Syllabus
GS Paper 2 Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
GS Paper 3 Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights.
Applications where to apply?
When asked about
– Regulatory framework for digital platforms, role of government in regulating industries
– Contribution of the online gaming industry to the Indian economy, potential for growth and employment, impact on taxation.
– Social impact of online gaming, issues of addiction, mental health
Context
The article argues that the rapidly growing Indian online gaming industry needs strict regulation, since it has ramifications on financial, social and political sectors of India.
Source
The Hindu | Editorial dated 14 January 2024
Regulating India’s online gaming industry
India’s online gaming industry is rapidly growing at 27% CAGR but lacks adequate regulation.
Need for Regulation in Online Gaming Industry in India
- Rapid Growth of the industry
- With a staggering 692 million Internet users, India has the world’s second largest Internet user base and ranks eighth globally in terms of time spent on mobile apps.
- The average daily mobile app usage has surged to 4.9 hours, a 32% increase since 2019.
- Notably, a significant 82% of usage is dedicated to media and entertainment with social media accounting for roughly half of this engagement
- It is widely estimated that AI and online gaming can add up to $300 billion to India’s GDP by 2026-27.
Concerns due to lack of regulation:
- Economic issues
- money laundering – In July 2023, the Parliamentary Standing Committee on Finance, identified four major trends in cybercrime. Notably, one includes the use of international online betting sites for purposes such as money laundering.
- Revenue loss – $45 billion annual tax loss for India due to offshore gambling.
- Social issues like:
- addiction,
- suicide,
- fraud,
- privacy concerns
- Internal Security related concerns
- Illegal offshore gambling flourishes due to weak enforcement and lack of regulatory framework.
- The illegal offshore gambling and betting market receives $100 billion per annum in deposits from India and has registered a growth rate of 20% in the past three years.
- National security issues.
Consequences:
- No mechanism exists for individuals to differentiate between legitimate gaming platforms and illegal gambling/betting site.
- Number of illegal operators is multiplying
- 373 million Indian gamers exposed to potential harm.
- Unregulated market hinders responsible growth of the sector.
- Some State governments attempt to ban online gaming. However, the inherent crossborder nature of the Internet makes enforcing such a ban almost impossible, leading to the unintended consequence of legitimate, regulated platforms being replaced by unregulated and potentially harmful ones.
- International Monetary Fund, a combination of high taxes and a weak, discretionary approach to regulatory enforcement creates the most fertile ground for the proliferation of a shadow economy
Benefits of regulation:
- Benefits include safeguarding public interest and trust.
Government Intervention
- Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.
- The rules were notified by the Ministry of Electronics and Information Technology in February, 2021. Specific provisions related to online gaming are:
- The Rules provide the due diligence to be followed by an intermediary (including social media intermediary) while discharging its duties, Grievance Redressal Mechanism and Digital Media Code of Ethics.
- Due diligence: Gaming intermediaries must exercise reasonable care and skill to prevent their platforms from being used for any illegal activities, including games of chance or gambling prohibited by Indian laws.
- Registration: Intermediaries offering real-money games must register with a self-regulatory body (SRB) recognized by MeitY.
- The rules were notified by the Ministry of Electronics and Information Technology in February, 2021. Specific provisions related to online gaming are:
Key Recommendations
- Establish a strict regulatory framework for online gaming.
- Learn from best practices of countries like the UK.
- UK’s centralized regulator with strict enforcement and targeted harm reduction initiatives show positive results.
- Ensure responsible growth of the industry while protecting users and national interests
Conclusion
The meteoric rise of online gaming in India has undoubtedly brought immense economic potential and entertainment value. However, the absence of a robust regulatory framework has cast a dark shadow over its future. Choosing inaction will only exacerbate the current ills. But by embracing responsible regulation, India can unlock the true potential of this sector, ensuring a win-win scenario for gamers, investors, and the nation as a whole.
RELATED TOPICS
Key Terms in the article
Monopoly
A market structure where a single seller or producer controls the supply of a good or service. This control enables the monopolist to:
- Dictate prices: Monopolies can charge higher prices than they could in a competitive market without losing customers, as they have no close substitutes.
- Limit supply: Monopolies can restrict the quantity of the good or service they produce to artificially increase demand and keep prices high.
- Stifle innovation: Monopolies have less incentive to innovate and improve their products or services since they face little competition.
Shadow Economy
The shadow economy, also known as the informal, underground, or parallel economy, refers to all economic activities that happen outside the official channels of a country’s economy. This encompasses a wide range of activities, from small-scale street vendors to large-scale tax evasion by corporations.
Key characteristics of the shadow economy:
- Unreported income: Transactions are not reported to the government, meaning they escape taxation. This can include cash-based transactions, barter, and hidden income from businesses.
- Lack of regulation: Shadow activities often operate outside the legal framework, leading to risks in terms of worker safety, consumer protection, and environmental standards.
- Size and impact: The size of the shadow economy varies greatly between countries, but it can be significant. Estimates suggest it can account for up to 20% of GDP in some developing countries.
- Drivers of informality: Several factors contribute to the growth of the shadow economy, including high taxes, complex regulations, lack of social protection, and limited access to formal employment.
State Government Measures to control online gaming
Several states have implemented their own restrictions or outright bans on specific types of online games, particularly those involving real-money wagers or games of chance:
States with complete bans on online gaming:
- Telangana: In 2017, Telangana enacted a law banning all forms of online gambling and betting, including games of skill like rummy and poker.
- Andhra Pradesh: Following suit in 2020, Andhra Pradesh also prohibited all online real-money games, encompassing both skill and chance-based categories.
States with partial bans or restrictions:
- Tamil Nadu: The state banned online rummy and poker in 2021, categorizing them as games of chance despite arguments classifying them as skill-based. However, the Madras High Court struck down the ban on online skill games in September 2023.
- Karnataka: A 2021 law banned all online games involving real-money wagers, but the Karnataka High Court overturned the ban
References
Practice Question
Critically analyze the need for regulation in the online gaming industry in India. Discuss the effectiveness of existing regulatory measures and suggest possible approaches for a robust regulatory framework. [250 words]