The Video Game industry requires an Audience.
It's primary demographic is between age groups 18-34.
India does not have enough of these Gamers to justify the industry , at least at the major investment levels we are talking about.
The only other way India investors can make money is to make world class games , on major platforms like PS3 , Xbox 360 or Wii and also the PC(with Proper Copy protection Distributed through Steam).
That required Millions of dollars in investment , and that's not going to happen . Unless Investors get guarantee's .
Indian companies in general have yet to focus on the Home entertainment market.
That's because the Number of Indian's are willing to fork out the cash for Home entertainment is still small.
As that section of Middle income earner grows
The Demographic of Indian's who play games(and buy them) grows.
This can easily be determined through Video game sales , which is abysmal currently.
The lack of a tech nerd culture in India does not help matters , Instead there are millions of study nerds , who's parents barely let them watch any TV let alone play Video games.
Video games in India is still a sub-culture , that is often even frowned upon.
Computers and video games , only became personal in India only 15 years ago. That too only for a minority of the population. Those kids who play Video still have not grown up , to become spending adults.
Who are willing to spend some of their money on a new machine , to Buy a new expensive PC . And then buy new games.
Right not the market for VG's in India does not exist , just look at this abysmal Xbox 360 ad
Who the hell are they even targeting.
Ps3 does bit better . but it did not perform any better in the sales department
See , since most Indian's don't but these consoles , And Don't spend money on High end Gaming machines as well as Software. Major companies who don't need the investment don't see a market. So they won't even develop the software let alone the hardware.
If you wasn't to see how Video game Industry develops take a look at japan and how Video game industry came about over there. Video games was an American phenomenon till the Japanese and then the Europeans got involved. But Japan is case where it was very much Domestic conditions that created the industry that latter expanded overseas.
There have been what i can call Proto attempts at Video games:
It's not a good game , but hey it was a good concept for a video game , implemented properly it could have been good.
Apart for the lack of market, the fact that India does not have a strong Programming R&D and Hardware R&D center's also are a hindrance.
We don't have companies that make software and roll out with continuous updates.
Motherboards , GPU"s or CPU not manufactured or designed in India.
Indian IT sector needs to find incentives in expanding it's scope of operations.