Published: 15 September, 2023

The rise of Indian gaming

Consultant Jaydeep Chakravartty highlights the need for regulation in Indian gaming and the impact this will have, as well as the economic benefits it brings

With the proliferation of high-speed and dependable internet connections across India and recent developments in iGaming technology, the online gaming industry has seen a massive boom in India over the last five years.

The Indian gaming market is expected to grow from $2.8bn in 2022 to $5bn in 2025. Total market value of the gaming business climbed to $155.9bn in 2020. Indian Prime Minister Narendra Modi on many occasions has praised the gaming industry as a sunrise sector that has the potential to create jobs and cater to the global market.

The online gaming industry has seen a massive boom in India over the last five years. Between 2017 and 2020, the country’s industry expanded at a CAGR (compound annual growth rate) of 38%, compared to 8% in China and 10% in the US. For the past two years, India’s proportion of new paying users (NPUs) in gaming has grown at the fastest rate in the world, rising from 40% in 2020 to 50% in 2021.

According to the Mobile Game Advertising 2022 report, India is the second-largest gaming market in the world now, with over 9.33 billion mobile games downloaded in 2022 alone. India recorded about 390 million online gamers in 2021, out of which 95 million gamers paid to play. The quantity of players in the nation is supposed to expand from 420 million in 2022 to 450 million by 2023 and hit 500 million by 2025.

With technological developments, the iGaming business in India is witnessing significant expansion, while the overall mobile gaming market is projected to reach more than $1.1bn by the end of 2023. The World Economic Forum (WEF) claims that mobile devices are the main force behind the growth of the gaming sector in India. Smartphone use has prompted development in the gaming industry. There is a need for efficient regulation to safeguard consumers, uphold moral standards and solve future social issues due to this exponential expansion.

Currently, the sector is governed by state regulations, with each state passing its own state-specific legislation, the majority of which is obsolete and not designed for online models of business. Simultaneously, there is inconsistency in how different states view online skill-based real-money gaming, with some even banning it. Due to divergent views on what’s allowed and what’s not in different regions, uncertainty is growing, which has further complicated the situation and created more chaos in the business.

The State’s power to legislate is only limited to its territorial boundaries and activities that are intra-State in nature. An inter-ministerial task force set up by the Indian Federal Government to explore new regulations for online gaming last year has recommended federal legislation to govern the industry.

A lack of a uniform regulatory approach for online gaming in state laws is a cause for concern, according to the report suggested by the task force. The report was placed with the Prime Minister’s office last year. A clearly defined regulatory framework is crucial for the industry’s future growth because it has already seen tremendous expansion to this point.

Despite the centre’s new gaming rules and legal jurisprudence set by the Supreme Court and several high courts, Tamil Nadu banned legally permitted online skill gaming in the state.

The Indian Government can take a cue from the United Kingdom to regulate the industry. The UK set up the Gambling Commission in 2005, which is responsible for regulating the market by making sure that users have a set of guidelines and best practices to follow to protect them from the threat of addiction.

The Commission is responsible for licensing the brands and it also protects children and vulnerable people from exposure to gambling. The Indian Government must take a progressive step towards effectively regulating this sector, considering the challenges and difficulties faced by consumers, without blindly following the gaming industry rules in the UK, Ireland, the United Arab Emirates and Singapore.

Last month, the Indian Government announced that it will impose a 28% tax on funds that online gaming companies collect from their customers. Many experts have termed the decision ‘unconstitutional, irrational and a setback to the $1.5bn industry.’

The Federal Government has ushered in a new era of responsible online gaming through strict guidelines by notifying amendments to the IT Rules of 2021. It would be ideal for local governments and the Federal Government to reach a consensus and collaborate with each other to achieve comprehensive and harmonised regulation, in consultation with industry stakeholders because of the dynamic nature of the industry and the intricacies involved.

Such a collaborative effort would not only encourage the online gaming industry’s responsible and sustainable expansion, but also secure consumer protection, uphold moral standards and effectively address social issues.

This would make it possible for the local and federal governments to build a common framework that functions consistently across the nation and do away with regulatory inconsistencies that may result from various states establishing their own laws. A unified regulatory framework will foster a transparent and predictable environment for the online gaming industry.

Another major concern in the industry is that, despite stringent rules, there is a rise in surrogate advertising in the gaming industry. It was found that ahead of the major tournaments, betting or gambling services were promoted in the guise of sports news.

Earlier, the Federal Government found that many online offshore betting platforms had started using news websites as a surrogate product for their advertisement on TV channels, which has financial and socio-economic risks for consumers.

Ahead of the Asia Cup and World Cup, betting advertisements increase around major sporting events and likely involve black money, the Federal Government stated recently. In regards to this, the Federal Ministry of Information and Broadcasting issued an advisory asking all stakeholders, including media entities, online advertisement intermediaries and social media platforms, to immediately refrain from showing advertisements and promotional content on betting or gambling in any form. Failure to adhere to this advisory, the ministry said, mayinvite appropriate action.

Last year the Ministry also issued a similar advisory to stop gambling advertisements. This is the fourth time the Ministry has issued such an advisory. The Federal Government also directed Google to stop overseas online betting platforms, such as Betway and Bettilt, from marketing their ads in the country late last year.

India missed the opportunity of becoming a global manufacturing hub in the 2000s and a social media hub in the 2010s. Hopefully, we won’t miss the bus when it comes to online gaming, second-order biomes and ecosystems, which will flourish more, absorb more foreign investment and provide job possibilities for millions. There is a need for efficient regulation to safeguard consumers, uphold moral standards and solve future social issues due to this exponential expansion.

There is a need for efficient regulation to safeguard consumers, uphold moral standards and solve future social issues due to this exponential expansion