The online gaming industry has been going through a tough phase recently. The online gaming industry, the fourth largest segment of the Indian media and entertainment sector in 2023 has witnessed a draught in investments this year to date. The online gaming industry has raised total funds worth $23.4 million between January-September 3, this year, thereby reporting a decline of 78.77% when compared with the same period, during the previous year, when it raised funds worth $110.2 million, revealed data from Tracxn, a data platform. As per industry experts, the government’s decision to impose 28% GST on the whole deposit amount and lack of clarity regarding taxation has caused uncertainty. “The protracted decision-making process regarding the proposed increase in GST from 18% to 28% has caused uncertainty. Additionally, there is no clarity on whether GST will be charged solely on the income of developers and platform providers, rather than on the total amount wagered. This lack of clarity has stalled investment in the industry, as investors await the outcome of the Supreme Court judgment or an initiative from the union government,” Aruna Sharma, policy advisor, practitioner development economist and former secretary, Government of India told BrandWagon Online.
It is widely believed that if the final decision by the apex court doesn’t remove the retrospective effect, pending payments potentially force online gaming companies to shut their shop. Industry experts believe both gaming companies and the government need to take strategic and collaborative steps. “ Establishing a direct dialogue between gaming companies and the Ministry of Electronics and Information Technology (MeitY) will be crucial. Additionally, a clear differentiation between casual gaming and real money gaming (RMG) is essential. By categorising these segments correctly, the government can formulate laws and regulations which are fair and appropriate for each type of gaming,” Kashyap Reddy, Co-founder & CEO, Hitwicket said.
However, amidst the overall scarcity of investment in the online gaming industry, investors relied on casual gaming. As per data accessed by Tracxn, investment in casual gaming has increased from $4.6 million in January-September 3, 2023 to $15.9 million in the same period of 2024. As per industry experts, the rising consumer spending on casual games has been one of the key factors behind the surge in investments. “According to the Lumikai report, India is home to 568 million gamers, of which 25% are paying users. The growth in paying users has seen an increase of 17% year on year. This signifies that the local market for casual games is expanding, making it an attractive proposition for investors. As more gaming studios focus on catering to this growing demand, they naturally attract more investment interest. We expect this trend to continue, with investment numbers increasing every year,” Reddy said.