Gaming Can Give India An Edge In AI Innovations: Here's What How The Govt Can Help

More than vocal support, what the gaming industry instead needs is a conducive regulatory and taxation policy environment that can ensure sustainable growth and innovations.

With developers, platforms, and gamers all co-located within the same geographical region, India has a unique advantage.

Source : Pixabay

During the 78th Independence Day speech, from the ramparts of the historic Red Fort, PM Modi detailed a plan for ‘Viksit Bharat @2047. One of the critical mentions in his speech was that India is well-positioned to leverage its burgeoning tech population to lead innovations, particularly in the field of game design and development. 

Although, our Prime Minister has been supportive of the gaming industry in various instances, from interacting with the top gamers of the country, to encouraging the youth to take a lead in game design and development. But do these measures push for path-breaking innovations within the industry? 

More than vocal support, what the gaming industry instead needs is a conducive regulatory and taxation policy environment that can ensure sustainable growth and innovations. India’s technical prowess is underscored by the fact that a significant share of Indian-educated tech professionals decorate Silicon Valley and have extensive exposure to new use cases, including gaming.

Even in India, the startup culture is progressing leaps and bounds with many startups building tech-enabled products and services. The online gaming industry has become one such arena for attracting higher investments from domestic and foreign investors that could trigger skilled-job creation, and multiply innovations in game design and development.

Online Gaming & Indian GDP

According to the report - ‘India's Booming Online Gaming Industry - A Potential Powerhouse’ published in July 2024, the share of online gaming in India’s GDP has seen a growth of 27.5 per cent from 2019-22. 

Moreover, as per the findings of the India Gaming Report 2024, India’s online gaming industry is expected to almost double by 2028 to $6 billion from $3.1 billion in 2023. Simultaneously, the deepening of smartphone and internet accessibility and emerging technologies have further boosted the number of gamers, especially from tier 2 and tier 3 cities within India. Such significant changes in the gaming landscape require the use of advanced and emerging technologies to ensure safe and responsible gaming. In this context, artificial intelligence (AI), plays a crucial role in stimulating innovations, especially in ensuring responsible online gaming. 

Additionally, the Government has taken cognizance of the dynamic nature of the online gaming industry and its immense revenue potential that can add to the government’s coffers. However, the unstable regulatory and taxation policies of the government have added to the industry woes, especially the application of 28 per cent GST on both games of skill and chance. 

Thus, recognising the difference between the games of skill and chance through legislative and legal frameworks is a critical step to achieving the twin objectives of responsible gaming and increasing revenues. 

How Can Innovations Promote Responsible Gaming & Economic Growth? 

India’s extensive network connectivity and the proliferation of over 60 million smartphones provide access to a diverse group of gamers. This has further contributed to increased demand for a wide variety of games, especially from tier 2 and tier 3 cities within India.

With developers, platforms, and gamers all co-located within the same geographical region, India has a unique advantage. Additionally, the gaming sector offers a spectrum of experiences, from free educational games designed to enhance motor skills to mental skill-based games involving real money. The design of such games is becoming increasingly sophisticated, inclusive, and team-oriented through the use of AI and other emerging technologies.

AI also has the potential to enhance analytics in games of chance, providing deeper insights and optimising gameplay. Furthermore, AI can expedite the detection of anti-money laundering (AML) violations and other unlawful activities on gaming platforms, alerting enforcement agencies more quickly. The self-regulatory organisations (SROs) governing the gaming industry have already implemented codes of conduct centred on ‘responsible gaming’ to curb instances of addiction and ensure mental well-being. 

Furthermore, AI can help identify not only illegal activities but also ensure compliance with Know Your Customer (KYC) requirements and digital payment protocols. In addition, AI could monitor social impacts, detect if an individual is spending excessive amounts of time or money on gaming, and trigger interventions such as counselling when needed.

As the gaming industry increasingly embraces AI in the pursuit of responsible gaming, both developers and platform providers are leading the charge. With social and ethical concerns addressed, the government should actively support the growth of AI in gaming. This expansion of AI in gaming will, in turn, spill over into other use cases, fostering innovation across various sectors.

AI will also improve security for databases, digital payments, and KYC processes, ensuring that gaming platforms can trace winnings and prevent misuse. The potential for AI growth across multiple sectors is vast. The gaming industry can serve as a testing ground for improved analytics, regulations, and resource utilisation. Given India’s large gaming audience and technically proficient developers, the country is uniquely positioned to develop AI and tech-enabled gaming products for the global market.

Currently, the online gaming industry in India faces a volatile regulatory environment. The lack of clear and consistent policies across states creates uncertainty for investors to invest in the industry, expecting stable and growing returns.

According to the report published by EY and USISPF in June 2024, this instability has indeed discouraged long-term investments in some of the top gaming companies. The report explicitly stated that these gaming companies have witnessed decreased revenues due to increased GST costs and are also facing a ‘funding winter’ since October 2023.

Thus, affirmative policy changes such as establishing distinguishing parameters between games of skill and chance and clarity in tax administration are necessary steps to foster innovations, curate gaming products for the world and set India on the path to becoming a $5 trillion economy by 2047. 

(The author is a Practitioner Development Economist and retd Secretary to GoI)

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