In today’s Finshots, we talk about internet shutdowns and how they affect people and businesses alike.

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Now, on to today’s story.

The Story

What do Rajasthan, Manipur, Haryana, Bihar and Uttar Pradesh have in common?

No, it’s not their cuisine, culture or even festivals. It’s the internet blackouts.

These states witnessed government-imposed internet shutdowns in 2024. And it’s not just them. Similar disruptions occurred across several other states and Union Territories.

But here’s the thing. These weren’t statewide shutdowns. They were localised, impacting specific regions. That’s probably why these events don’t get the attention they deserve. A few headlines, some social media chatter and then they’re forgotten.

So why do governments resort to these internet blackouts?

The common justification is to prevent the spread of misinformation and control volatile situations before they spiral out of control.

Sure, that sounds reasonable on paper. The internet can amplify provocative content and mobilise masses, as seen during the ethnic clashes in Manipur or the communal riots in Uttarakhand’s Haldwani. But while these measures might help at the moment, they leave behind staggering economic consequences.

To put things in perspective, the Global Cost of Internet Shutdowns report by Top10VPN estimated global losses of $7.69 billion in 2024. India alone contributed nearly $320 million to that figure. And back in 2020, things were even worse. Of the $4 billion global loss, India accounted for a jaw-dropping $2.8 billion or 75% of the total.

But how is the economy losing these massive amounts of money, you ask?

To begin with, there are foreign direct investment (FDI) losses.

Think about it. Industries like IT services, e-commerce and fintech rely heavily on uninterrupted digital connectivity. So, when shutdowns happen, they’re left stranded. And if these disruptions become frequent or prolonged, they create an unpredictable environment which can turn into a nightmare for businesses and investors alike.

For foreign investors eyeing India as a destination, this unpredictability raises red flags because FDI thrives on stable and predictable business environments. But when shutdowns are enforced abruptly to manage unrest or security concerns, it signals a lack of consistency in policy decisions. Investors can’t help but worry about their operations getting disrupted too.

And it doesn’t end there. Internet shutdowns also dent India’s reputation on global platforms. Rankings like Ease of Doing Business and Internet Freedom take a hit, making India less appealing to companies hunting for stable markets to expand.

This ultimately means that even if these disruptions are localised and temporary, they affect the reputation of the entire country.

It’s no surprise, then, that investors lean towards regions with stable and reliable digital infrastructure. After all, no one wants their business operations disrupted by unpredictable internet blackouts. And while there aren’t any recent reports estimating the FDI losses from internet shutdowns, you could sense the impact by looking back a bit. For context, between January and June of 2023, India lost $118 million in FDI due to these disruptions.

But it’s not just about foreign investments. On a more personal level, these shutdowns affect something as basic as making everyday payments. Imagine, in day-to-day life, numerous big and small payments are made through UPI or card transactions.

How would these be possible without an internet connection?

If you don’t have spare cash with you, you just can’t buy things. And the businesses that could have benefitted are left without any revenue or profit. Now, imagine thousands of people unable to transact even for a brief stretch of time. Businesses would be hit hard, no?

On top of that, particularly vulnerable sections suffer when internet connectivity is disrupted. Take the rural poor, for example. Many rely on government programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which promises 100 days of employment. For millions, wages from this scheme are their only lifeline.

But since January 2023, marking attendance under MGNREGA has gone digital. Workers now have to be geo-tagged and photographed twice daily using an online attendance app. And here’s the catch. If the internet is shut down or connectivity is poor, which it often is in remote areas, these workers can’t log in. And no attendance, means no pay.

It’s a similar story when it comes to accessing basic necessities through the National Food Security Act. Families need to authenticate their identity using Aadhaar online to receive subsidised food. But without the internet, the system breaks down, and people are left hungry.

Even the rural common service centres — places that help people with banking, bill payments and government paperwork, are helpless during a shutdown. These centres rely on mobile internet and when it’s cut off, entire communities feel the ripple effects.

In short, internet-enabled technologies are now the backbone of everyday life. And disrupting them doesn’t just inconvenience people, it derails livelihoods and essential services.

So, what’s the way out of this?

Well, you see, internet shutdowns aren’t illegal. In fact, the Indian government formalised the process in 2017 under the Temporary Suspension of Telecom Services rules, which fall under the Indian Telegraph Act of 1885.

But here’s the problem. These shutdowns have far-reaching consequences, and something had to be done to rein them in. That’s where the Supreme Court stepped in.

In 2020, the Court made a landmark judgment that changed the game. It declared that internet access isn’t just a luxury. It’s a fundamental right. This ruling came after the internet blackout in Jammu and Kashmir when its special status under Article 370 was removed. People questioned the legality of such sweeping restrictions, and the Court had some strong opinions.

Now, the Court didn’t outright ban shutdowns, but it laid down some strict ground rules. For starters, it emphasised that any internet shutdown order had to be published. People deserved to know why the internet is being cut off and for how long.

Next, it asked governments to create systems which ensured that everyone could access social protection schemes and security programs, whether the internet was working or not. After all, no one should lose access to these essential services just because the connection is down.

It also made it clear that indefinite shutdowns were a no-go. Such orders had to be temporary and reviewed periodically.

And finally, governments were told to take it easy with the sweeping bans and were urged to use these measures sparingly, only as a last resort. In simpler terms, don’t use a hammer to kill a mosquito.

And it does look like governments are taking steps in the right direction. Since the Court’s ruling, the number of shutdowns has halved, and the costs of internet disruptions in India have dropped by a staggering 88%.

So yeah, the next time you hear about an internet shutdown, remember, it’s not just about controlling unrest. It’s about protecting livelihoods, safeguarding India’s global reputation, and avoiding massive economic losses.

And while progress has been made, there’s still more to be done to truly tackle this issue.

Until then…

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