Online gaming in India to become a $2.7 bn industry in FY25

Online gaming in India may grow 20% to become a $2.7 billion (₹23,100 crore) industry by the end of fiscal 2025, a study said.

Currently home to 442 million gamers, next only to China, India will host 538 million gaming enthusiasts by the end of the fiscal year, the study titled ‘Guardians of Safe Play: Ethical Gaming for Vibrant Bharat’ said.

Gamers spent 8.5 hours a week on real money gaming in FY22, contributing 83-84% of industry revenues, according to the joint report by Grant Thornton Bharat and E-Gaming Federation.

Despite the introduction of a steep 28% goods and services tax (GST) in 2023, investor confidence stayed strong, with SBI Mutual Fund investing ₹410 crore (about $50 million)and the Kamath brothers (Nikhil and Nithin of Zerodha) committing ₹100 crore ($12 million) in online gaming firm Nazara Technologies.

International players have also shown keen interest: Japanese entertainment giant MIXI Inc. launched a $50 million venture fund for the Indian gaming sector, while South Korean game developer Krafton Inc. announced a $150 million investment in Indian startups, adding to their existing $140 million investment portfolio across 11 gaming ventures.

Krafton’s involvement extends beyond direct investments, participating as a limited partner in 3one4 Capital and Lumikai, representing about 10% of their total Indian investments.

“Since 2021, the industry has seen over six strategic exits worth $775 million, (the birth of) three unicorns, and a public listing (that was) oversubscribed 175X, with 80% listing gains,” Grant Thornton Bharat partner Vishal Agarwal said.

“India’s tax and regulatory framework for online gaming has evolved, with clarity in FDI positions and overhauls in tax and GST regimes,” Agarwal said, adding that despite the promising outlook, industry growth still hinges on a robust regulatory framework.

The report also throws light on the need for organized growth and consumer protection in online gaming, under the Consumer Protection Act of 2019.

While innovation thrives, cybersecurity threats in real-money gaming pose risks, requiring constant adaptation to regulations and risk mitigation.

Protecting vulnerable players and promoting responsible gaming practices are crucial. Collaborative efforts from industry, regulators, and advocacy groups are essential for a safer and more responsible gaming environment, the report said.

Differentiating between games of skill and chance is vital for regulating real-money gaming. Skill-based games, relying on players’ decisions, are legal in India, while games of chance, relying on luck, are often prohibited. This distinction shapes regulations, determining legality, taxation, and oversight.

“Recognizing this difference allows for tailored regulations that address specific risks associated with each category while supporting innovation and growth within the gaming industry,” the report said.

India’s gaming industry operates under a mix of federal and state laws. While some states like Goa allow licensed physical casinos, others like Meghalaya, Nagaland, and Sikkim regulate online gaming through licenses.

A centralized federal approach is gaining traction, with courts recognizing “skill-based gaming” as a protected right under the Constitution, allowing states to regulate but not ban it.