Although highly unlikely, there are countries that do this already (eg. North Korea). Suppose India decides to do the same and implement only an Intranet for the citizens, what would happen to the blockchain? Since we already have a copy of the blockchain before they shut off the internet, will be be using bitcoins with 0 confirmations since all the mining pools are outside India? Or will the blockchain get split? What would happen if they turn the internet on again after that?
Since we have only a handful of ISPs here, isn't it also easy for them to carry out Sybil attacks on the peers and disrupt the network?
BBS, Radio, Mesh, etc..
Doing something like that will only increase the research and implementation on alternatives.