The Promotion and Regulation of Online Gaming Act, 2025 has sent shock waves through India’s investment ecosystem, with implications that extend far beyond the gaming industry. 

• It was passed in Parliament with minimal discussion and without public or industry consultations.
• The Act has triggered concerns about regulatory unpredictability and business confidence in India’s sunrise sectors.

The Economic Significance of Gaming

• Major Pillar: India’s online gaming sector has grown into a major pillar of the digital economy. 
• High Growing Segment: The EY Media & Entertainment Report 2025 reveals that 155 million of India’s 488 million gamers participate in real-money gaming, making it the single largest segment of the industry, growing at around 10% annually.
• Direct and Indirect Losses: Gaming companies recently warned of direct and indirect revenue losses approaching ₹20,000 crore. 
• Job Creation: Beyond this, the sector contributes ₹7,000 crore annually to advertising, sponsorships, data centres, and cybersecurity. 
  • A FICCI-EY study attributed over ₹50,000 crore in indirect job creation to allied fields such as event management and digital marketing.

Causes Behind the Current Crisis

• Sudden Policy Reversal: The law imposes a sweeping ban on all forms of online money gaming — including advertising and financial transactions without adequate debate or consultation, not even with the Department of Consumer Affairs.
  • It ignores the judicially recognised distinction between games of skill and games of chance, collapsing both categories into a uniform prohibition.
• Contradictory Actions: After years of nurturing the sector — including bringing gaming under MeitY in 2022, introducing light-touch regulation in 2023, and launching the AVGC-XR Task Force — the abrupt reversal shocked stakeholders.
• Centralisation vs. Uncertainty: The 2023 amendment to IT Rules had promised centralised regulation and stability. The new Act nullified this assurance, creating fresh uncertainty.
• Sweeping Powers in the Act: The provision allowing the government to ban any game deemed “prejudicial to user interests” widened ambiguity to include even legal, skill-based, or e-sports segments.

Effects of the Ban

• Stifling Innovation: The sector had been generating spillover benefits like IP development, indie and AAA game growth, and positioning India as a global hub. These gains are now under threat.
• Investor Anxiety: The absence of due process signals to investors that sudden reversals can occur in any sector, making India appear unreliable for long-term capital commitments.
• Loss of Trust: Beyond economic setbacks, the biggest casualty is trust — in both policymaking and regulatory predictability.
• Damage to Global Image: International confidence, built painstakingly through initiatives like Digital India and Start-up India, risks being eroded.
• Chilling Effect Across Sectors: Sunrise sectors such as drones, AI, and e-commerce may also be seen as vulnerable to abrupt policy shocks.

Risks Going Forward

• Undermining India’s Growth Story: If trust is not restored, India’s image as a hub for digital innovation could weaken, threatening the broader India growth narrative.
• Capital Flight: Investors may redirect funds to more predictable markets, depriving India of critical FDI in gaming and other tech-driven industries.
• Innovation Going Underground: Developers may shift to informal or overseas ecosystems, stifling domestic growth and job creation.
• Ecosystem-Wide Damage: Ambiguity over “prejudicial” games risks spreading uncertainty even into non-gambling areas like e-sports, animation, and social gaming.

Way Forward

• Regulatory Clarity: Government should urgently issue FAQs and guidelines to specify which categories of games remain legal.
• Confidence-Building Measures: Partnering with industry bodies to host global gaming showcases and investor summits can signal long-term support for legal gaming.
• Institutional Credibility: Consistency in policy is essential. A predictable framework will ensure both consumer protection and investor confidence, safeguarding India’s digital innovation journey.

DOWNLOAD PDF