This report provides a brief analysis of the Indian economy relating it to the boom in the Indian gaming industry. It further highlights the FDI policies, the domestic competitors, various risks and threats facing the gaming industry in India and then concludes by suggesting certain risk leveraging measures for investing in India such as a Joint-venture with a local games developing firm. The GDP of India in the year 2007-2008 was 9.5% and is projected to continue to develop at a rate of 5% or more till 2050 which would make it the 4th largest economy of the world. The Indian gaming market is also growing at a dizzying pace. According to a report published by Nasscom (National Association of Software and Service Companies in India) in 2007, the gaming market in India is expected to grow to US $424 million by 2010.
India also has easy access to tech-savvy workforce at competitive wages which enables it to produce games 30-40% cheaper than the United States. In addition to this it has high-tech IT infrastructure and is centrally located in Asia with many domestic companies looking for potential foreign tie-ups, which makes India a hot-spot for investment in the gaming industry.dia coupled with its robust economic development, skilled manpower and improved investment environment has become the second hottest investment spot in the world only after China1. India which is the largest democracy and the tenth largest economy in the world2 is also fast emerging as a key one-stop destination for games development.
Game development today is a US $10 billion industry in the United States and India has more than a handful in this lucrative pie. It has emerged as a key one-stop destination for game development. The Indian gaming market is growing at a dizzying pace. According to a report published by Nasscom (National Association of Software and Service Companies in India) in 2007, the gaming market in India is expected to grow to US $424 million by 20103. With high-end infrastructure, competitive labour rates and three major IT hubs in the nation, the industry players are optimistic and expect the industry to grow at a compounded annual growth rate of 72 % over 2006-20104.
Competitors and their functioning: Gaming industry has created a huge Indian market and as a result of this phenomenon quite a few firms have evolved and are giving tough competition to each other. Dhruva Interactive, Milestone Interactive Studios, Paradox Studios, Spiel Studios and Indiagames are some of the major games developers functioning in India. Out of these most of them bank on the easy availability of skilled and cheap labour and a broad knowledge of the gaming taste of people in India.
Most of these firms operate on a small scale basis with the biggest of them having no more than 270 employees5. The strategy applied by these firms is to set up their games developing base in India along with sales offices around the globe. This enables them to reap benefits of the cheap and skilled technicians available in India and sell games at a relatively higher profit margin overseas. The following figure indicates the salary package of Game Designers in the United States: The figure suggests that the average salary of a male Game designer in the United States is $62,113, which is substantially more than the salary of a game developer in India. Recent comparisons and surveys reveal that salaries of game developers in India are 1/3rd that of the game developers in
The United States. This has a major impact on the cost of the final product and enables to develop a game for 30-40% cheaper than the United States6. According to India’s National Association of Software & Service Companies (NASSCOM), a PC game that would cost anywhere near $6 million to $7 million to be developed in the United States can be developed in India for only $500,000 to $3 million in India7.
India’s Insight: The Present and the Future of Indian economy The Indian economy is the 12th largest in USD exchange rate terms. India’s GDP has touched US$1.25 trillion. India is the second fastest growing economy of the world and during the fiscal year 2007-2008 India’s GDP growth rate was nearly 9.5%8. Indian economy is a diverse one, encompassing agriculture, textiles, handicrafts etc. Although many people are still dependent upon agriculture, the service sector is also playing a very important role in the Indian economy. Indian GDP per capita is $1,089 which is very nominal. But the crossing of Indian GDP over a trillion dollar mark puts India in the elite group of 12 countries with trillion dollar economy.
The contributions of various sectors in the Indian GDP are as follows: It is great news that the service sector is contributing more than half of the Indian GDP. It takes India one step closer to the developed economies of the world. Earlier mainly it was agriculture which contributed in the GDP. The Indian government is still looking up to improve the GDP of the country and so several steps have been taken to boost the economy. Policies of FDI, SEZs and NRI investment have been framed to give a push to the economy and hence the FDI inflows surged to $23 billion in 2007. Strong cross-border mergers and acquisitions were the key factor driving up such flows9.
A number of studies have highlighted the growing attractiveness of India as an investment destination. According to the study by Goldman Sachs, Indian economy is expected to continue growing at the rate of 5% or more till 2050. Indian economy is slated to become the fourth largest economy by 205010. Foreign Direct Investment Policy and Rules: India has among the most liberal and transparent policies on FDI among the emerging economies.
FDI up to 100% is allowed under the automatic route in all activities/sectors except the following, which require prior approval of the Government:- 1.Sectors prohibited for FDI. 2. Activities/items that require industrial license. 3. Proposals in which the foreign collaborator has an existing financial/technical collaboration in India I the same field. 4. Proposals for acquisitions of shares in an existing Indian company in financial service sector where SEBI is attracted. 5. All proposals falling outside notified sectoral policy/CAPS under sectors in which FDI is not permitted.
Most of the sectors fall under the automatic route for FDI. In these sectors, investment could be made without approval of the central government. The sectors that are not in the automatic route, investment requires prior approval of the Central Government. The approval in granted by Foreign Investment Promotion Board (FIPB). In few sectors, FDI is not allowed. After the grant of approval for FDI by FIPB or for the sectors falling under automatic route, FDI could take place after taking necessary regulatory approvals form the state governments and local authorities for construction of building, water, environmental clearance, etc.
Intellectual Property Rights: India provides protection to Intellectual Property Rights in accordance with its obligations under the TRIPS Agreement of the WTO. The importance of intellectual property in India is well established at all levels- statutory, administrative and judicial. India has well-established administrative mechanism for enforcement of Intellectual Property Rights. Police officers are empowered to take action against the infringement of IPRs in case of pirated and counterfeit productions.
Cases of infringement of IPRs are tried in the judicial courts. Indian Intellectual Property Rights Laws also provide for appeals in the judicial courts of the administrative decisions relating to Intellectual Property Rights. The major statue under which Intellectual Property Rights of Game developers in India are protected is as followed: