the main issue. Instead, the central vulnerability lay in the vast quantities of legitimate legal tender that Maoists routinely gathered from local populations residing across their areas of influence.

Kamath noted that Maoist cadres collected levies from forest dwellers and local workers, particularly contractors and labourers involved in harvesting tendu leaves and trading minor forest produce. Because an underground armed movement cannot route such funds through formal banking channels, these collections were held entirely in liquid cash across individual armed operational units, known locally as dalams.

“It’s not exactly the fake notes. You know, what has happened is that these people collect money. And from the, you know, in that area, whoever is cultivating tendu leaves and so many other things. They collect it from the villages. Now, that is all real money,” Kamath said.

He explained that each individual operational unit carried a substantial cash balance to sustain its local logistics and day-to-day operations.

“So, what would happen is that one dalam would have a certain amount of money, like ₹5 lakh or ₹10 lakh, because they needed that much cash to move forward. Then demonetisation came, and they got stuck. The question was, what would they do with so much cash?” Kamath said.The Direct Impact of Demonetisation on Insurgent Coffers

Kamath outlined how the sudden invalidation of high-value currency notes placed the Maoists in a precarious situation because their accumulated funds were entirely outside the formal banking system. While the government established a formal window allowing citizens to exchange discontinued banknotes, completing those transactions required official personal identification and active bank accounts.

Because underground Maoist cadres could neither walk into banking branches nor show identification without risking immediate arrest, they were unable to deposit or convert their hoards directly. This dilemma forced them to turn to local individuals who possessed operational bank accounts, including affluent landlords, contractors, and local figures from whom they had previously extorted funds.

“They had to go to the landlords and the people from whom they had taken the money because those people had bank accounts. They went to them and said, ‘You get this exchanged for us,’” Kamath said.

However, formal limits and regulatory monitoring meant those intermediaries could only process restricted sums. Consequently, the Maoists attempted to funnel their cash in smaller fragments through family networks and urban acquaintances. “What we understand is that they spoke to them and said, ‘We will send this money through our relatives to the towns,’ and so the money flow became a trickle. These people could not do much. The Maoist leadership could not do anything,” he said.

Internal Doctrinal Conflicts Triggered by the Currency Ban

Kamath emphasized that the fallout from demonetisation extended beyond logistical disruptions and frozen funds, precipitating a deep ideological crisis across the insurgent ranks.

He noted that many grassroots cadres had joined the movement out of rigid ideological conviction, viewing wealthy landlords and local elites as class enemies of the rural poor they claimed to defend. When senior commanders were forced to negotiate with those very landlords to salvage their cash reserves, dedicated cadres saw it as an unacceptable compromise of their core principles. “Those who were ideological did not like it. The people we considered to be the enemies of the masses, we had to go to them,” Kamath said. This contradiction eroded internal morale, sparked resentment, and prompted several members to abandon the outfit.

“So, a split started emerging. Some people came out. I don’t know why this aspect has not been discussed much in the press either. So, this was a turning point. That is how demonetisation affected the Maoists,” he said.

When Gupta sought clarification on whether the decisive factor was indeed genuine currency rather than counterfeit networks, Kamath confirmed the assessment: “No. It was real currency.” He added that the leadership’s sudden dependence on class adversaries forced a visible retreat from their political stance: “They climbed down from the ideology, and the cadres who were actually ideologically motivated saw this.”The Indispensable Role of Capital in Armed Insurgency

Kamath explained that the sudden paralysis of the Maoists' financial pipeline placed immense strain on their overall operational capability.

Ideological conviction alone could not sustain an armed movement indefinitely, as daily field survival, tactical travel, rations, and weapons procurement all required steady financing. “The other thing is that the collection also stopped for some time. This put pressure on their movement. Money is everything, you know? Ideology is there, but without money, they could not move or meet their needs. They had to buy arms and ammunition,” Kamath said.

In his evaluation, demonetisation served as a major financial shock that compromised the Maoists' liquid reserves, choked off their supply lines, and fractured their internal cohesion from within.

Operation Kagar and the Broader Counter-Insurgency Framework

While Kamath’s reflections highlighted the financial vulnerabilities of the Maoist apparatus, the central and state governments have simultaneously advanced a multifaceted counter-insurgency campaign combining tactical security operations, ground intelligence, surveillance technology, physical infrastructure expansion, and proactive surrender-and-rehabilitation policies.

As part of this comprehensive strategy, security authorities initiated Operation Kagar in January 2024, focusing operational pressure on long-standing Maoist base areas across the Dandakaranya region. These ongoing operations bring together specialized central and regional units, including the Central Reserve Police Force (CRPF), Commando Battalion for Resolute Action (CoBRA), District Reserve Guards (DRG), and state police forces.

Parallel to targeted tactical engagements, the administration has pushed into formerly inaccessible jungle tracts by constructing arterial road networks, bridges, and fortified security camps. This infrastructure push has steadily linked isolated forest settlements with administrative services and public welfare schemes. A notable milestone in this coordinated offensive occurred in 2025 across the Karreguttalu hill range along the Chhattisgarh-Telangana border, where security personnel carried out a sustained multi-day operation against entrenched Maoist formations.

The steady contraction of Left-Wing Extremism across central and eastern India is viewed by security agencies as the cumulative result of sustained tactical operations, actionable intelligence, expanded civil connectivity, and an increasing rate of cadre surrenders.