Tracing the growth of the online gaming sector

Online gaming is now seen as a mainstream source of entertainment for people across the globe. With a rise in the adoption of smartphones, internet connectivity, and digital transformation, online gaming has metamorphosed into a lucrative industry with a definite impact on the domestic and international economy.

The global online gaming industry reached a value of over $196 billion by the end of 2022, growing at a CAGR of 9.9%. India witnessed a much higher appeal towards online games. With a CAGR of 40%, the market value of the sector in the country touched over $2.8 billion in 2022.

With its contribution to job creation, revenue generation, and GDP growth, the role of the online gaming industry in the economy cannot be sidelined. In India, this industry has created over 40,000 career opportunities, and this number is expected to increase to 250K by 2025. The sector increased its contribution to the GDP from 0.1% to 0.5% between 2020 and 2022.

As a by-product of the fast-paced developments in the sector, the digital ecosystem of India has seen crucial progress. With an increase in demand for high-speed internet connectivity, digital payment systems, and e-commerce platforms, there exists a significant need to develop a robust digital ecosystem. This would contribute to the growth of other industries such as e-commerce and digital payments. And this goes both ways.

Opportunities and challenges

The sector’s growth has risen in parallel with the increase in smartphone usage and high-speed internet penetration in the country. With over 560 million smartphone users and 700 million internet users, India is one of the largest markets for online gaming.

As opposed to a couple of years back, when gaming was popular only in the metropolitan cities of the country, the boundaries are blurring now with people across the country playing together on easy-to-access, secure, and inclusive gaming platforms. In fact, Tier II and Tier III towns account for a significant share of the total user traffic for leading gaming platforms in India.   

Mobile phones are playing a big role in the rise of online gaming in the world. Being a mobile-first market, 85% of the total online gaming revenue comes from mobile gaming in India. With the Prime Minister’s vision to boost mobile production in the country, we could gradually see a two- to three-fold rise in revenue numbers in the next couple of years. 

The convenience, portability, and availability of affordable smartphones make a good case for mobile gaming. This has also increased investors’ interest in the sector. As per India Brand Equity Foundation, gaming companies in India have raised funding worth $2.8 billion from domestic and overseas investors in the last five years.

All these factors have made the industry highly competitive, with gaming companies constantly innovating and launching new games to attract users.

On the other hand, the Indian online gaming sector is one of the most volatile sectors in the country. The primary reason for this is the lack of clear regulations. The industry is currently governed by a patchwork of laws and regulations, with different states having different laws governing online gaming.

With the new guidelines around TDS and rules for online gaming companies released by MeitY (Ministry of Electronics and Information Technology), there is a ray of hope for things to settle for good. However, interpretation and implementation are key to this, and it is still very early to predict the full picture.

Another challenge the industry is facing is the lack of awareness and understanding among policymakers and the general public about the industry’s potential. Many people still view online gaming as a frivolous activity, without recognising its potential as an industry that can create jobs and contribute to economic growth while also being one of the most engaging means of entertainment.

The online gaming industry contributes significantly to the economy—both in India and globally. But there still remains enormous untapped potential across the world, and harnessing this can yield greater economic benefits.

The author is Senior Director - Public Policy and Corporate Affairs, Head Digital Works (A23).