In the First Advance Estimates report published by the Ministry of Statistics and Program Implementation last week, India’s Gross Domestic Product (GDP) is set to contract by 7.7 percent in the current financial year. In contrast to the same period last year, India projected a growth of 4.2 percent.
The report is meant to help Finance Ministry and other departments to prepare the broad strokes for Union Budget for the 2021-22 fiscal year. The report is compiled by analysing seven months of data and making subsequent projections. The second advance estimates will come in late February.
That said, a question remains – could this massive drop be partially off-set if gambling were legal and regulated in India?
This steep drop in the GDP was pretty much expected, given the havoc wreaked by the Covid-19 pandemic. The last of the 2020-21 financial year saw the implementation of a strict, months-long lockdown that saw production and services come to an abrupt halt in one of the largest economies in Asia.
This contraction mentioned by the statistics bureau is slightly more than what the Reserve Bank of India had predicted back in December. Back then, the GDP forecast was a decline of 7.5%. This GDP drop is one of the largest ones on record in India; in the monetary terms, this projected drop translates into a loss of Rs.11.3 lakh crore of GDP.
Can Legalised, Regulated Gambling Add to GDP?
There is a precedent as to why this can work India, but it depends significantly on having a well-established framework and regulation. In a report published by the KPMG, it has been mentioned that the betting market in India is worth upwards of $130 billion. The market has grown like clockwork at a CAGR of ~7 percent in the past decade. It is worth mentioning that a wide majority of this is unregulated and underground, which means a significant loss in tax revenue.
Case in point, take online IPL betting. Year after year, the tournament sees massive, incredible betting action. One can imagine the benefits of regulating and taxing such a market.
To tap into this market and leverage it into improving India’s GDP will require a model suited to a nation of billion people. Cues can be taken from developed countries in the west where betting is legal, largely regulated, and taxed.
A paper focusing on the correlation of Gambling in National GDPs of Italy, Austria, Croatia, and Slovenia highlights the rising dependence of these nations on gambling revenues. Italy leads the way in this regard with up to 5.7% of its GDP, relying on betting and gambling activities. In Croatia and Slovenia, the trend is more or less stable.
However, the paper also highlights that while the importance of gambling on national GDPs of these nations cannot be undermined, it must not be treated as a solid option either. Gambling presents risks like addiction with it and it is crucial to keep it under control.
In a country where betting and gambling has been deep-rooted in us, legalising and regulating these activities can open up new channels for the government and the punters. In fact, the trajectory to go about implementing this can be derived from the regulation of online fantasy sports platforms, which has also received a significant impetus in recent times.
It will be interesting to see how things proceed in the future, considering the ever-growing market of sports betting in India.
