MUMBAI - India's animation industry is expected to hit $1 billion by 2012 and the gaming industry would touch $830 million then, aided by increased outsourcing and a growing domestic market, a report released on Wednesday said.

The Indian animation market, estimated at $494 million in 2008, is seen growing at a compounded annual growth rate of 22 percent till 2012, a report by National Association of Software and Service Companies (NASSCOM) and Ernst & Young said.

"The industry will witness a dip in growth rates for two years before becoming a billion dollar industry by 2012," Farokh Balsara, Partner & National Leader-Media & Entertainment Practice with Ernst & Young, said at a media briefing, referring to the animation industry.