Chennai: The video gaming industry is witnessing a challenging environment due to a slowdown in funding and an inability to attract talent post the real money gaming (RMG) ban, along with steep hardware costs and lower user spending. The regulatory uncertainty over the Promotion and Regulation of Online Gaming Act, introduced in late 2025, and the abrupt shutdown of the industry have raised concerns for foreign investors.Anuj Tandon, partner and head of emerging markets at Bitkraft, a gaming-focused investor, said the initial expectation that a ban would attract capital and talent to video game studios has not materialised. “The green shoot we saw is actually not a green shoot. It created widespread public confusion and noticeable caution among young talent and fresh college graduates considering joining the sector. We also expected talent leaving RMG platforms would transition into building traditional video game studios. Instead, skilled builders and fresh graduates were heavily absorbed into consumer AI companies,” he said. Bitkraft has been reallocating capital away from pure gaming and content due to market conditions. Tandon said multiple factors, including the global slowdown, have impacted it, but added that India is among three fast-growing markets and expects a revival next year.Sridhar Muppidi, chairperson of the Game Developer Association of India (GDAI), said international investors have adopted a cautious approach and are largely holding back capital from Indian-focused gaming startups. The sudden shutdown and heavy taxation of the real money gaming sector have raised concern for a section of foreign VCs, while ambiguous terminology in gaming bills, potentially affecting non-RMG game mechanics like in-app purchases, also plays a role, he said. “Investors are still actively funding studios targeting global and tier-1 markets rather than the domestic Indian market,” he added.Advances in AI have drastically lowered the capital required to develop games. India’s low monetisation and global hardware prices are also playing a role. India’s video-game market generated an estimated US$1.04 billion in revenue in 2025. However, with 511 million players, its annual revenue per user stands at just $2.04, representing a minuscule share in the $200 billion global gaming market.Shaurya Kajaria COO of Funcell Games said 80% of Funcell’s revenue comes from developed markets, mainly the United States and their games are culturally designed to succeed with players in those markets. He added there is positive long-term potential over the next two to five years.Kashyap Reddy, chief executive of Hitwicket, a cricket strategy game, said investors are no longer backing early-stage concepts or pitch decks, now requiring deeper data like proven user retention, engagement, and unit economics before committing capital. “Overall consumer spending in India is increasing YoY across Tier-2 and Tier-3 cities, driven by a younger generation entering the workforce with higher disposable income,” he said.
