Today's Editorial

Getting to a new level in India’s online gaming sector

Relevance: GS Paper III

Why in News?

The Prime Minister’s vision to establish India as a prominent global gaming hub has received renewed attention. In April 2024, he spent a day with seven of the country's top gamers.

Prime Minister's Involvement and Vision:

• PM discussed the trajectory of the gaming industry and sought to understand the challenges gamers encounter, particularly the nuanced distinction between skill gaming and gambling (a game of chance). This could pave the way for a more conducive and forward-looking regulatory environment.
• The online gaming industry forms a critical part of Digital India's vision and initiative.
• Some of the key takeaways from the discussion included the opportunity offered by the increasing number of games based on Indian mythology and the scope to encourage the participation of women, in addition to fostering innovation.
• The players also highlighted the issue around the perception of gaming as a career in India.

Rapid industry growth:

• The online gaming sector in India is experiencing fast growth, with a 28% compound annual growth rate (CAGR) from FY20 to FY23 and projections to grow to ₹33,243 crore by FY28.
• This sector not only attracts significant foreign and domestic investments but also generates substantial direct and indirect employment.
• Leveraging India’s IT prowess, the industry holds natural potential for India. Notably, while the size of the global gaming industry crossed $300 billion in 2021 — more than the combined markets for the movie and music industry — the online gaming segment in India constitutes 1.1% of the global online gaming revenue.
• Online gaming is not only a multi-billion opportunity for Indian start-ups, but it can also form an important part of ‘India Techade’ and the goal of a $1 trillion digital economy. 

Cultural and Social Impact:

• The gaming industry in India is uniquely positioned to leverage the country's rich cultural heritage by incorporating India’s rich cultural heritage (stories, legends, and folklore), which could appeal to both domestic and international markets.
• Additionally, there's a push to encourage women's participation in the gaming industry, fostering diversity and inclusivity.
• As perceptions about gaming as a viable career option evolve, India stands to benefit from a growing pool of talented individuals driving innovation and pushing boundaries in the gaming landscape.

Government Initiatives and Regulations:

• These initiatives aim to foster innovation and provide a stable policy framework for the industry. All these measures have provided a sense of clarity and certainty in terms of a policy framework for all online gaming startups. This will go a long way in fostering innovation.
• The Ministry of Information and Broadcasting established the Animation, Visual Effects, Gaming, Comic and Extended Reality taskforce.
• The Ministry of Electronics and Information Technology was identified as the sector's nodal ministry.
• The implementation of the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, has been introduced to provide a clearer regulatory environment for gaming startups.
• Clarification around the ambiguity concerning tax deduction at the source of winnings.

Challenges and Regulatory Issues:

• Despite the provision of self-regulatory bodies within the IT Rules of 2021 intended to regulate the industry, there are concerns about the effective implementation of these rules, thus nullifying their intended impact.
• Recent revisions in taxation have placed the industry, particularly startups, in a precarious position.
• During the July 2023 Goods and Services Tax Council meeting, the Council decided to enforce a tax rate of 28% on the total face value of bets (effective October 1, 2023), regardless of whether the activity is classified as a game of skill or chance.
• Before this, online gaming firms in India were subjected to an 18% GST rate since the introduction of the indirect tax system in July 2017.
• While this measure has resulted in an initial uptick in government tax revenue, it raises concerns about the industry’s long-term sustainability and its consequential impact on job creation in this sector.

Way forward:

• By fostering an enabling environment for skill gaming, promoting diversity and inclusion, and capitalising on its rich cultural narratives, India can not only realise its vision of a $1-trillion digital economy but also shape the future of gaming on a global scale.
• India stands at the threshold of a transformative era in the gaming industry.
• Self-regulation is crucial in an industry driven by innovation and fast-evolving technology. The IT Rules of 2021 should be effectively implemented.
• NITI Aayog’s discussion paper with draft guiding principles for the online fantasy gaming sector also proposed a self-regulatory model of governance with a self-regulatory organisation at its helm.

Conclusion:

The Prime Minister’s meeting with top gamers highlights the government's commitment to understanding and potentially revising regulatory frameworks to support the industry better. India has ambitious plans to enhance its stature in the global gaming market through strategic growth, regulatory adjustments, cultural leverage, and inclusivity initiatives. The country is looking to balance economic goals with cultural promotion and social inclusivity, creating a robust ecosystem for the gaming industry.