Online Gaming Industry in India: Regulation, Growth & Challenge

Context: 

This editorial is based on the news “Regulating India’s online gaming industry” which was published in The hindu. This article highlights the challenges with the online gaming industry in India, which not only diminish economic value but also erode societal well-being, which results in decline in the trust of users.

Evolution of Online Gaming Industry in India:

• High Internet Base: With a staggering 692 million Internet users, India has the world’s second-largest Internet user base. The average daily mobile app usage has raised a 32% increase since 2019. 
• High Contribution in GDP: The online gaming industry in India is predominantly a home-grown start-up ecosystem growing at 27% CAGR. 
  • It is estimated that AI and online gaming can add up to $300 billion (bn) to India’s GDP by 2026-27.

Challenges Associated with Online Gaming Industry in India:

• Social Concerns: Addiction, Mental Illness, Suicides, Financial Frauds, Privacy and Data Security. 
• Security Concerns: Money Laundering and National Security Concerns. 
  • The growth of illegal offshore gambling and betting markets wherein the volume of digital transactions is a fertile ground for financial malpractices. 
    • The illegal offshore gambling and betting market receives $100 bn per annum in deposits from India and has registered a growth rate of 20% in the past 3 years. 
• Insufficient Regulation: No mechanism exists for individuals to differentiate between legitimate gaming platforms and illegal gambling/betting sites. 
  • The absence of a specialized regulatory authority and enforcement is lacking. 
• Substantial losses to the Exchequer and Market Failure: Estimates indicate that India lost $45 bn per annum in taxation due to operations of illegal offshore markets.

Online Gaming Industry in India: Government Initiatives, Regulations, and Challenges in the Modern Era

• Formation of Regulations: The government is responding to these challenges by proposing new forms of digital regulation for the online gaming industry in India. 
  • The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 marked a commendable step towards oversight. 
    • However, the delayed notification of Self-Regulatory Bodies has stalled the progress.
• Ban on  Online Gaming Industry in India: Some State governments attempt to ban online gaming. 
  • However, the inherent cross-border nature of the Internet makes enforcing such a ban almost impossible.

Way Forward: Global Insights and Imperatives for Regulatory Success

• Follow Global Perspectives: The U.K. has a centralized government regulator, which publishes quarterly the effects of regulation in the online gaming sector. 
  • The strict enforcement, coupled with targeted efforts aimed at harm reduction during 2018-22, has led to a decline in both disordered gaming and medium-to-low risk gaming behavior.
• Regulatory Enforcement: According to the International Monetary Fund, a combination of high taxes and a weak, discretionary approach to regulatory enforcement is a concern with the online gaming sector. 
  • Establishing a strict regulatory framework is an urgent need to protect digital citizens, national interests and also to ensure responsible growth of the online gaming sector.

Conclusion:

Market failure in online services has taken new characteristics and complexities due to the intricate interplay of data and algorithms. To protect 373 million gamers in India, who are potentially at risk, it is imperative that the sector is strictly regulated.