Getting to a new level in India’s online gaming sector

There is much potential in India to shape the future of the gaming industry

May 07, 2024 12:08 am | Updated 12:35 am IST

‘The online gaming industry forms a critical part of the Digital India vision and initiative’ 

‘The online gaming industry forms a critical part of the Digital India vision and initiative’  | Photo Credit: Getty Images

The Prime Minister’s vision to establish India as a prominent global gaming hub has received renewed attention as he engaged with seven of the top gamers in the country. Spending a day with them, in April 2024, he discussed the trajectory of the gaming industry and sought to understand the challenges they encounter, particularly on the nuanced distinction between skill gaming and gambling (game of chance) — it could pave the way for a more conducive and forward-looking regulatory environment. The online gaming industry forms a critical part of the Digital India vision and initiative. Some of the key takeaways from the discussion included the opportunity offered by the increasing number of games based on Indian mythology and the scope to encourage the participation of women, besides fostering innovation. The players also highlighted the issue around the perception of gaming as a career in India.

Rapid growth

The online gaming industry in India has seen a rapid expansion of 28% CAGR between FY20 and FY23. Projections indicate further growth to ₹33,243 crore by FY28, with a sustained 15% CAGR. This sector not only attracts significant foreign and domestic investments but also generates substantial direct and indirect employment. Leveraging India’s IT prowess, the industry holds natural potential for India. Notably, while the size of the global gaming industry crossed $300 billion in 2021 — more than the combined markets for the movie and music industry — the online gaming segment in India constitutes 1.1% of the global online gaming revenue. Thus, the potential for growth is enormous.

Not only is online gaming a multi-billion opportunity for Indian start-ups but it can also form an important part of ‘India Techade’ and the goal of a $1 trillion digital economy. The sector has witnessed an array of positive developments, including the establishment of the Animation, Visual Effects, Gaming, Comic and Extended Reality taskforce by Ministry of Information and Broadcasting, the identification of the Ministry of Electronics and Information Technology as the nodal ministry, the introduction of a series of regulations through the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, and clarification around the ambiguity concerning tax deduction at source on winnings.

All these measures have provided a sense of clarity and certainty in terms of a policy framework for all online gaming startups. This will go a long way in fostering innovation that is being powered by young Indians.

Issues that need scrutiny

Nevertheless, there are unresolved issues that require the attention of the government to enhance regulatory clarity. Primarily, despite the provision of self-regulatory bodies within the IT Rules of 2021 intended to regulate the industry, the effective implementation of these rules is pending, thus nullifying their intended impact. In an industry driven by innovation and fast-evolving technology, the role of self-regulation is crucial. NITI Aayog’s discussion paper with draft guiding principles for the online fantasy gaming sector also proposed a self-regulatory model of governance with a self-regulatory organisation at its helm.

Further, recent revisions in taxation have placed the industry, particularly startups, in a precarious position. During the Goods and Services Tax Council meeting in July 2023, the Council decided to enforce a tax rate of 28% on the total face value of bets (effective October 1, 2023) regardless of whether the activity is classified as a game of skill or chance. Before this, online gaming firms in India were subjected to an 18% GST rate since the introduction of the indirect tax system in July 2017. While this measure has resulted in an initial uptick in tax revenue for the government, it raises concerns about the industry’s sustainability in the long term and its consequential impact on jobs being created in this sector.

Soft power

By remedying these deficiencies, India stands at a distinctive juncture to emerge as a prominent global gaming hub. Another advantage lies in tapping India’s rich cultural heritage (stories, legends, and folklore). With an increasing number of games inspired by Indian mythology, there is a unique opportunity to cater to domestic and international audiences.

Furthermore, there is a concerted effort to encourage the participation of women in the gaming industry, fostering diversity and inclusivity. As perceptions about gaming as a viable career option evolve, India stands to benefit from a growing pool of talented individuals driving innovation and pushing boundaries in the gaming landscape.

India stands at the threshold of a transformative era in the gaming industry. By fostering an enabling environment for skill gaming, promoting diversity and inclusion, and capitalising on its rich cultural narratives, India can not only realise its vision of a $1-trillion digital economy but also shape the future of gaming on a global scale.

Amar Patnaik is a former Member of Parliament, Rajya Sabha, from Odisha and an advocate by profession. He was a CAG bureaucrat. The views expressed are personal

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