Other BriefingsIndia Appoints Nodal Ministries to Regulate Online Gaming, E-sports Industries
The Ministry of Electronics and Information Technology (MeitY) has been appointed the nodal ministry for online gaming in India. For e-sports, the Department of Sports under the Ministry of Youth Affairs and Sports, has been notified as the nodal department. This move has given legitimacy to the sector which was eagerly awaiting regulatory reform to attract greater investments and protect the largely young gaming population. India’s online gaming and e-sports industries allow 100 percent FDI through automatic route.
In a recent move widely hailed by the industry, the federal government designated the Ministry of Youth Affairs and Sports (MYAS) as the nodal ministry for “e-sports (video games without monetary exchange) as part of multi-sport events” and the Ministry of Electronics and Information Technology (MeitY) as the nodal ministry for online gaming-related matters. On December 26, 2022, the government published a gazette notification announcing an update to the “Allocation of Business Rules” to announce these changes.
The government also disclosed that it would shortly draft regulations for intermediaries in the online gambling industry and initiate a public consultation process. A uniform regulation at the federal level is seen by many industry watchers as necessary for the gaming industry to reach its next development phase, capitalizing on a combination of growth drivers, such as India’s expanding mobile phone user base, growing spending power, broader access to higher internet speed, and pandemic restrictions to outward mobility.
Further, the allocation of a nodal ministry for the online gaming sector has resolved a long-standing debate on considering gaming platforms as intermediaries or publishers. MeitY, the Ministry of Information and Broadcasting, and the Ministry of Consumer Affairs were considered to be key contenders to govern the sector.
Online gaming in India: Market overview
Online gaming in India is among the country’s fastest growing industries, with a potential to generate revenue worth INR 154 billion by 2023 (in terms of rake fees earned), as per a joint report by EY- All India Gaming Federation (AIGF) titled, ‘Online gaming in India – The GST conundrum.’
According to Statista, the market value of the Indian online gaming sector was around INR 79 billion in the financial year (FY) 2021–22 and is expected to reach INR 150 billion in FY 2023-24, indicating a compound annual growth rate (CAGR) of around 15 percent.
As per a KPMG report, the online gaming sector in India is estimated to be worth INR 323 billion by 2025.
Expanding user base in India
In terms of user base, the number of online gamers in India is rapidly expanding, with the mobile gaming community taking the lead. India has more than 560 million internet users, making it the second-largest internet consumer base in the world. Within this, the mobile phone user base comprises an overwhelming 85 percent of the industry, followed by personal computer users at 11 percent and tablet users at just four percent.
Mordor Intelligence found that in 2021, India had over 220 million gamers spending an average of 42 minutes per day on mobile games, while Invest India has pegged this number at 303 million.
The popularity of e-sports has also grown immensely among the users, many of whom are taking it up as a career option. At present, India has around 600,000 e-sports players and 100,000 e-sports teams.
Why is it important to regulate online gaming and e-sports industries in India?
India’s online gaming market, which is among the world’s fourth largest, has come under scanner in recent times after the proliferation of games like cards, casinos, and fantasy sports among young people led to addiction and financial losses, with some reported cases of suicide.
In response, several states in India, including Kerala, Tamil Nadu, Madhya Pradesh, and Karnataka, have attempted to impose bans on online gaming with monetary stakes, following outcry from distressed parents of children addicted to playing these games. Although the judicial institutions in these respective states overturned the ban, the industry has been plagued by the uncertainty of its future in India. Although the judicial institutions in these respective states overturned the ban, the industry has been plagued by the uncertainty of its future in India. This move to bring the sector under regulatory control has provided it with much-needed legitimacy, lifting the looming threat of a ban.
Additionally, it is essential that the sector be managed by a specified set of regulations to avoid ambiguity in the future given the enormous investment potential that the gaming business possesses, having attracted FDI to the tune of US$544 million during the August 2020–January 2021 period.
It must be noted that in the absence of a nodal ministry to oversee the sector, online gaming intersected with multiple ministries, including MeitY, the Ministry of Information and Broadcasting (MIB), and MYAS.
By allocating MYAS as the nodal ministry for e-sports, the government has officially recognized e-sports and given them an equal footing with traditional sports in the nation. This is happening at a time when the Asian Games have already acknowledged e-sports as a pilot medal sport. At the 2022 Commonwealth Esports Championships earlier in the year, India also claimed the bronze medal.
How is the industry responding to the development?
Shivani Jha, a tech policy lawyer and the director of the EWA Center (eSports Players Welfare Association) commented that this “step will lead to the centralization of the digital rights of gamers”, while making the procedure simple and fair for all stakeholders.
Roland Landers, CEO, All India Gaming Federation (AIGF), welcomed the appointment of MeitY as the nodal ministry for online gaming, stating that “a uniform central regulation for the sector has been a long-standing demand of the industry, and this step by the government will hopefully lead to a progressive regulatory framework underpinned by consumer welfare.”
For the e-sports industry, Roland added the nomination of MYAS as the nodal ministry, which will finally lead to the recognition of an India Esports Federation, better rules and procedures for selection of India teams for international events like the Asian Games, and also lead to better opportunities and facilities for our e-sports players on par with other sportspersons.
According to Joy Bhattacharjya, Director General of the Federation of Indian Fantasy Sports (FIFS), the appointment of MeitY as the primary regulating body will give investors, businesses, and consumers clarity and stability. He further added that this decision was in line with the government’s initiative to push for growth of the animation, visual effects, gaming, and comics (AVGC) sector, making India a global hub for online gaming.
Rohit Jagasia, founder and CEO of Revenant Esports, lauded the decision stating “We can now proudly consider e-sports a legitimate sport in India. This revolutionary decision will not only transform the country’s gaming landscape in terms of improved infrastructure, funding, exposure and providing education about the sector but will also put India on the global e-sports map as a force to be reckoned with.”
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