Disconnected Economies: The Rising Cost of Internet Shutdowns
In a world increasingly driven by digital connections, the notion of deliberately severing internet access seems counterintuitive. Yet across the globe, governments are resorting to this drastic measure in growing numbers, often under the banner of national security, misinformation control, or public order. Nowhere is this practice more frequent—and economically impactful—than in India, where shutdowns have become an almost routine response to unrest. But as the world’s largest democracy continues to toggle its internet infrastructure on and off, the financial and social costs are adding up in ways that are becoming difficult to ignore.
India’s story is not unique. Globally, internet shutdowns are rising in frequency, duration, and scope. From sub-Saharan Africa to Southeast Asia, from authoritarian regimes to democratic nations, digital blackouts have emerged as a new frontier in state control. These shutdowns may succeed in quieting the digital noise temporarily, but the long-term consequences—particularly economic—are increasingly coming under scrutiny.
When the World Goes Dark
In July 2016, analyst Darrell West published a report estimating the global economic cost of 81 internet shutdowns across 19 countries during the previous 12 months. The number was sobering: $2.4 billion in losses to global Gross Domestic Product (GDP). Countries like India ($968 million), Saudi Arabia ($465 million), and Morocco ($320 million) topped the list. But what was more striking than the totals was what these figures didn’t include: reductions in tax revenue, diminished investor confidence, stunted startup ecosystems, and the human cost of disconnection from vital services and communication networks.
That was nearly a decade ago. Today, the stakes are even higher.
In 2024 alone, India recorded 84 shutdowns, second only to Myanmar, which imposed 85. Though slightly lower than the 116 shutdowns reported in India in 2023, the frequency remains among the highest in the world. These shutdowns often span multiple regions and are justified as measures to contain unrest, prevent violence, or stop misinformation. However, the direct economic toll is rarely part of the public conversation.
Counting the Economic Cost in India
The first half of 2023 offers a revealing snapshot. During just those six months, internet disruptions are estimated to have cost the Indian economy approximately $1.9 billion. Within that period, losses included $118 million in foreign direct investment (FDI) and over 21,000 job losses. The blow to productivity was widespread, affecting everything from banking to retail to transportation.
For industries that rely heavily on internet connectivity, the fallout can be immediate and severe. Consider India’s booming fintech sector. Companies built around seamless digital transactions find themselves paralyzed when the internet vanishes. Rishi Gupta, CEO of Fino Payments Bank, described how shutdowns in areas like Uttar Pradesh disrupted customer interactions and cash flows. “It affects confidence,” he noted, “not just among customers, but also investors and employees.”
The gig economy, particularly app-based services such as food delivery and ride-hailing, is even more vulnerable. Workers in this space often operate on razor-thin margins and depend on real-time digital platforms for their daily income. During a four-day internet blackout in Meghalaya, a delivery rider shared how he and others were left scrambling, unsure whether they’d be able to earn enough to cover daily expenses. “Everything stops. The app doesn’t load, we can’t get orders, and the money just disappears,” he explained.
A Broader Pattern Emerges
India is not alone in facing the economic fallout of shutdowns. In Saudi Arabia, Snapchat outages aimed at controlling content during sensitive times have cost the economy hundreds of millions. Morocco’s block on internet-based calling apps in 2016 sparked national protests and inflicted losses across multiple sectors.
In most cases, shutdowns not only paralyze immediate communication but have lingering effects on digital infrastructure and public trust. The temporary suspension of service can deter entrepreneurs from investing in digital-first ventures, knowing that their platforms might vanish with the flip of a switch. It can also deter foreign investors who require reliable communications and transparency as minimum conditions for doing business.
The Invisible Costs
While direct economic losses—calculated through GDP impact, job losses, or disrupted services—are easier to quantify, a set of indirect consequences quietly eats away at economic resilience. One such consequence is the erosion of investor confidence. Unpredictability is poison for foreign investment, and frequent, unexplained shutdowns make nations appear unstable or unwelcoming to capital.
Another major concern is the breakdown of essential services. In rural areas where telemedicine is gaining ground, an internet blackout can cut access to critical healthcare consultations. Education, especially during exam seasons, is another casualty. With many schools and universities relying on digital platforms for instruction and testing, entire academic calendars can be thrown into disarray.
The financial technology (fintech) boom—often heralded as a key pillar of inclusive economic growth—also finds itself threatened. These platforms depend on uninterrupted internet for micro-loans, digital wallets, and even identity verification. During shutdowns, millions of users are locked out of essential financial tools, compounding the already dire economic consequences.
The Political Tradeoff
For governments, internet shutdowns offer a seemingly simple solution to complex problems. Social media-driven unrest, misinformation, and protests can be silenced swiftly. But these short-term fixes come at the cost of long-term economic health and democratic accountability.
The United Nations has weighed in on this issue, passing a resolution supporting the “promotion, protection, and enjoyment of human rights on the internet.” While largely symbolic, it underscores the global consensus that access to the internet is increasingly viewed as a basic human right—one that should not be infringed upon lightly.
Despite such international pressure, shutdowns are rising, not falling. In India, courts have upheld the right of the state to enforce shutdowns under certain conditions, even as civil liberties groups push back. Globally, countries like Iran, Ethiopia, and even the United Kingdom have floated policies that give authorities sweeping powers to limit or regulate digital access during times of crisis.
Shutdowns in a Digital Economy
The digital economy is more than e-commerce or social media—it’s the backbone of modern financial systems, health services, supply chains, and government operations. When it goes down, the ripple effects are immediate and sometimes irreversible.
Analyst Darrell West warns that the financial impact of shutdowns is likely to increase as more nations integrate digital infrastructure into their core economic strategies. In many developing nations, the internet is not merely a tool—it is the economy. Halting it means halting banking, commerce, logistics, education, and emergency services all at once.
As economies become more connected and more dependent on digital infrastructure, the logic of internet shutdowns becomes increasingly tenuous. They are not just a civil liberties issue—they are a threat to macroeconomic stability.
A Call for Accountability
If internet shutdowns are to be deployed at all, governments must treat them as a last resort. Transparent protocols, judicial oversight, and post-shutdown audits should be the standard, not the exception. At the very least, data on duration, reason, and affected populations should be made publicly available.
Multilateral institutions like the World Bank, International Monetary Fund, and United Nations should integrate internet accessibility metrics into their economic assessments and development funding criteria. If nations want to benefit from global trade and investment, they must commit to digital openness and reliability.
The Road Ahead
The need for open, reliable, and universally accessible internet infrastructure has never been greater. As the world continues to shift toward knowledge-based economies, every shutdown pushes countries further from growth and stability. The challenge is no longer just about restoring access but preventing the impulse to restrict it in the first place.
Shutdowns may feel like an easy tool for control, but they come with a price. As the evidence mounts, it is increasingly clear that the cost is too high.
Key Takeaways:
- In 2024, India experienced 84 internet shutdowns, second only to Myanmar, signaling a persistent global trend.
- Shutdowns in India alone cost $1.9 billion in economic output in the first half of 2023, including significant losses in FDI and employment.
- Globally, internet shutdowns caused an estimated $2.4 billion loss in GDP between July 2015 and June 2016, with figures likely rising in recent years.
- Vulnerable sectors include fintech, gig economy services, and rural telemedicine and education platforms.
- International efforts, such as UN resolutions, have condemned shutdowns, but enforcement remains weak.
Sources:
- Darrell West, “Internet shutdowns cost countries $2.4 billion last year”
- indianexpress.com
- business-standard.com
- analyticsindiamag.com
- hrw.org
- finshots.in
- United Nations Internet Resolution (2021)
