New Rules On Online Gaming : Daily Current Affairs

Date: 19/01/2023

Relevance: GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Key Phrases: Self-regulatory body, SRO ecosystem, cent compounded annual growth rate, Soft-touch approach, cyber bullying, games of chance.

Context:

  • Recently the Union Ministry of Electronics and IT released the draft rules for online gaming for public consultation.

Key Highlights:

  • The rules framed the approach of the self-regulatory body (SRO) that would be responsible for registering and approving games.
  • The rules specify the mandatory know-your-customer norms for verification and stipulate a grievance redressal mechanism.
  • The sector is also crucial for India’s leap towards the $1-trillion digital economy milestone.
  • Therefore, harmonising the multiple legal positions of the state governments on the sector had become imperative.
  • Online games require a player to make a deposit with the expectation of winning. These games can be broadly divided into ones that require skill and ones in which chance plays a major role.
  • They could have a single or multiplayer format. Action games, card games, e-sports, fantasy sports and strategy sports are some of the genres of online gaming.
  • Note: In the Indian context, games of chance are illegal and thus ruled out in the proposed SRO ecosystem.
  • The new rules encourage the development of games of skill. They will be in three broad categories —
    • free to play,
    • pay to play and
    • play-to-earn.
  • According to the rules, the board of directors of SROs will comprise industry representatives, information communication technology specialists and experts in psychology.
  • There will be regular communication with the Centre about every registered game — this should act as the necessary oversight on the SRO.
  • Audit mechanisms will have to be enforced and the loopholes that were found in cyber security audits should not be repeated in the sector.

India’s Gaming Industry at a glance

  • India’s share of the global online gaming industry is currently just 1 per cent.
  • In contrast, China has a 25 per cent share and the US 23 per cent share in a market of about three billion users.
  • Expected Growth Potential
    • According to industry estimates, in 2020, the worth of India’s online gaming industry was around $1.8 billion.
    • With a 38 per cent compounded annual growth rate (CAGR), the industry is expected to grow to $5 billion by 2025.
  • Potential Users
    • There are about 400 million online gamers in India and their numbers are expected to grow to 450 million by 2024.
    • India’s advantage also lies in the fact that 86 per cent of online gaming is mobile gaming and this sector is growing the fastest.
    • According to the industry body, IAMAI, there are about 950 start-ups in the sector with 15,000 developers; three of these start-ups have acquired unicorn status.

Why centre is taking self-regulatory approach?

  • Soft-touch approach: The Centre has taken a prudent step by adopting a soft-touch approach in the form of an SRO, rather than a regulatory body under the government.
  • Draw investments: The self-regulatory approach could help draw investments that has, so far, been very subdued due to the variety of conflicting legal positions across states.
  • The rules indicate that the government has two initial targets:
    • One, making Indian companies major players in the sector by encouraging innovative games and
    • Two, encouraging the growth of the Indian online gaming industry so that the online gaming economy comes to scale.
  • The government is taking a calculated risk in using the self-regulation approach for the online gaming sector.

Do you know?

  • The online gaming industry pays 18% GST on its revenues or platform fee intake (known as ‘gross gaming revenue’ or GGR) for providing users a platform to play.
  • This fee happens to be roughly 15% of the overall prize pool in any contest.
  • It means GST is about 2.7% of the overall prize pool and if 28% GST is levied on the overall prize pool as suggested by some policymakers, it would result in a 1,000% increase in the effective tax burden.

Challenges associated with Online Gaming

  • Strong dependence on online gaming:
    • A large number of people are developing a strong dependence on online gaming. This addiction is destroying lives and devastating families.
  • Dramatic increase in our screen time:
    • Compulsive usage of technology was heading towards becoming an issue and the pandemic managed to catalyse the steady journey. It has caused a dramatic increase in our screen time.
  • Impact on children:
    • Young boys and girls are trapped in compulsive gaming, many spending as much as six to eight hours per day playing online games.
    • This is affecting their performance in school and straining their social lives and relationships with family members.
  • Impact on Health:
    • Psychologists have opined that the opportunity cost of this is immense as the impact on health is growing with each passing day.
    • Online games like PUBG and the Blue Whale Challenge were banned after incidents of violence and suicide.
    • This addiction is also said to be causing near-sightedness in our youth.
  • Rising incidents of cyber bullying:
    • Further, inadvertent sharing of personal information can lead to cases of cheating, privacy violations, abuse, and bullying.

Steps to boost the Gaming Industry

  • To make a $25 billion industry the gaming industry needs the right entrepreneurial spirit.
  • It needs to be supported through the right policy framework that gives operators-
    • An opportunity to innovate
    • Protects users from operator and self-abuse
    • Maximizes tax revenues without hurting the industry’s growth and innovation.

Conclusion:

  • Requiring a participant to be 18 years and above is a good move.
  • However, it remains to be seen how this is implemented — the experience with the now-banned PUBG indicates, teenagers are more hooked to online games.
  • The regulatory approach will have to target the menace of offshore gambling platforms and illicit entities that advertise their products in several media.
  • The onus is on the SROs to ensure a healthy ecosystem for online gaming.

Source: Indian Express

Mains Question :

Q. Briefly discuss online gaming industry in India. What are the challenges associated with online gaming? (250 words)