While the global animation and VFX industry is currently valued at USD 179.78 Billion (as of 2024) with North America being the leading player in the sector, Indian animation and VFX industry is valued at USD 1.38 Billion. The following article aims to explain the current trends, advantages, challenges and future outlook of the VFX industry of India.

What is VFX?

Visual effects or simply say VFX is the technique through which you can bring your imagination and creativity to the real world. Computer generated visual effects (CGI), compositing also known as chroma keying, and motion captures are the key tools that are used for visual effects. Visual effects are widely used in the entertainment and media industry for creating scenes and visuals which are either too dangerous to shoot or don’t exist in reality. The growth and development of technology in visual effects has significantly contributed to the exponential growth of the entertainment industry.

Indian VFX Industry: Current Scenario

Revenue Streams

The Indian VFX industry is valued at US$ 653.67 million as of 2023 according to IBEF, of which 70% of the revenue comes from the services outsourced to the rest of the world. 

Though a major contribution is coming from international projects, domestic projects are also showing a growth in the revenue share with projects like ‘Adipurush’, ‘Bhramastra’, ‘RRR’ and more which incorporated a major cost in VFX. Apart from movies and series, the advertising and gaming industry are also notable consumers of these services. Advertising agencies have shown a significant increase in incorporating computer generated imagery in their projects as using CGIs are more efficient and feasible options. Besides being cost effective, VFX usage in advertising has increased owing to wider scope of creativity which can be noticed in recent campaigns of brands like L’Oréal, Maybelline etc. Moreover, 5% to 10% of the revenue of the VFX industry is driven by commercials only. The industry is expected to grow at a 10% CAGR in India while the industry is growing at a rate of 8.43% CAGR globally.

Advantages of India

As India has emerged as a major hub for providing IT services, India also holds a potential to become a global outsourcing hub for visual effects. We are able to achieve this owing to multiple factors such as cost efficiency, technical expertise and infrastructure.

• Cost Effective

Indian studios are able to produce high quality VFX at a comparatively cheaper cost, say 30-50% cheaper than those in the U.S. and Europe, which helps in getting large scale projects. Therefore, India enjoys a major advantage in cracking deals in the global market owing to its competitive pricing. 

• Skilled Workforce

When it comes to the workforce, India has a privilege of having talented professionals out there. India has highly trained artists, animators, and VFX professionals graduated from institutions like MAAC, Arena Animation, and Frameboxx possessing all the relevant skill sets required in the industry. The skilled labour has showcased its potential time to time by delivering high quality projects.

• Infrastructure

Huge investments are made in the infrastructure, say in cloud rendering, motion capture, etc which allows to produce high quality output efficiently and enhancing the capacity to handle complex projects. The Indian VFX industry can leverage on the skilled workforce and advancement in AI, machine learning and real time rendering for its growth.

Additionally, AI has profoundly reshaped the visual effects industry by enabling creators to bring their imagination to the world which once seemed impossible. AI-powered tools are enabling the production of highly complex imagery and effects. These innovations are not only pushing the boundaries of creativity and enhancing visual storytelling but also proven in being more cost efficient. Besides this, by working on major projects like Avatar, Avengers, Inception and more, India has proven its potential of delivering quality content.

• Role of Government

The government has recognised the potential of the industry and is taking measures to boost it. The establishment of the AVGC Promotion Task Force, Draft Model State Policy 2022, and the Draft National Policy for AVGC-XR 2022 are some notable steps that the government has taken to help the industry grow. Initiatives like the National Centre of Excellence in Animation, Gaming, and Visual Effects, along with various incentives such as up to 30% reimbursement on a minimum spend of INR 10 million and an extra 5% for significant Indian content, the Indian government is offering incentives for foreign animation, visual effects, and post-production projects that use Indian services and grants, shows the government’s commitment. The Create in India initiative and setting up institutions to upskill people are highlighting the government’s dedication in supporting the AVGC sector.

Through policies like the National Digital Communications Policy and the National Education Policy, the government is laying a robust foundation for the AVGC sector to thrive. 

AVGC policies are in effect in states like Telangana, Maharashtra, Karnataka, Delhi, and Kerala. For instance, few states are offering subsidies on rentals, establishing AVGC-XR labs, financial support, tax exemption, legal assistance, reimbursement on various stuff according to state’s policies.

Meanwhile, states such as Tamil Nadu, UP, MP, West Bengal, and Haryana are in the process of drafting policies. Efforts are underway to establish policies in Rajasthan, Gujarat, and the North Eastern states, envisioning a Center of Excellence in each state.

Economic Impact of the VFX Industry in India

According to a CII report, this sector is expected to create 1,60,000 new jobs annually and 20 lakh new jobs by 2030 and collaborating with international production houses such as Disney, Netflix, marvel and more will bring foreign direct investment in the economy. Therefore, it can be concluded that the sector’s growth will be a boost to the Indian economy by bringing forex and generating employment opportunities. Additionally, Mumbai and Hyderabad have seen economic development by becoming VFX hubs, infrastructure development, job opportunities and rise of standard of living are happening owing to this.

Apart from this, in order to collaborate with the west for international projects, there exists a need to upskill people and teach them about the visual effects to meet and fulfil certain standards, therefore, in order to meet the demand for talent there arises an opportunity to establish institutions to train people regarding the same. Hence, many opportunities in the education sector are coming forward. Many institutions nationwide are already providing various undergraduate and postgraduate courses in visual effects and related aspects.

Challenges in the Indian VFX Industry

Though India is aiming to become an outsourcing hub for the west, there are certain challenges that appear in the way. This primarily includes the dependence on international projects as its main source of revenue. About 70% of the total revenue comes from international projects which shows huge dependence of the industry, revenue and growth of the industry can be hampered owing to strikes, delays and cancellation of the projects which has been witnessed earlier as well, Writers Guild of America and the Screen Actors Guild American Federation of Television and Radio Artists strike was a shock to the industry but the Indian VFX industry dealt with it by engaging in domestic projects and exploring other markets as well.

The other shock the industry might face are owing to deduction in the budgets of OTT platforms. Recently,  Disney+ and Netflix have significantly reduced their budgets which implies lesser projects for the Indian VFX industry. The cost cutting by these giants result in loss of business for the industry.

The dependence and delays in international projects can hamper the momentum of the industry, therefore, slowing its growth.

Key Players in the Indian VFX Industry

The local VFX industry has also been setting up a benchmark in the International Entertainment & Graphics Industry by contributing majorly in their VFX and Animation world. Companies like Red chillies entertainment have a major hand in animation of films like Sin City: A Dame to Kill For which stars Eva Green and Joseph Gordon-Levitt. DNEG (Double Negative) one of the leading VFX companies of India has contributed to the production of eminent and phenomenal films.  They have played an important part in the making of 2.O and Brahmastra: Part One – Shiva. They have also provided graphics and VFX to movies like Inception, Interstellar, Dune, Blade runner, Tenet, First man and Ex machina. Their subsidy Prime Focus has majorly contributed to the VFX part of Avatar movie.

• Prime Focus Limited

Founded in 1997, by Namit Malhotra, is the world’s largest integrated media services powerhouse. The organisation provides Film & TV post-production, VFX, 3D conversion services. Prime Focus Limited has showcased its potential by working on projects like Avatar, Interstellar, Baahubali and The Martian. In 2006, with the launch of Prime Focus World, it expanded its operations in London, New York, Los Angeles and Vancouver. Prime Focus limited has also merged with double negative, a British company, in the year 2014.

The company is spread across 16 cities in 4 continents. Analysing the financial reports, it can be observed that the company has encountered a major revenue drop in previous year from ₹1209.20 million in FY 2022 to ₹402.42 million in FY 2023 to ₹334.48 million in 2024 which indicated severe financial distress or ongoing restructuring needs.

•  Red Chillies VFX

Bollywood superstar, Shah Ruk Khan, owned Red Chillies VFX is a subsidiary of Red Chillies Entertainment which is specialising in film visual effects and motion graphics. It has provided its expertise in projects like Ra.One, Pathaan, Bulbul and Zero. The Red Chillies VFX has reported a revenue of $13.6 million.

Besides producing content for the Indian market, it has also worked on Hollywood projects such as Sin City: A Dame to Kill For and Avengers: Age of Ultron.

•  Moving Picture Company

Established in 1970 in London, moving picture limited set up its office in India in 2007, is a key player in the Indian VFX industry. The Jungle Book and The Lion King are notable works of the organisation. The company has also won an Academy Award for best visual effects in the year 2017 for its outstanding work in The Jungle Book.

•  DNEG

DNEG is a British-India company, established in 1998 which opened its office in Mumbai in the year 2009, is one of the prominent VFX studio which has produced award winning projects like Inception, Interstellar, Ex Machina, Blade Runner 2049, First Man, Tenet and Dune. The company was formerly known as Double Negative but renamed as DNEG after it got merged with India’s Prime Focus Limited in the year 2014.

• Phantom Digital Effects Limited

Established in 2016, the studio is behind delivering extravagant projects like Avengers-Assemble, RRR and Baahubali, this Chennai based company holds a major stake in the Indian VFX industry showing a steady growth in the past few years. It has reported a revenue of ₹893.31 million in FY 2024 while it was ₹578.94 million and ₹223.33 million in the financial year 2023 and 2022 respectively.

Phantom Digital Effects has acquired an 80% stake in Tippett Studio, a renowned VFX company founded by Oscar-winning filmmaker Phil Tippett which will be enhancing their portfolio and capabilities in delivering high-quality visual effects for international projects.

Future Potential and Outlook

India is holding an advantage of being cost effective, having talented and skilled human capital along with development in the infrastructure. Besides this, the government is also supporting the industry via various measures as discussed earlier. The technological advancements are acting as an aid to industry by increasing its scope and efficiency. Moreover, India has proven itself by producing global award-winning projects and gaining global recognition which has helped in gaining confidence of the west for outsourcing their projects. Besides this, there is a lot of potential in the gaming and comic industry for the VFX industry to tap. 

According to EY’s report, the VFX can grow at a CAGR of 17.5% to reach INR 185 billion by 2026. This will lead to inflow of forex as well as will help in employment generation. Apart from international collaborations, the usage of VFX in local and regional films is also increasing. This will promote domestic growth.

However, the other side of the coin is the dependence of the industry on international projects as a main revenue source can be concerning as global shocks will cause a significant dent on the sector. Apart from this, brain drain can also emerge as a major challenge for the domestic industry as the highly skilled professionals will be seeking jobs in the international companies owing to tempting career opportunities. Therefore, retaining talent in the country is an emerging challenge for this sector to grow exponentially and for holding a strong position as a global player.

The other challenge that the domestic industry needs to tackle is to increase its share from providing services which is currently 80% to unique IP based in order to hold a global position. Huge investments in design are required along with shifts in content creation, script development and development of a systematic registration mechanism for safeguarding the interest.

India currently possesses all the necessary characteristics that can help this sunrise industry boom from cost efficiency, talent, infrastructure to government support. Steps taken in right direction, utilising the resources at optimum level will lead the country to emerge as a global leader in this sector.