Policy uncertainty, low ARPU push gaming developers abroad, risking India’s Orange Economy

India has the players, the talent and an expanding digital economy to become a global gaming powerhouse. Yet, for the studios expected to turn that potential into original games, the commercial calculations are increasingly pointing beyond the country’s borders.

The problem is stark: India is a market of hundreds of millions of gamers, but relatively few of them spend enough to sustain the development of commercially ambitious games. Add regulatory uncertainty, funding constraints and difficulties in monetising domestic audiences, and the incentive for Indian developers to build for overseas markets becomes difficult to ignore.

The risk goes beyond gaming. If Indian studios develop their products and intellectual property (IP) for global audiences but establish their companies and ownership structures elsewhere, India could lose a significant share of the economic value generated by its creative talent. The country’s emerging “orange economy” — spanning gaming and other creative industries — could end up supplying skills to global businesses without building enough globally competitive Indian-owned IP.

The findings of the Game Developer Association of India’s (GDAI) GameDev Outlook 2026 underline the scale of the challenge. India’s video-game market generated an estimated $1.04 billion in revenue in 2025, growing 14.8% year-on-year, and served 511 million players. Yet average annual revenue per user (ARPU) stood at just $2.04.

That disconnect between audience size and spending is shaping business decisions across the development ecosystem.

“Nearly 99% of global gaming revenues come from outside India, so it makes sense for Indian game developers to build for global markets rather than focus exclusively on India. This has two key benefits: developers get access to a much larger market and compete with the best in the industry. That competition pushes them to build higher-quality games, which can also perform better in India. Our recommendation is clear: don’t build games exclusively for India, because the domestic market is still too small to sustain the industry on its own,” said Sridhar Muppidi, Chairperson of GDAI.

The message is not that Indian developers should abandon their home market. It is that the economics of game development make a domestic-only strategy difficult to sustain.

A billion-dollar market that struggles to monetise

The GDAI report reveals the commercial pressures facing studios. Among 104 industry survey submissions, 75% identified access to capital and publishing investment as a barrier to growth, while 69.2% cited low willingness to pay. Regulatory uncertainty was identified by 28.8%.

Nearly half of respondents — 48.1% — rated the health of India’s video-game market as poor or very poor. Only 10.6% considered conditions good or excellent.

These figures expose a structural weakness in the industry’s growth story. Downloads and player numbers can demonstrate demand for games, but they do not automatically translate into revenue sufficient to fund development teams, pay for marketing, secure publishing deals and support games after launch.

For studios building original IP, the challenge is particularly acute. A game can require months or years of investment before its commercial prospects become clear. Developers must finance production, test their products, acquire users and retain them — often without knowing whether domestic spending will cover their costs.

The report finds that 74% of surveyed studio responses indicate that less than 10% of revenue comes from India. This suggests that overseas markets and commercial relationships are already central to the business models of many participating studios.

Muppidi believes India’s domestic opportunity remains substantial, but it will take time to mature.

“We believe India could potentially become the world’s third-largest gaming market over the next decade as prosperity grows and more people engage with video games. However, that growth will take time. Even after nearly a decade of increased digital access, gaming expenditure in India remains significantly lower than in mature markets. With the average American spending more than $350 a year on gaming, India’s per-user spending remains far lower. Despite its population of 1.5 billion, the Indian market alone is not yet large enough to sustain the industry when compared with the $200–300 billion global opportunity outside India. Developers should therefore focus on global markets while India’s domestic market continues to mature,” he said.

For developers, targeting international audiences is therefore a commercial necessity, not simply an ambition to export Indian creativity.

One country, multiple markets

The domestic monetisation problem is complicated by the diversity of India’s consumer base. A strategy that works in one state or income segment may not translate easily to another, making pricing, distribution and customer acquisition harder to standardise.

Harish Chengaiah, Founder, Game Director, Writer and Producer at Outlier Games, said, “India is an incredibly diverse country, and metrics such as average revenue per user vary significantly across states because of differences in GDP and purchasing power. So, when we talk about catering to the Indian audience, we’re not talking about one homogenous market, but a diverse, state-level audience.”

This fragmentation creates a difficult equation for studios already operating with limited capital. Developers must decide which audiences to target, how to price games, which monetisation models to adopt and how much to spend acquiring users. Building a go-to-market strategy for a fragmented domestic audience can be expensive, particularly for smaller teams without dedicated publishing and marketing functions.

“Building a monetisation strategy and go-to-market plan for such a market is complicated. As the business environment becomes more viable, there is a greater emphasis on exports. The idea is to build a sustainable business through global markets while gradually developing the domestic market over the next five years. During this period, purchasing power is expected to improve, potentially narrowing the gaps across states and making it easier to develop and execute go-to-market strategies for India,” Chengaiah said.

The danger is that what begins as a rational export strategy could become a long-term structural dependence on overseas markets, investors and corporate entities.

Regulatory uncertainty could push IP offshore

Weak monetisation is not the only concern. Regulatory uncertainty can influence where companies incorporate, where investors deploy capital and which jurisdictions ultimately own the products created by Indian teams.

For investors financing a studio, the location of the legal entity matters. If they perceive India as a difficult or unpredictable operating environment, they may prefer a company registered in a jurisdiction such as Singapore or Dubai. The development team may continue working in India, but the IP and the associated ownership rights could sit with an overseas entity.

“There is a real risk here. For instance, an investor might tell a company to register in Dubai or Singapore because of the regulatory challenges in India. Companies may be willing to make that move because these markets offer a more conducive business environment, including from a taxation perspective. While the company may continue to employ people in India, the intellectual property could end up belonging to an entity based in another country. If investors push companies in this direction, we could see an outflow of intellectual property from India,” Chengaiah said.

This distinction is critical to the future of India’s orange economy. Employment and technical expertise are valuable, but ownership of original IP can generate additional returns through licensing, sequels, merchandising, acquisitions and the creation of new companies.

Foreign companies establishing Indian subsidiaries present a different proposition when they use India as a global capability centre, employing local talent to serve international markets. The concern is not overseas business itself, but whether Indian-founded studios can build and retain ownership of globally competitive products.

The policy test: From playing games to owning them

India’s development ecosystem is not short of ambition. The GDAI survey found that 82.7% of industry respondents prioritised launching new game IP, while 41.3% prioritised scaling existing products. The market is also projected by the report to reach nearly $1.2 billion in 2026 and $1.77 billion by 2030.

But ambitions will not translate into globally successful Indian companies without better access to capital, publishing expertise, international partnerships and predictable business processes.

GDAI’s recommendations include stage-specific funding for prototypes, production and commercialisation; stronger connections between studios and publishers; production-oriented training; and clearer guidance on regulatory, banking and tax-related issues.

The government’s challenge is to create conditions in which building for global markets does not require Indian founders to shift ownership of their businesses abroad. That means reducing administrative friction, providing predictable regulatory guidance and improving access to funding that carries studios from early prototypes through launch and commercial growth.

India does not need to choose between building games for domestic audiences and exporting them to the world. Indeed, global competition can strengthen the quality of games available to Indian players.

But the country must distinguish between exporting creative products and exporting the ownership of the businesses that create them. If Indian studios continue to develop original games while capital, IP rights and the long-term commercial gains accumulate elsewhere, the country could remain a major source of talent without becoming a comparable centre of creative ownership.

The stakes extend beyond the gaming industry. Games combine software engineering, storytelling, animation, music, design and interactive technology — capabilities that also support other parts of the creative economy.

India has spent years building a vast digital audience. Its next challenge is to ensure that the companies creating the experiences consumed by that audience can survive, scale and retain value at home.

Otherwise, the country’s gaming boom could produce a troubling paradox: millions of players, thousands of developers and world-class creative talent, but too few globally valuable Indian-owned gaming businesses.