Clear and uniform regulations crucial to attract FDI in gaming: Dr Aruna Sharma

In an exclusive interaction with Adgully, Dr Aruna Sharma, Policy Advisor, Development Economist, and former Secretary to the Government of India, provides invaluable insights into India’s evolving policy landscape in the gaming industry, coupled with her experience in fostering public-private partnerships, provide a unique perspective on how the nation can address current and future economic challenges. With a career spanning several decades, Dr Sharma has been at the forefront of shaping India’s economic policy and development strategies. Her vast expertise in governance, economic reforms, and policy frameworks has made her a key figure in driving India’s growth and navigating its challenges.

What are the key trends, developments, innovations that are expected to dominate the industry and the economy in 2025?

Insisting on KYC and online payments can pave the way for blockchain-based technology, enhancing transparency in the gaming industry. Games can also integrate culturally relevant themes and educational elements, making them more impactful, especially in rural India. Responsible gaming has the potential to drive growth as a tool for learning and engagement.

To attract foreign investment, clear and uniform regulations are crucial. A well-defined framework will create a stable environment for investors, fostering confidence and encouraging innovation. By focusing on transparency, cultural relevance, and regulatory clarity, India can position itself as a global hub for gaming development, driving sustainable growth and unlocking the industry’s full potential.

What are you looking forward to in 2025?

In 2025, the focus should be on establishing clear parameters to distinguish between games of skill and chance, introducing a licensing framework for online skill-based games, and ensuring consistent taxation policies. These steps can position India as a leading hub for online game development and significantly boost user engagement.

Uniform and transparent taxation rules are equally crucial to address long-standing issues like retroactive taxes and GST ambiguity. With the growing global popularity of Real Money Gaming (RMG), the sector holds immense potential. Clear regulations will not only attract international investment, but also provide access to advanced knowledge and technologies, driving the industry’s growth and innovation.

What are the headwinds and tailwinds that you foresee in the year ahead?

The growth of the online gaming industry in India is promising, but key issues still need resolution. Clear parameters to distinguish games of skill from games of chance, as well as clarity on taxation – particularly retrospective GST on betting amounts – remain unresolved. While these activities are not banned, the lack of legitimacy and consistent policies hinders progress. We need unified legislation!

Introducing mechanisms for onshore and international gaming developers to obtain licenses can drive industry expansion. Games involving real money, such as rummy, fantasy sports, poker, horse racing, and others with skill elements, as recognized by court orders, must be supported through clear registration processes.

Delays in addressing retrospective GST, defining taxable components, and distinguishing games of skill from games of chance are slowing the industry’s growth. Resolving these issues will be crucial to unlocking the sector’s full potential.

How would you describe the overall state of the gaming and E-sports industry in India during 2024?

India’s gaming and e-sports sector has seen phenomenal growth in 2024. With 442 million gamers, the country is now the second-largest online gaming market, valued at $3.8 billion (As per The State of India Interactive Media and Gaming Report) and expected to triple in the next five years, driven by widespread internet and smartphone adoption. Beyond entertainment, online gaming is becoming a hub for education and skill development, showcasing its economic and cultural importance. However, the industry faces some key challenges.

While the recent GST hike from 18% to 28% on online games has boosted revenue for the government by 412% in just six months, bringing in $690 million in 2024, this figure could rise further with a regulatory framework requiring international platforms to register and obtain licenses in India.

Furthermore, the retrospective GST from 2017 and the taxation of players’ money on the table (and is not an income to the platform) are slowing growth. While steps have been taken to address these issues and define GST’s scope more clearly, these efforts are still awaiting full implementation. Resolving these challenges will be crucial for the industry’s sustainable success.

What impact has the broader Indian economy had on the growth and investment in the gaming/ E-sports sector this year?

Not the economy as such, but the proliferation of smartphones, which constitute 60% of the 100 million mobile phones in India, supplemented by the spread of affordable internet, is resulting in increased engagement amongst online gamers. Online gaming provides, besides entertainment at a low cost, an opportunity to learn skills, hone them, and acquire the capacity to coordinate and engage in group games.

This expansion is mostly attributed to the increased adoption of mobile gaming, which offers a chance to develop skills like coordination along with the ability to attain affordable rejuvenation.

Real Money Gaming (RMG) has also seen substantial traction amongst players looking for skill-based, competitive games like rummy, poker, and fantasy sports. However, regulatory clarity on taxation and licensing remains essential to ensure sustainable expansion in this segment. The gaming industry’s dynamic potential is highlighted by the combination of technical accessibility, changing user tastes, and clarity regulations, which positions India as a major player in the global gaming and e-sports market.

What key trends and developments dominated the gaming and E-sports sector in 2024?

In 2024, the gaming and e-sports sector has seen significant advancements, with ease of access and e-sports projected growth to 611 million globally by 2025, with an annual growth rate of 5%. Real Money Gaming (RMG) gained traction, boosted by blockchain technology for transparency, while regulatory hurdles like the 28% GST and licensing ambiguity challenged growth. Despite these barriers, India’s gaming industry continues to boast a vast growth potential with nearly 568 million gamers and 9.5 billion downloads. In India, with a focus not only on professional gamers, but also on coaches and analysts, the country has the potential to emerge in the global e-sports market.

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