If i'm playing the game and I get disconnected from the wifi, I'm unable to interact with the game even though I have allowed the app to use my GPS.
The game uses your location to generate Pokemon, and the same Pokemon will appear for people in the same area. If you're offline, the game wouldn't be able to register Pokemon being caught by other players. Even if it has access to your GPS, it won't be able to register the actions of other online players.