Today, online gaming in India has rapidly evolved from a mere hobby to a whopping INR 16,428 crore market in FY23. One of the largest online gaming markets in the world, it is projected to generate revenues of 1.47 billion USD in FY24. (Source)
This boom in India's e-gaming sector is attributed to several factors, like easy accessibility to high-speed internet, proliferation of smartphones, and an evolving tech-savvy population. However, we cannot overlook the role of the pandemic in the rapid expansion of India’s online gaming market. Statistics say that while there were 300,000 Indian online gamers in 2020, the number doubled to 600,000 by 2021. (Source) Top Indian players even participated in the Asian Games 2022 held in Hangzhou, where esports marked its formal debut.
Online gaming at the crossroads after GST hike
While it massively exploded, yielding super-impressive numbers, India's esports and online gaming market arrived at a crossroads very soon. This is because the GST council of India declared their decision to increase taxes on real-money games, from 18% to 28%, which came into effect from 1st October 2023. Along with 28% GST, the ministry also slapped a 30% TDS on earnings from wins.
The result of this revised tax model dealt a sharp blow to the country's esports and online gaming sector involving real-money games. And soon, India's "sunrise sector" observed ripple effects such as shrinkage in the number of active users, gaming startups going bankrupt, and larger gaming companies diversifying overseas. This tax hit quickly slashed market growth estimations in the next 5 years, from 25% earlier to a meager 5%.
Experts eye the sunny side
India's burgeoning e-gaming sector has attracted wholesome investments in 2023, even after complying with the revised tax model. Newer avenues of finance have surfaced, apart from venture capital funding, for instance, the SBI Mutual Fund investment worth INR 410 crore, corporate venture funding by Japan's MIXI Inc. worth 50 million USD, and INR 100 crore funding from Kamath Brothers for Nazara Technologies.
Experts predict that Indian e-gaming companies can resume their earlier growth trajectory by revising their marketing budget and possibly increasing it. According to Lumikai, a venture capital funds company, by 2028, nearly 70% of the revenues of digital gaming are expected to be generated from in-app purchases, safe bookmakers’ deposit options, ad revenues, and subscriptions. Studies suggest that more and more players are now inclined towards experimenting with fresh genres, and not just casual gaming. While one-quarter of the active Indian player base comprises paying users, the major part of the revenues is estimated to be driven ahead through innovative mid-core gaming.
Esports teams are also focusing on content creation, like brand shoots, streaming, and social media posts. They feel that simply focusing on winning tournaments cannot sustain wealth creation in the long term. Creating and posting content, for example, about players' lifestyles, can help ignite further interest among their curious fans.
Conclusion
Despite the cries of doom, industry insiders have chosen to stay optimistic about the future of this industry. They are positive that India’s online gaming and esports sector can modify and reshape itself to rise towards blue skies in the next few years.