Indian online Gaming sector

Indian online Gaming sector

Context:

Recently, Digital India Foundation (DIF) has recommended the government to establish a ‘whitelist’ of compliant gaming companies, ensuring that payment gateways and internet service providers serve only the listed operators to curb money laundering.

Relevance:

GS-02 GS-03 (Government policies and Interventions, Economy)

Dimensions of the Article:

  • Key Highlights of the report
  • India’s online gaming industry
  • Factors that led to the growth of gaming industry
  • Challenges of the Industry

Key Highlights of the report:

  • The report points out that money laundering is a major risk to the success of the Indian online gaming sector.
  • The report highlights the use of international online betting sites for money laundering and terror financing as a growing trend in cybercrime and recommends the government to create a ‘whitelist’ compliance to gaming companies to ensure legitimacy.
  • It advocates for the creating of a dedicated task force to target illegal operators and also to make Know Your Customer (KYC) practices more stronger.
  • The report calls for action against misleading advertisements related to online gaming.
  • Growth of the Indian Real Money Gaming (RMG) Sector: The Indian RMG sector has grown at a compound annual growth rate (CAGR) of 28% between FY20 and FY23, with projected revenue of $7.5 billion in the next five years.

India’s online gaming industry:

  • It is one of the world’s largest and the fastest growing industry.
  • The size of the gaming market in India in 2023 was valued at US\$2.2 billion, and is expected to grow to US\$8.6 billion by 2028.
  • As of November 2023, there were about 538 million gamers in India.

Factors that led to the growth of gaming industry:

  • The democratization of technology has made affordable access to smartphones widely available, and the competitive pricing of mobile data plans has further facilitated its growth.
  • India currently has a smartphone base of more than 680 Million, of which more than 80% have 4G connection.
  • With initiatives like BharatNet and the National Broadband Mission, the internet infrastructure and its connectivity especially in Tier-2 and Tier-3 cities have expanded making it feasible for the online gaming sector.
  • Moreover, the government’s regulatory framework under IT (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021 for have strengthened online gaming industries.

Challenges of the Industry:

  • Regulation: Policy frameworks concerning online gaming differs from state to state creating uncertainty for the players. For example: Karnataka is more liberal as compared to Telangana and Andhra Pradesh.
  • Tax: The recent introduction of 28% GST on the total face value of bets has created a problem for the industry , especially in the long-run. It would demotivate small gaming companies.
  • Addiction concern: The problem of young generation especially below the age of 24 getting involved in gaming has detrimental affects of getting addicted to it.

Way forward:

  • The government should regulate whitelist of compliant gaming companies to enhance transparency and restrict access for illegal operators.
  • Meanwhile, frequent audits and verifications must be made to enforce Anti-Money Laundering (AML) standards across the gaming sector to reduce the risk of money laundering and terror funding.
  • The users should also be made aware about the harmful effects of using illegal gaming platforms to make sure that they don’t fall prey to fraudulent gaming operators.