When India's Promotion and Regulation of Online Gaming Act banned real money gaming in August 2025, a $2.3 billion category began collapsing overnight. For months, the fear in India's gaming industry was that the ban would drag down everything around it. The gamer base would shrink. Spending would dry up. The momentum built over five years would stall.
That didn't happen. According to Lumikai's State of India Interactive Media Report 2025, the Indian video games market (excluding RMG) grew 17% year-on-year to $1.5 billion. The gamer base did contract, from 609 million to 555 million, a 9% drop. But payer conversion held steady at 25%, and in-app purchases combined with ad revenue grew 17%.
"The exit of RMG users, in our data, shows that it has left behind a more engaged, more entertainment-driven cohort. Which is why player conversion has held steady. I believe that's actually a more positive signal for the long-term health of the market."Salone Sehgal, Founder & Managing Partner, Lumikai
"There has been a reset in the revenue mix, with IAPs now actually driving revenue," Salone Sehgal, founder and managing partner at Lumikai, told Outlook Respawn. "We've also seen a transition of RMG users moving to entertainment formats like micro-drama. It essentially means that interactive formats, whether it's mid-core gaming or social entertainment, have been able to absorb that spending. I believe this is a healthier and more sustainable revenue mix."
Aditya Deshpande, Principal at Lumikai, reinforced that reading. "If you look at just the in-app purchase and ads market, they've combined grown at 17% year-on-year," he said. "That also shows that this is a more entertainment-driven, engaged, and intent-based user base."
Where the RMG users went
VTION, a consumer insights platform that tracked roughly 100,000 smartphone users, captured the migration in real time. Former RMG players increased their daily time on music streaming by 43%, on micro-dramas by 40%, on social media by 24%, and on OTT video by 20%. Time spent on free-to-play shooters like Free Fire MAX and BGMI also rose post-ban.
Sehgal saw the overlap as partly structural and partly a matter of timing. "When you look at any market, when a large category exits, time naturally reallocates to adjacent formats," she said. "The RMG ban also coincided with the rise of micro-dramas, which we've seen over the last 12 months. And there are certain characteristics, these formats are designed for mobile attention. Short sessions, high frequency engagement. So yes, there is structural overlap, and obviously with the ban, there was audience displacement."
She went further, suggesting the shift may have been inevitable. "Micro drama, music streaming, et cetera, these are almost natural substitutes. It probably helps that the timing coincided with the RMG ban. Otherwise, what we would have probably seen is timeshare being taken away from RMG going to micro-dramas. I think that shift would have been inevitable actually."
There is a murkier side to the migration. VTION data showed a sharp rise in usage of VPN-enabled browsers like Opera among former RMG players post-ban, and web traffic to offshore betting platforms increased after August 2025. The report's indicative analysis suggests 1 in 3 RMG players may have moved to offshore platforms with no consumer protection. This is a policy outcome worth watching, though it falls outside the video games market proper.
Hybrid monetization is the path forward
With RMG gone, the revenue equation rests on IAPs and ads. Mid-core games generate an ARPPU of $15 against $3 for casual. The report flags this gap as room to grow, and the question is what it takes to close it.
Sehgal framed it as a product design problem, not a pricing one. "Casual gaming in India has scaled because it's accessible, short session lengths, ad-led monetization, which is similar to global patterns," she said. "Now, to increase ARPPU, one would have to see much stronger progression systems, much more deeply developed meta-layers in terms of monetization depth, much more live ops sophistication."
The answer, in her view, is hybrid monetization. "There's this new phenomenon of hybrid casual games which are monetizing with both," she said. "It has to be a combination rather than IAP-only or ads-only."
Deshpande backed that up with the numbers. India's aggregate eCPM across all ad formats sits at $1.1, with rewarded ads at $2.43. "India's eCPM is actually very healthy, two and nearly two and a half dollars for rewarded ads," he said. "It helps you monetize users that are not converting and eventually hope to convert them. I would believe that ads and IAPs will coexist."
Sehgal put it practically. "India has a very large user base, and there is some degree of price sensitivity. So as a developer, you should have both, rewarded ads for scale, IAP for monetization. I think there will be a gradual increase in IAP contribution, and ad monetization also tends to help on paying gamers versus non-paying gamers. It helps monetize the entire user base. So I don't think we will ever see a full shift away from ads."
The IP gap, and what's being built
The fact that keeps the conversation grounded: all ten of India's top-grossing titles are from global franchises. Garena Free Fire, BGMI, Candy Crush Saga, Clash of Clans, Call of Duty, Pokemon GO, Roblox. Gaming accounts for 36% of India's top 25 app revenue but only 8% of downloads. Globally, those figures are 44% and 16%.
Sehgal put the gap in context rather than treating it as an indictment. "It's a little bit unfair to compare a five-year-old market, gaming in India is just about five years old in its institutional journey, to the Korean market, which has about 30 to 40 years of experience building games," she said. "Top-grossing global titles require long development cycles, significant capital, and deep game design and live ops expertise. India is still building those capabilities at scale."
She pointed to what Lumikai is seeing in its own portfolio. "We see strong mid-core pipelines. We backed a company called Mayhem, we backed a company called Studio Sira. We see experimentation on mid-core games. We see much deeper thinking in terms of monetization design and a focus on retention, which is also very important. And lastly, we're seeing more globally aware studios, founders are aware of the quality they need to deliver if they want to appeal to an Indian audience."
The first breakout Indian title, she said, will emerge over the next few years. What will it take for gaming to also become a top-of-discovery category in India? Sehgal listed three things: broader genre diversity, locally resonant IP of high quality, and a distribution-first mindset. "We no longer exist in a market where you can build a game and just hope audiences will come to you," she said. "Developers have to think distribution first."
"Gone are the days where one can build titles and hope that with a D1 of 30% and a D7 of sub-10%, one can actually scale. There needs to be a lot more focus on deep metrics and metric-driven growth, as well as building more creative, locally resonant IP of equal standards, if not better, than global titles."- Salone Sehgal, Founder & Managing Partner, Lumikai
Lumikai projects the video games market will reach $3.2 billion by CY30 at a 17% CAGR, with IAP growing at 19% and ads at 13%. The biggest execution risk to that number, Sehgal said, is monetization not scaling in line with engagement. But the demand is real, the payment rails work, and the first generation of metric-driven Indian studios is in the pipeline. The foundation is laid. What India's gaming market needs now is a game to match it.
