The Potential and Challenges of India’s Online Gaming Industry: Need for a Holistic Approach
Amrit Kiran Singh, Founder President, Skill Online Games Institute (SOGI)

India's online gaming industry stands at a pivotal moment, reminiscent of the inflection point that the IT sector faced in the 1990s. The regulatory approach adopted by the government will determine whether the online gaming industry can replicate the transformative impact that the IT industry has had on the Indian economy over the past three decades.

Prime Minister's Vision

In a recent interaction with players, the Prime Minister emphasized the need for the government to understand the online gaming industry and make necessary changes to support its growth. His remarks highlighted the government's recognition of the industry's potential and the importance of creating a supportive regulatory environment. This vision aligns with the broader goal of positioning India as a global hub for digital entertainment, including online gaming.

The Rise of Online Gaming in India

Global Context

According to a recent report by Accenture, the global gaming industry surpassed $300 billion in 2021, outstripping the combined markets of the movies and music industries by over 3 times. This monumental growth highlights the immense potential within the sector and positions online gaming as a significant player in the global entertainment market and one of the largest industries in the world today.

India's Position

Despite rapid growth, India's online gaming segment contributes a mere 1.1% to the global online gaming revenue. This disparity indicates a substantial untapped potential within the Indian market, which, if harnessed correctly, could elevate India's status in the global gaming industry because of its natural ability in the IT filed. The disparity is even more glaring when you realize that China contributes 25% and US contributes 23%. This is borderless industry that is fuelled by innovation. India could easily grow to 5-10% because of its natural ability in this field unless we score “self-goals”. Self-goals in this sector would be over regulation that will kill innovation and over taxation which would put Indian companies at a disadvantage against international competition.

The AVGC-XR Sector: A Driving Force

The online gaming sector is part of the broader Animation, VFX, Gaming, Comics, and Extended Reality (AVGC-XR) sector, which has emerged as a critical growth engine within the Media & Entertainment (M&E) sector. With an impressive annual growth rate of 20%, the M&E sector in India is the world's fifth largest and most globalized industry, as recently highlighted by Union Minister for Information & Broadcasting, Shri Anurag Thakur.

Economic Impact

Targeted interventions could enable the AVGC-XR sector to significantly bolster the M&E industry and help India achieve its ambitious goal of a $1 trillion digital economy by 2026. India's online gaming segment is the fourth-largest domain within the M&E sector, driven by the Hon’ble Prime Minister’s vision of positioning India as the world's gaming hub.

Government Initiatives and Regulatory Landscape
Positive Developments

This vision has led to the establishment of the AVGC taskforce by the Ministry of Information & Broadcasting (MOIB), the identification of the Ministry of Electronics and Information Technology (MeitY) as the nodal ministry, and the introduction of regulatory frameworks through IT Rules. These initiatives are aimed at fostering a supportive environment for the industry to thrive.

Challenges with GST

However, recent amendments to the GST framework, which increased the GST rate to 28% of the full-face value of bets, pose significant challenges to the nascent industry. This move deviates from both India's historical indirect tax approach and international best practices, which typically cap tax rates between 15% and 20%. The silver lining is the government's commitment to review this decision after the elections. This increase in GST not only puts Indian companies at a huge disadvantage against international competitors it also offers the big Indian market of 300 Mn players to illegal international companies who advertise in India luring players to come to their platforms and win without paying TDS & GST. This also has huge PMLA (Prevention of Money Laundering Act) implications.

Growth Metrics

Despite these challenges, the online gaming industry in India has shown remarkable growth, clocking a compound annual growth rate (CAGR) of 28% to reach over INR 16,000 crores in FY23. It is expected to exceed INR 33,000 crores by FY28 with a CAGR of 15%.

Investments and Employment

The sector has been a major contributor to job creation, technological innovation, and foreign investments, attracting nearly INR 23,000 crores in investments over the past five years and producing three unicorns led by Indian entrepreneurs. In the coming years, the industry, alongside AI, is expected to contribute up to $300 billion (over INR 25,000 crores) to India’s GDP by 2026-27.

Cultural Impact

Beyond economic metrics, the online gaming industry holds the promise of making Indian culture globally accessible, bridging the Indian diaspora to their roots, and bolstering tourism and allied industries.

Addressing Industry Challenges
Addiction and PMLA Concerns

The challenges of this industry have been discussed extensively, particularly the dangers of addiction and concerns under the Prevention of Money Laundering Act (PMLA). While other industries, such as fast food or alcoholic beverages, can only issue warnings (examples: Excessive drinking is injurious to health) the online gaming sector can leverage technology to mitigate negative impacts.

Technological Solutions

For instance, technological solutions can be employed to "lock out" players who overindulge and to prevent money laundering. These concrete actions demonstrate the industry's potential to address its challenges effectively. An Indian Council of Medical Research (ICMR) funded study by AIIMS researchers has shown that gaming disorder can be prevented trough digital interventions.

Future Directions
Lessons from the IT Industry

Given the borderless nature of the gaming industry, continuous innovation is essential for companies to maintain competitiveness on the global stage. Lessons from the IT industry's growth should be applied to ensure the online gaming sector achieves similar success.

Collaboration and Innovation

By fostering a conducive financial environment and investing in skill development, Indian gaming companies can maintain their competitiveness globally. The collaboration between the government and the industry will be crucial in navigating the challenges and maximizing the positive benefits for India.

India is at the cusp of a digital revolution in online gaming, and with the right regulatory support, it can emerge as a global leader in this dynamic field. The success of this industry will not only bring economic benefits but also enhance India's cultural footprint on the global stage.

As we embark on this journey, let us remember that the potential of the online gaming industry for India is too significant to overlook, while the challenges can be effectively managed through strategic collaboration and innovation. Government and industry need to work together to maximise the benefits from this industry to India while mitigating its negative aspects.

This extensive article aims to provide a comprehensive overview of the potential and challenges facing India's online gaming industry, integrating insights from the provided documents and presenting a balanced perspective on the way forward.

(The paper is the author’s individual scholastic articulation. The author certifies that the article/paper is original in content, unpublished and it has not been submitted for publication/web upload elsewhere, and that the facts and figures quoted are duly referenced, as needed, and are believed to be correct). (The paper does not necessarily represent the organisational stance... More >>

Image Source:

Post new comment

The content of this field is kept private and will not be shown publicly.
5 + 12 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.
Contact Us