By Rameesh Kailasam & Madhabi Sarkar
India is one of the world’s fastest-growing economies. With a population of nearly 1.4 billion, more than half of India’s population is below the age of 40 years. India has embarked on a path to transform its economy through three essential pillars—digital technology, infrastructure development, and sustainable growth.
Over the last decade, India has witnessed an unprecedented digital boom, including the implementation of the Aadhaar ecosystem, UPI, as well as digital payments. The numbers speak for themselves—as of December 2022, India has a teledensity of 84.56% (134% in urban areas) and more than 830 million telecom subscribers. These data points point to a vast market for digital goods and services. It is precisely here that India’s startup ecosystem, including the gaming companies, can reap the benefits of India’s digital penetration, provided the government offers a supportive ecosystem that balances stakeholder interest through light-touch regulations.
On December 23, 2022, the government of India’s Allocation of Business (370th Amendment) Rules, 2022 was notified allocating matters relating to online gaming to the ministry of electronics and information technology (MeitY). Further to this, MeitY, on January 2, 2023, issued the Draft Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules (“Draft Rules”) to provide a responsible and accountable regulatory framework for online gaming intermediaries.
The gaming industry has tremendous development potential in India, considering the teledensity and smartphone penetration in the country. The online skill gaming industry today is an embodiment of Make-in-India and Digital India. There are more than 500+ Indian online gaming startups which have attracted more than `20,000 crore in investments/ FDI and are expected to attract more than `50,000 crore by FY25. According to the AVGC task-force report constituted by the government, India is expected to become one of the world’s leading markets in the gaming industry. Growing steadily for the last five years, it is expected to reach three times its current value and reach $3.9 billion by 2025. According to a KPMG report, India currently has over 400 gaming companies and 420 million online gamers, second only to China.
Recognising the potential early on, the Indian government has rightly assesessed the significance of gaming as an industry. As a result, many gaming and multimedia startups are looking to foray into gaming. But they are held back for various reasons.
First, we keep seeing reports about certain states equating online gaming with wagering or gambling. Despite a recent decision of the apex court clearly stating that games of skill are perfectly legal, there is a general tendency at the state level to discourage the online gaming industry keeping a view of one or two games they may have developed a perception about.
This lack of clarity creates an unfortunate perception issue—banks become risk-averse, lest they be held responsible for non-compliance with payments. As a result, they refuse to partner with gaming companies and marketplaces, citing different reasons. As in-app purchases are a significant source of revenue for game developers/ marketplaces, this becomes an existential threat. The government, RBI, banks, and financial institutions must therefore devise a framework that facilitates the smoother transfer of payments between gamers, publishers, and other institutions, provided they comply with the applicable law. The gaming industry can do its part to assuage any fear that the regulators have.
Another missing factor seems to emanate from a lack of fundamental understanding of the gaming business at the field level. It is important that the police and tax departments be familiarised and sensitised with how the industry works as well as with the role of each stakeholder in the process. There needs to be a government-industry collaborative for capacity building and awareness in this regards for government functionaries and others involved in interacting with this ecosystem.
The gaming sector has developed tremendously during the last decade. Games have more interactive and life-like, integration of virtual and augmented reality and the development of what the industry calls Massively Multiplayer Online Games (MMORGs)/ Massively Multiplayer Online Role-Playing Games (MMORPGs). As per experts, high-speed internet connectivity through 5G and faster broadband will further accelerate this trend, leading to further immersive and interactive low-latency games. Therefore, telecom company and government investments in telecom infrastructure should be prioritised. Furthermore, accommodative policies in the form of tax benefits and so on must be extended to incentivise the players in the industry. Skill development for the gaming sector—imparting skill-based training in coding, multimedia, and animation should be a focus for our educational institutions. All of these will help India become a gaming powerhouse. At the same time, it is noteworthy that the Union government is equally rising upto the occasion and working in this regard. A great policy backed by an equally enabling tax regime is the need of the hour.
About the authors: Rameesh Kailasam & Madhabi Sarkar respectively, CEO, and senior manager (policy), Indiatech.org. Views are personal.