The Indian online gaming industry is projected to grow to USD 6.26 billion by 2028 with an estimated compound annual growth rate (CAGR) of 15.68% between 2023-28. Many startups are hopeful and are investing in emerging technologies to make the fastest-growing online gaming ecosystem more safe and responsive.
India has the right recipe for developers in terms of technically trained manpower, spirit to innovate, and storytelling ability – a basic ingredient to develop a game. A more conducive environment for startups, developers, and other stakeholders could bring in higher investments, innovation, and employment opportunities and allow gamers to use their skills to earn a livelihood.
India with a bustling population of 1.4 billion and a demographic structure featuring 25% of the population under the age of 15 and a further 65% under 60, presents a thriving market for online gaming. Simultaneously, the widespread accessibility to the internet and smartphones has given a major boost to the sector.
While the fever of e-gaming is fashionable amongst the youth but not restricted to them, the elderly population is developing a flair for online gaming too. This phenomenon is unfurling a new trend in the online gaming arena as the aging population has greater accessibility to mobile devices and low-cost internet.
Similarly, the transition from console gaming to mobile-based games has expanded accessibility and fostered innovation within the industry. The development of online gaming beyond arcade and strategy games to including poker, rummy, and online casinos has brought opportunities for the developers to build on the user experience by leveraging technologies such as artificial intelligence, machine learning, augmented and virtual reality.
Furthermore, the recognition and distinction between the games of skill and games of chance by the Supreme Court of India has reinforced the legality of skill-based online gaming and gambling. The court stated that games wherein success relies more on skill than on chance will not be classified as gambling or wagering, but will be recognized as games of skill.
In December 2022, the Ministry of Sports and Youth Affairs also announced the integration of E-sports with traditional sports while acknowledging and encouraging gamers to participate in multisport events. Additionally, the MeiTY has provided much-needed recognition to skill-based e-sports and e-games as permissible under the IT Amendment Rules, 2023.
However, certain recent developments in laws and regulations governing online gaming in India have become a matter of concern for its stakeholders.
Firstly, a major bone of contention is the increased tax rate of 28% under the new GST is applicable on the face value of all the bets placed in all online gaming and casinos rather than on gaming revenue. Additionally, GST authorities have made no difference between the games of skill and chance.
A higher tax has also adversely affected the revenue and earnings of online businesses and gamers respectively. The net value of developers has also been affected adversely with a fall in stocks by 15-18%. Further on, the indirect tax authorities have served tax evasion notices to gaming companies to the tune of one lakh crore. This is a dampener and needs resolution
Secondly, the application of IT Amendment Rules, 2023 on online gaming has further termed such platforms as intermediaries and passed on them the responsibility of self-regulation and monitoring. Thus, under the act, the companies are saddled with increased compliances and related costs. Additionally, gambling being a state subject under the frame of the Indian constitution has also triggered confusion among stakeholders in complying with dual sets of laws.
Many critics suggest that a more effective and distinct mechanism will be necessary in the long run to regulate online games and gambling activities. Moreover, distinguishing parameters for games of skill that are permissible should be addressed clearly. In this regard, the self-regulatory organizations (SROs) set up by intermediaries could set parameters in discussion with the government to further distinguish between games of skill and chance.
The country comprises a huge consumer market with nearly 650 million smartphones and 67% households having a phone spread bound to increase the potential for the gaming sector. Currently, the e-gaming sector in India is flourishing with investments and technological advancements to make online gaming safer for users, both mentally and financially.
However, India becoming a hub is an opportunity but the pain points need immediate resolutions by striking a balance between supportive policies and precise regulations.