The Growing Popularity of Online Gaming

Introduction

Online gaming in India has experienced remarkable growth in recent years, and this trend is expected to continue in the coming years. According to a report by KPMG, India had 433 million online gaming users in FY 2021, generating revenues of Rs 136 billion ($1.6 bn). The report also states that by 2025, the number of users is anticipated to increase to 657 million, with revenues of Rs 290 billion ($3.5 bn).

The Growing Popularity of Online Gaming

During the COVID-19 lockdown, people turned to online gaming as a source of entertainment. The affordability of high-speed internet, increased smartphone penetration, a rise in the use of digital payments, and a generation raised on technology have all contributed to the surge in the number of individuals playing online games in India. Rajat Ojha, CEO of Gamitronics, states that online gaming has evolved immensely, especially during the pandemic, as people found new ways to connect and socialize within games.

Are Online Games Gambling?

The terms “gaming” and “gambling” are often used interchangeably in the context of online games. Elements of gambling can be found in various online games, and vice versa. However, in India, the legality of online gaming is still unclear.

Gambling vs Online Games: What Rules Apply in India?

In India, gambling falls under the jurisdiction of the states, as specified in List-II of the Seventh Schedule of the Constitution. This means that only the states have the authority to enact laws governing gambling operations within their respective territories. Gambling is legal in Goa, Daman, and Sikkim, while the Public Gambling Act of 1867, a central law, prohibits all games of chance except for lotteries and games of skill.

However, the definition of a “game of skill” remains unclear. The various state laws governing online gambling in India make it challenging to determine which online games are skill-based or gambling. While betting and gambling are included in the state list, there is no mention of “online gaming” in any of the lists. The existing law on gambling in the country was enacted in 1867 and does not reference online gambling due to the nonexistence of the internet at that time.

The Need for a Government-Backed Regulatory Body

To ensure player protection and confidence in the industry, the government has endorsed the recommendation to establish a centralized regulatory body and legislative framework for online gambling. The Ministry of Electronics and Information Technology has set up a task force to make recommendations on how to regulate the online gaming industry in India. Once the government gives final clearance to the task force’s findings, a comprehensive and supporting regulatory framework can be expected in the coming months.

India’s Online Gaming Scenario

As the online gaming sector in India continues to grow, concerns have arisen regarding addiction, financial fraud, and varying state regulations. Tax officials also believe that online gaming companies have evaded paying significant taxes in recent years. In an effort to crack down on possible tax evasion, the IT department has sent “show cause” letters to seven online gaming companies and several high-value players active on those platforms.

Advantages of Online Gaming

Apart from providing entertainment, the booming online gaming industry can also benefit the economy in several ways:

1. High Earnings through Tax: By taxing gaming and improving laws, the government can control a vast unreported sector and generate substantial revenue. This can significantly impact India’s economy and allow the government to allocate funds where needed. Online gaming is subject to two different rates of GST taxation in India – 28% for games of chance (betting and gambling) and 18% for games of skill (excluding betting or gambling).

2. Job Creation: The growth of the online gaming infrastructure has created job opportunities in various sectors, including game publishers, payment solution providers, smartphone makers, and network service providers. This can contribute to reducing the unemployment rate in the country.

3. Boosting Advertising Revenues: The casual gaming industry’s ad revenues amounted to Rs 3600 crore in FY21, accounting for 60% of casual gaming revenues. This is projected to increase at a CAGR of 29% to Rs 9900 crore in FY 2025, according to a report by KPMG.

4. Revenues from Subscriptions: With the advent of 5G and cloud-based gaming, subscription-based models may gain market share in the mobile-based casual gaming industry. A successful subscription model provides a more reliable revenue stream compared to advertising.

The Downside of Online Gaming

While online gaming can be entertaining and lucrative, it also has potential drawbacks. Extended gaming activities can lead to neglect of social and family commitments, limited social interactions, isolation, and negative effects on relationships and well-being. It can also contribute to bad dietary habits, eyesight problems, and poor posture, which negatively impact physical health. Addiction, driven by a dopamine-mediated high, can lead to compulsive gaming behaviors.

Combating Gaming Addiction

To combat gaming addiction, prevention is key. Limiting access to certain games for children and adolescents, setting time limits, and supportive monitoring are preventive measures that can be taken. If necessary, treatment at a mental health center can involve medication and behavior modification.

Conclusion

The establishment of a central regulatory agency for online gambling in India is expected to be implemented soon. Gaming has become a popular form of entertainment, and people are willing to spend money on online games. A streamlined policy that protects consumers and gamers will lead to increased revenues, job creation, foreign direct investment, and overall economic growth in the country.