India is the “Internet shutdown capital of the world,” in the words of opposition party member Anand Sharma. National and regional governments use shutdowns to tackle anything from political protests to schoolchildren sharing exam papers. As the UK and India negotiate a free trade agreement in which technology and digital services are likely to feature heavily, these disruptions pose a risk to businesses and investors looking to tap into the country’s booming digital economy.
Frequent internet shutdowns in India pose a threat to the country’s own aspirations to be a leader in the global digital economy. (Photo by Kunal Patil/Hindustan Times via Getty Images)
The impact of internet shutdowns on the digital economy
On 13 January, authorities in the Arunachal Pradesh district ordered private internet service providers to shut down mobile networks and WiFi services, after a youth organisation demanded that the district’s chief minister resign over alleged corruption charges.
This incident brought the total amount of internet shutdowns in India to 553 since 2012, according to data from the Software Freedom Law Centre. Reasons for these internet shutdowns range from suppressing political demonstrations and communal tensions, to attempting to curb the spread of misinformation and leaked exam papers.
Some shutdowns have been partial, throttling internet speeds in a particular area. Others have seen both mobile and fixed-line networks cut off entirely.
Researchers at comparison site Top10VPN estimate that these shutdowns cost the Indian economy a total of $583m in 2021 alone. This estimate is based on a tool by internet monitoring group Netblocks, which calculates the economic cost based on the number of hours disrupted.
This may not give a true picture of the cost of shutdowns, however, warns Mansi Kedia, digital economy fellow at the Indian Council for Research on International Economic Relations (ICRIER). “What we realised when we were doing our case studies and field research was that each shutdown was very unique in terms of the number of people and the types of businesses it was impacting,” she said.
Kedia's research also found that most incidents involve restricting mobile internet services, not fixed-line connections. As such, businesses with established contingency plans were relatively insulated, while small companies and gig workers bore the brunt. “Businesses that really felt the impact of this were part of the informal economy where people use mobile phones and WhatsApp to interact and trade with vendors and suppliers,” she says.
For example, e-commerce in districts like Uttar Pradesh and Assam have been particularly disrupted by mobile internet shutdowns. Online retailers including Amazon and Flipkart saw business decline by up to 20% in those regions as a result of shutdowns, according to local reports.
How India's internet shutdowns might affect UK investors
India’s booming e-commerce market is one of the industry sectors that UK investors are most interested in, according to a joint study published last year by Grant Thornton Bharat, the UK Department for International Trade (DIT) and the Confederation of Indian Industry. Local businesses in the UK have also been invited by the UK India Business Council and DIT to collaborate on a ‘digital-first’ project that accelerates a “faster route to [the] India market through e-commerce solutions”.
According to Vasuki Shastry, associate fellow in the Asia Pacific programme at Chatham House, some British companies and international banks that are looking to tap into the nascent digital economy market in India are concerned about the impact of internet shutdowns.
While all governments have national security powers, internet shutdowns, in general, should be the last resort, he argues. “The problem in India is that these things have become the rule, rather than the exception.”
Shastry calls for strict policies and guidelines, subject to parliamentary approval, that can provide certainty for investors and the private sector. “India is trying to benefit from the global digital economy and subvert it at the same time,” he says. “You can't do both.”
Kedia believes that internet shutdowns are likely to remain a blanket policy tool to deal with a wide range of issues in India. She argues that while current technological developments allow for more targeted measures to deal with such problems, India has “gotten too used to it and it seems like a very easy escape".
Shastry, meanwhile, hopes that the optics of India’s government-imposed internet shutdowns will provide some cause for reflection. “The group of countries that frequently shut down the internet is a veritable rogue’s gallery,” he says. “Does India want to be associated with this group?”
