Six hundred million gamers—that’s India’s player base, larger than the entire population of most countries and rivalling gaming powerhouses like the United States. You’d think investors would be scrambling to throw money at Indian game developers, right? Wrong. Between FY2022 and FY2025, funding for Indian gaming startups plummeted nearly 90%, dropping from over $610 million across 71 investment rounds to a mere $56 million across 34 rounds. This dramatic collapse creates a bizarre paradox: India has massive gamer participation, but developers can barely secure capital to build games for this enormous audience.
The disconnect stems from regulatory confusion around taxation, monetisation challenges in free-to-play mobile markets, and investor uncertainty about returns. Yet, despite these brutal funding headwinds, Indian studios continue producing breakout hits like Anant Express, which went viral with 10 million views across platforms without significant marketing budgets. This success—despite adversity—defines India’s gaming ecosystem: enormous creative talent and massive audiences constrained by capital scarcity and regulatory ambiguity. Understanding why funding dried up and how developers still manage to succeed reveals both the promise and problems plaguing India’s gaming future.
The Funding Collapse: How Money Disappeared
The 90% funding plunge between FY2022 and FY2025 represents one of the steepest capital withdrawals any Indian creative industry has experienced. This wasn’t a gradual decline—it was a near-total investor retreat from gaming ventures that previously attracted hundreds of millions annually. Regulatory uncertainty around Goods and Services Tax (GST) on real-money gaming triggered much of this withdrawal. Investors couldn’t determine whether platforms would face 18% or 28% GST on deposits versus winnings, creating impossible financial modelling scenarios. When tax treatments remain unclear, investors simply exit rather than risk compliance disasters.
The absence of a cohesive national regulatory framework compounds this problem. Different states enforce different rules regarding skill-based versus chance-based gaming, creating compliance nightmares for developers trying to operate pan-India. Investors dislike regulatory fragmentation because it multiplies legal costs and operational complexity. Monetisation challenges further deter investment. India’s gaming market operates predominantly on mobile-first, free-to-play models where only 1-2% of users actually pay for content. Those who do pay—termed “whales” in industry jargon—drive disproportionate revenue, but this concentration creates unstable business models that make investors nervous.
Early pandemic-era investments favoured rapid user acquisition over sustainable monetisation, leading to inflated valuations followed by brutal corrections. Companies that raised capital at high valuations struggled to justify those numbers when revenue growth disappointed, making subsequent funding rounds nearly impossible. The real-money gaming segment, which initially attracted substantial investment, faced particular scrutiny. Regulatory crackdowns and GST hurdles made previously attractive fantasy sports and prize-based platforms seem risky, causing investors to withdraw from the entire gaming category rather than distinguish between different gaming types.
Success Despite Adversity: When Talent Beats Capital
Anant Express demonstrates what Indian developers can achieve even without substantial funding. This psychological horror game, set inside an Indian train, launched in August 2025 and quickly went viral in India and Indonesia, amassing over 10 million views through gameplay streams. Built by indie developer Yash Gupta without major investment backing, Anant Express succeeded through organic community discovery rather than paid marketing. Major content creators like Triggered Insaan, Xyaa, and Windah Basudara played it to wide acclaim, with audiences celebrating its authentic depiction of culturally specific horror themes.
Reddit forums and gaming communities praised Anant Express for its atmosphere, relatable settings, and homegrown authenticity—qualities that distinguish it from Western-dominated horror titles. This organic success proves that culturally rooted content can overcome funding limitations through community amplification and influencer partnerships. Other Indian success stories include Dream11, now valued above $5 billion despite regulatory uncertainties in fantasy sports. Nazara Technologies became a flagship listed company with revenues nearing $120 million and international expansion. Nodding Heads Games created Asura, garnering global acclaim while innovating within tight budgets.
These examples reflect a vibrant, undercapitalised ecosystem that combines local cultural insights with global quality standards. The successes demonstrate that India possesses the creative talent and technical capabilities—what’s missing is consistent capital access enabling developers to scale beyond indie projects.
The Path Forward: Regulation, AI, and Strategic Investment
Growing industry consensus calls for a central gaming regulator or pan-India policy framework similar to FSSAI certifications, legitimising operators and unlocking capital flows. Clear, consistent regulations would remove the ambiguity currently deterring both domestic and international investors.
Artificial intelligence is quietly transforming Indian game development despite funding constraints. AI tools like Unity ML and Eleven Labs help studios build immersive experiences with limited budgets, enhancing content generation, player retention, and operational efficiency. Startups focusing on AI-driven gameplay, fraud detection, and user behaviour modelling are attracting fresh investor interest.
Government initiatives around skilling, incubation programmes, and growth in tier-2 and tier-3 cities add optimism. The Indian gaming market is projected to reach $4.5 billion by 2025, creating 250,000 jobs—representing substantial economic potential if regulatory clarity emerges. Strategic investment should shift from chasing viral mobile hits towards supporting robust game formats, intellectual property development, and AI-driven innovation. Moving beyond mobile free-to-play towards mid-core and hardcore gaming genres could unlock higher monetisation rates, making Indian studios more attractive to investors.
The sector’s massive user base, cultural richness, and AI adoption provide a strong foundation for growth—but realising this potential requires stable regulatory frameworks and strategic funding support. If policymakers deliver clarity and investors regain confidence, India could transform from a high-engagement, low-revenue market into a high-margin, innovation-driven gaming powerhouse competing globally. The talent exists; it’s the capital that’s missing.
