Digital Gaming – The new export?

Digital Gaming – The new export?

By Dr. Jaijit Bhattacharya

If we do not export such value-added compute, others will, and India will end up becoming a large consumer of imported digital games, writes Dr Jaijit Bhattacharya.

With all things getting digitalised, it was obvious that online gaming, would become a very large industry in India and globally. It is not a new phenomenon. Digital gaming has been around pretty much since modern computers were created. It has simply ballooned with the advent of the internet and better digital infrastructure. And as our Prime Minister Narendra Modi has sounded the clarion call for focussing on new large industries where India would have a competitive edge, he has referred to online gaming as Digital Gaming in his policy push for greater support for the gaming industry.

So, what is the issue with the digital gaming industry in India, if the government is supporting the industry and if the startups are coming up in their hundreds, and if people are consuming digital gaming as a cheap form of entertainment? The issue arises from the fact that some games are actually gambling, and it gets difficult to draw the line as to where gaming stops and gambling starts. The reason for this situation is the fact that people have to pay for availing gaming services and gaming does involve payouts on winning. A larger issue that comes from such a stance is that there is a view that Digital Gaming is to be viewed as a “sin” and hence “sin tax” is applicable at the rate of 28% on the total amounts, rather than 18% on the platform revenues. This is akin to having 28% GST on all bank deposits and not 18% on the interest earnings. So if we adopt a stance that any game that involves real money would be gambling, then even services like Netflix become gambling as real money is involved in subscribing for it, and it does provide games. And so, it is not an easy problem for policymakers to solve as gambling does have a detrimental effect on people and families and must be discouraged.

Let us also look at what is at stake, and why does our Prime Minister want to promote Digital Gaming? Globally, digital gaming companies have been acquired for upwards of USD 50 billion by companies such as Microsoft etc. In India, there are almost 450 million digital game users and a substantial number of them are women, as they find it a safe and convenient option for entertainment. It also becomes a means for getting more women familiarised with the world of digital, thus reducing the gender divide in digital. Digital gaming industry generates over Rs 15,000 crores in revenues with a combined valuation of Rs 1,50,000 crores across over 1,000 companies. Digital gaming can also be the killer app that contributes to the usage of BharatNet, the government’s flagship telecom project. Digital gaming contributes to Rs 2,200 crore annually in indirect taxes and perhaps a similar amount in direct taxes. These are all big numbers and at stake are thousands of jobs and also access to cheap entertainment. So clearly, as the proverb goes, we cannot throw the baby with the bathwater.

In addition, digital gaming would be the next generation of exports. As exports have evolved, for millennia, we used to export only merchandise. Then we started exporting manpower that were unskilled labourers, semi-skilled labourers and also highly skilled people like programmers and bankers etc. We then moved into providing services remotely, leading to the creation of the BPO and KPO industries. And now, we are slowly getting into the export of value-added compute. What that essentially means is that we are selling computation from our datacenters and cloud computing facilities by providing value-add to that computation. Digital gaming is one such important value-add.

And the problem is if we do not export such value-added compute, others will and India will end up becoming a large consumer of imported digital games. There is always an argument that we can stop such consumption of imports of digital gaming, but we all know that efforts to stop such imports are akin to the efforts at prohibition – they are eventually doomed.

So, how do we ensure that India does not lose out on the opportunities but at the same time, ensure that the evils of gambling are restrained? Along with this, the additional issue is to ensure that users do not slip into digital addiction. We should perhaps consider having regulations that enforce a limit on the amounts that individuals can spend on a single digital game platform and limits on the duration of play by an individual on a digital gaming platform. There are also ample research done on digital addiction, and one should perhaps consider having regulations for the prevention of digital addiction, which is an issue that has severely harmed many children and adults.

At the end of the day, new kinds of services do raise regulatory challenges and one must take careful steps to ensure that the fledgling industry is not given a terminal sentence while trying to create supporting regulatory frameworks. A showpiece of such a regulation is the one on drones, where India was one of the first to have the regulation which has led to an explosion in the drone industry in India. Hopefully, similar supporting regulations would also lead to India emerging as an export powerhouse of digital gaming.