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ROLE OF FILM INDUSTRY IN INDIAN ECONOMY
A Project submitted to –
ARMY INSTITUTE OF LAW, MOHALI
In partial fulfilment of the requirements for the award of
degree of B.A.L.L.B.
Submitted to: Submitted by:
Ms. Ekjyot Gujral Sanya Shrivastava
Assistant Professor (Economics) Roll no. 2143
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DECLARATION
It is certified that the project work presented in this report entitled “Role of Film Industry in
Indian Economy” embodies the results of original research work carried out by me. All the
ideas and references have been duly acknowledged.
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ACKNOWLEDGEMENT
In preparation of my assignment, I had to take help and guidance of some respected persons,
who deserve my deepest gratitude. As the completion of this assignment gave me much
pleasure, I would like to show my gratitude towards Ms. Ekjyot Gujral for giving me
guidance for assignment throughout numerous consultations. I would also like to extend my
gratitude to all those who have directly and indirectly guided me in writing this assignment.
I would like to thank my family and peers, whose constant encouragement kept me motivated
to work towards the completion of this project. I would also like to extend my gratitude
towards Army Institute of Law, Mohali and Dr. Tejinder Kaur, the Principal, Army Institute
of Law, Mohali for giving me this golden opportunity of making a project on such an
interesting and engaging topic.
Sanya Shrivastava
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INDEX
S.No. Topic Page No.
1 Introduction 4
2 Economic Impact 6
3 Key trends and Drivers 10
4 Challenges faced by the Film Industry 12
5 Impact beyond Numbers 13
6 Conclusion 15
7 Bibliography 16
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INTRODUCTION
India’s entire media and entertainment (M&E) industry represents under 1% of its GDP. The
economic activity generated by these industries (the film, television, and OTT industries)
runs deeper, just like the bulk of an iceberg remains hidden below the surface. On the surface,
the television, film, and OTT industries are estimated to have a gross output of INR 115,000
cr (US$ 16.5 bn), and to employ 8.5 lac (850,000) people. This is the direct impact, which is
easily visible. Scratch the surface, however, and you would discover that these industries
stimulate other sectors in the economy. Including indirect and induced effects, these
industries generate a gross output of as much as INR 349k crore (US$ 49.9 bn) i.e., 3 times
direct gross output, and employ as many as 26.6 lakh (2.6 mn) people i.e., 3.1 times direct
employment.
In addition to this, creative industries also create an impact in several important ways that are
not captured by just the numbers above. These industries can connect people, cut across
cultural and political divides, act as a source of identity and expression, and shape attitudes
and thought processes. They are uniquely powerful tools to aid national integration, deliver
social messages and project India’s culture and influence on the global stage.
Value of the film industry in India from financial year 2014 to 2022,
(in billion Indian rupees)
Characteristic Value in billion Indian rupees
FY 2022 182
FY 2021 61
FY 2020 183
FY 2019 183
FY 2018 159
FY 2017 145
FY 2016 137
FY 2015 126.9
FY 2014 126.4
India has a vibrant film, television and online video services industry, and is brimming with
potential. It is the largest producer of movies in the world and has the largest DTH and the
second-largest pay TV subscriber base in the world. The online video services sector is
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poised for rapid growth. Smartphones with screen sizes exceeding six inches are available in
India for just INR 7,000 (US$ 100). Connectivity is cheap, with an average price per GB for
wireless data of INR 7.0 (US$ 0.1) - the lowest in the world by far! This has unlocked an
insatiable appetite for data, with Indian wireless subscribers consuming on average 10.4 GB
of data per month. Data usage strongly correlates with video consumption, and the rapid
increase in the number of video streaming services (from 9 in 2012 to more than 35 in 2019)
indicates the massive potential that market participants see in India.
The government and policy makers have demonstrated positive intent in many ways,
including designating the Audio - Visual Service Sector (under the M&E industry), as a
"Champion Service Sector", forming effective bodies such as the Maharashtra Cyber Digital
Crime Unit (MCDCU) and passing novel and practical rulings like the recent Delhi High
Court judgement to tackle the problem of mirror/ redirect/alphanumeric websites.
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ECONOMIC IMPACT: THE MULTIPLIER EFFECT
The economic impact of the creative industries is measured under three buckets:
• Direct impact: The output that is produced and employment that is generated by
companies that are directly engaged in the film, TV, and OVS industries.
• Indirect impact: The output that is produced and employment that is generated by
suppliers to the creative industries, as a result of economic activity by these creative
industries. For instance, increased activity by the film sector will drive demand for hotels,
transportation, cameras, etc., which will in turn generate economic output and employment.
• Induced impact: The output that is produced and employment that is generated because of
the consumption triggered by the direct and indirect employees above spending their wages.
These estimates are conservative. The iceberg effect reveals much greater economic activity.
The indirect impact values above have been estimated through input-output tables, which
identify 130 different sectors and their inter-relationships. Given the relatively small scale of
India’s media and entertainment (M&E) industry on the surface, the industry is tagged to a
sector labelled “other services” in the country’s input-output tables. While the “other
services” classification includes recreation, entertainment, radio and television broadcasting
services, it also includes sanitary services, and “services not elsewhere classified”. The
estimates of indirect impact are diluted due to the presence of several unrelated sectors in the
same bucket.
Multiplier effect in action
Spurring demand
Creative industries represent a powerful means to shape perception and influence demand.
Demand could be spurred through several mechanisms, including the following:
• Build awareness: Create awareness and interest about something the viewer may not know
about. For instance, introduction of new locations through scenes in movies and TV series.
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• Build familiarity: Reduce intimidation or unfamiliarity by displaying frequent usage of a
product/service, or by having a relatable character use the product/service. For instance,
positive scenes in an airport or in an aeroplane setting could make the prospect of flying less
intimidating for someone who has never flown before.
• Build aspiration: Create an aspirational value for a product/service by displaying it in a
luxuriant manner, or by having an admirable character use the product/ service.
The power of creative industries to spur demand is explored below through the lens of
tourism, as well as a broader set of products and services. For instance, sanitary services are
likely to be driven as a consequence of growth in other sectors, as against a film, which will
drive growth in other sectors. While there will be multiplier effects in both cases, a film is
likely to have a significantly higher indirect impact. To discover the extent of economic
activity generated by the film and television industry, we need to dive well beneath the
surface.
A medium-large budget movie can generate tourism revenue nearly equal to its domestic box
office collection (a 2x multiplier only from tourism). Indeed, a strong film with an attractive
location could have a significantly greater impact – such as 3 Idiots, which increased tourist
inflow to Ladakh to 2.4x, and Dilwale increasing the Indian tourist count to Iceland by a
factor of 19. Every INR 1 crore increase in tourism revenue results in employment for 87
people. Five films like 3 Idiots which may collectively employ a few hundred people directly
for shooting could result in indirect tourism related employment for 4 lac people – a
magnifying factor of greater than 100x. This tourism will also produce its own indirect
impact (estimated to be 3-5x of direct employment), and so on.
Similarly, a multiplex drives food and beverage sales in its own premises to the extent of 35-
40% of net box office revenue. Further, a multiplex often acts as an anchor tenant in a mall,
driving up footfalls and boosting overall consumption, as well as the value of the micro
market.
Several sectors are closely connected to the film sector, and together create an economic
impact larger than the film industry itself. For example, the wedding and grooming industry;
Bollywood has long been associated with style and trend setting clothing. The costumes and
dresses on screen influence real-life buying decisions. The wedding fashion and grooming
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industry is an area where Indians and Indian diaspora take inspiration from Bollywood. The
wedding industry in India is worth US$ 50 bn. Designers such as Manish Malhotra and Anita
Dongre have exclusive NRI clientele for bridal wear influenced by Bollywood movies.
Food and beverage (F&B); Multiplexes and single screens alike drive F&B sales. For the
leading multiplexes PVR and Inox, F&B sales contribute 25–30 percent to their overall
revenue. Music; The Indian music recording industry generates revenue of about INR 1,000
cr. Film music dominates the music industry in the country. The music industry in India is
dependent primarily on the film industry, with around 80% of music sales in India
attributable to “film music”
What does this mean for policy makers? An analysis of both direct and indirect impact should
be greatly encouraged. It is natural to look at the visible (direct) industry size and
employment, and often the sectors that are visibly larger may dominate attention. However,
this may de-prioritize a comprehensive analysis of the indirect impact. For instance, the Make
in India program could unlock significant indirect effects by focusing energies on targeting
creative industries to produce in India.
India’s demographic dividend gives it the potential for rapid growth over the next few
decades. As India looks to activate this potential, the role of indirect effects on the supply
side are starting to be recognized, with the government’s infrastructure push, including the
recent granting of infrastructure status to the logistics sector. At the same time, as India
grows in power, influencing the demand side will be key. Just as Hollywood has helped the
US sell the concept of American products and culture to the world, our creative industries
could help drive awareness and demand for India and Indian-made products.
The rest of the world is becoming increasingly receptive to India’s creative output.
Bollywood movie Dangal’s success in China (it became the top grossing non-Hollywood
foreign film of all-time there), followed again by the recent success of Secret Superstar are
telling examples. Supporting and harnessing the power of the creative industries is likely to
provide a high return on investment – both economic and social - through the multiplier
effect that is characteristic of these sectors. Through this report, we hope to make
stakeholders cognizant of this effect.
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The following table presents the impact on tourism of specific locations post shooting of
movies at that location.
MOVIE IMPACT ON TOURISM REGION/ PLACE
Zindagi Na Milegi Dobara 35% increase in first half of Spain
2011
Don 2 42.8% increase in Indian Berlin, Germany
visitors
Twilight Saga Tenfold increase in visitors Forks, Washington, USA
Braveheart 300% increase in visitors Wallace monument, Scotland
Saving Private Ryan 40% increase in American Normandy, France
tourists
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Key Trends and Drivers
Scale and evolution - India produces the most number of movies in the world, and
this number is growing. Over the past decade, the number of movies certified in India
has grown by 89 percent (a CAGR of 6.5 percent); from 1,279 in 2009 to 2,412 in
2019. Malayalam, Kannada, Bengali, and Marathi were amongst the languages that
registered the highest growth. Movies in some new regional languages, including
Nagamese, Manipuri and Chhattisgarhi, were certified in 2019 with 11, 15, and 18
certifications, respectively.
The “industries”—Bollywood, Regional, and Hollywood/Foreign - Regional films
have continued to witness a surge in investments from major film studios. Regional
filmmakers have developed the risk appetite in dealing with unrepresented topics,
such as the Marathi movie "Bucket List"; or dealing with big projects, such as “Sye
Raa Narasimha Reddy”, drawing inspiration from the success of “Baahubali 2”. This
trend has seen further growth this year and regional cinema, in turn, has led to an
increased contribution to the revenue in comparison to Bollywood.
Hollywood/foreign films have also shown good growth, with “Avengers: Infinity
War” and “Avengers: Endgame” proving to be very popular in India.
Bollywood movies operating at higher revenue intensity - In 2009, Bollywood
represented 18 percent of all movies made in the country and accounted for 19 percent
of the total movie’s revenue. Today, while Bollywood represents 21 percent of all
movies made in the country, it accounts for 40 percent of the revenue. In 2019,
Bollywood was estimated to have accounted for a first-ever net collection of about
INR 4,350 cr.
Revenue—Time versus performance— The shift in the recent past Strong story
lines have been a focus in recent times, causing movies to be genre-agnostic. The
chart below presents the week wise domestic collections of select content-based
movies against their lifetime worldwide gross. These movies have had slower starts,
but have made significant money and ROI in the longer run.
Glance: Animated films - Animation movies in the past year have contributed to 19
percent of the overall revenue from Hollywood movies released in India. Animation
movies grossed about INR 320 cr. The “Lion King” single-handedly contributed ~50
percent of the animation movie revenue. This suggests that there is an appetite for
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animated movies amongst the Indian audience. The Indian VFX and animation
industries generate revenues of over INR 5,950 cr.
Cinema screens and growth of multiplexes - Digitisation of cinema began around
2005 and was fully adopted by the end of 2009. Today, 100 percent of the screens in
India are digitised. In 2016, India produced 1,986 movies drawing more than a billion
footfalls across ~8,500 screens. In the same period, China attracted 1.37 billion
footfalls across 41,179 screens, putting India in the second position with respect to the
number of footfalls. As of December 2019, India had a screen density of 6.5 screens
per million.
The rise of technology and digitisation - The digital revolution has not only
revolutionised screen technology, but also the style of movie making and marketing.
In terms of marketing, VR experiences of the sets add to the strategy of selling and
making the audience interested in the largeness of the scale. Advertising in single
screens has become simple due to centralised selling and display of advertisements by
companies, such as UFO Moviez and Qube. Digitisation has allowed the release of
movies in a large number of theatres simultaneously, in remote areas, and with
superior quality prints thus, allowing for last-mile connectivity. This has reduced
piracy, as legal copies are readily available to a larger audience.
The dawn of online video services -With the entry of players in the online video
service industry, there has been a drive for a reduced period of exclusive theatrical
windows. Until a couple of years ago, the online premiering of movies was delayed
by six months from their theatrical release. Today, this gap has been reduced to 45–90
days. Bollywood typically follows an eight-week window from theatrical release to
online video streaming. Today however, the trend has changed. The digital releases
occur before their world TV premieres. Leading players in the online video services
space strike deals with producers and/or studios even before the theatrical release of
the movie, sometimes far in advance. Digital rights expand the revenue mix of the
movie, reduce dependence on box office performance, and allow the audience to
enjoy the movies at the pace and place they choose. In the case of deals struck in early
stages, digital rights also help fund the production. Digital video services provide a
good vehicle for low-cost movies that can provide high investment returns due to their
content, but lack the budget to have a 200+ screen release while competing with the
big-star, big-budget films.
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CHALLENGES FACED BY THE FILM INDUSTRY
The Indian film industry needs to combat an underdeveloped infrastructure, tax-related
challenges, and piracy in both digital and physical formats.
Underdeveloped infrastructure - While India certified 1,602 films in 2012, up to 90% of
them were not able to find enough theatres. Most urban metros have adequate screens;
however, the semi-urban and rural areas lack the required infrastructure such as good
locations like malls, access to low-cost power etc.
Complicated Tax regime - Different states levy different entertainment taxes based on the
film’s language. Some industry participants suggest a uniform entertainment tax across all
states to create a level playing field for films across India. While regional language films
have tax advantages in their home state, Hollywood and Hindi films are taxed heavily. For
instance,
In Maharashtra, Marathi films do not pay any entertainment taxes while all other language
films must pay it at the rate of 45% of the ticket price
In Tamil Nadu, Tamil films do not pay any entertainment taxes while all other language
films must pay 15% of the ticket price
• In addition to entertainment taxes, exhibitors incur other indirect taxes such as show tax,
municipal tax, property tax, service on rentals etc. which makes the tax structure fairly
complicated
• Service tax is levied on film distribution and sale of rights, and on technicians’ pay.
Industry participants suggest an exemption from service tax as these taxes ultimately impact
producer’s margins which are already in the red
• The lack of a credible and central source for box office data in India may create challenges
for tax collection authorities
Piracy - The reduction in theatre-to-television window of films has reduced the scope for
pirated DVD sales. However, piracy still continues to pose a threat to home video and web-
based revenues. The Hindi film home video market has been declining over the past several
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years largely due to the easy availability of pirated DVDs and VCDs at unorganized retail
outlets.
To combat online piracy, the Anti-Video Piracy Cell (AVPC) of the Andhra Pradesh Film
Chamber of Commerce (APFCC) has designed a free web application that helps users report
cases of piracy to the AVPC instantly. The application is multilingual and accessible on
multiple platforms. This initiative is in its early stages, and its impact may be felt in the short-
medium term.
Impact beyond the numbers
“You can’t manage what you can’t measure.” This phrase captures the essence of our
tendency to focus on quantification and measurement across fields—be it sports, medicine, or
public policy. This proclivity to quantify everything makes us susceptible to the “streetlight
effect”. We may behave a bit like a drunk who has lost his key in the dark, but is looking for
it on the other side of the street under a lamppost—because that’s where the light is. Our
natural desire to focus where the light is brightest, where data is available, and where things
can be quantified, may cause us to miss the most important issues that need to be taken into
account.
Creative industries can connect people, bridge cultural and political divides, act as a source of
identity and expression, and shape attitudes and thought processes. These are some areas
where the impact of creative industries cannot be measured in numbers. Some examples of
the impact of creative industries beyond the numbers are discussed below.
• National Integration: India is a diverse country, with 22 official languages and several rich
and varied sub-cultures. The output of creative industries can transcend cultural differences,
offering a powerful means to enhance “unity in diversity” and national integration. Consider
the movie "Mission Mangal", which was about India’s Mars Orbiter Mission. This movie
celebrated India’s incredible success in putting an orbiter around Mars in its first attempt (the
only country to achieve this feat) and at a cost of under US$ 75 mn. The movie resonated
with audiences across the country and fostered a sense of pride in the nation. It also sparked
interest in astronomy and raised awareness about ISRO and its "Chandrayaan 2" lunar
mission.
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• Social messages: Creative industries offer a means to deliver messages that stick. As India
rises from a low to a middle-income economy, video offers an option to transmit important
social messages around topics, such as health and nutrition, cleanliness, and environment to
its population (25 percent of which is not literate).37 The power of creative industries to
shape culture and behaviour can be used to generate positive social outcomes for the country.
For instance, the movie "Padman" addressed the sensitive topic of menstrual hygiene through
its real-life story of social entrepreneur Arunachalam Muruganantham. Several recent films
have explored other sensitive issues, such as infertility ("Vicky Donor", "Shubh Mangal
Saavdhan"), and premature balding ("Bala"). These movies have laced the sensitive topics
with light humour, making the messages more palatable and memorable whilst also enjoying
commercial success.
• Spreading culture and influence: Content generated by creative industries is one of the
key windows through which the world views and develops a perception about a country.
Creative industries thus, represent a compelling vehicle to expand a country’s influence. With
online video services making distribution largely frictionless, creative output can instantly
reach a world-wide audience. India could use creative industries to showcase Indian products
(such as khadi or yoga). Soft power could also be realised in other ways. China rapidly
expanded movie screens, adding an average of 19 new screens per day from 2012 to become
the country with the highest number of screens (surpassing the US) in 2017, with 45,000
screens. By the end of 2018, China was estimated to have 60,079 screens. Today, China is the
second-largest movie market in the world. There is a subtle incentive for Hollywood and
other foreign films to portray China in a positive light—the desire to be successful in the
large Chinese market.
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CONCLUSION
The value of the film industry in India in financial year 2020 was about 183 billion Indian
rupees. This was expected to more than half the following year due to the coronavirus
(COVID-19) pandemic. Estimates for fiscal year 2022, however, showed a growth of 196
percent.
Pandemic aside, India has consistently been the world’s largest producer of films since 2007.
At the same time, the country is the leading film market in terms of the number of tickets
sold. In terms of revenue, ‘Uri’ a military action film, released in 2019, generated over 876
percent of the original cost of the movie. This staggering amount of return on investment
ranked the sequel top of the leading movies produced in India in 2019 by return on
investment.
Advertisers in India are aware of the industry’s popularity with audiences and have invested
heavily in cinema based advertising. In fiscal year 2019, the revenue generated from in-
cinema advertising across India was valued at over 11 billion rupees. All-in-all, the Indian
film industry has a variety of revenue sources and with increasing focus on digital and
regional languages, the value of the industry is poised for growth.
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