The Indian art market's double dip

ArtTactic, a research and analysis firm, states in its latest report on India: "The Indian Modern and Contemporary art market continues the negative trend as other global art markets are on the rise. For the Summer sales, the auction houses attempted to respond to the disappointing results in March 2011 and had lowered the estimates to try to re-ignite buyer interst (sic)."

Saffronart's auction earlier this month was lacklustre. Over half the lots did sell above their higher estimate, but that was because, as the ArtTactic quote above suggests, those estimates were very modest. The June 15-16 sale achieved only one truly spectacular result: a Tyeb Mehta Kali that was acquired for a little over 1.3 million dollars, over three times its higher estimate, accounting for more than 30% of the 65-lot auction's entire value.

There's been a substantial rejig in the standings of the auction houses since the meltdown. Osian's has been worst hit, and has almost disappeared from the auction radar. Sotheby's has lost ground to Christie's, which is perceived as more dynamic and driven. Sotheby's was dealt a further blow when its long-time consultant, Dadiba Pundole, left and launched his own auction house, conducting a brilliantly successful sale of twenty paintings from Jamshed Bhabha's collection bequeathed to the National Centre for Performing Arts. Dadiba says the break from Sotheby's was unrelated to the setting up of Pundole's. The NCPA sale was offered to him after he ended the Sotheby's association, and an auction was the easiest way of liquidating the stock. I believe him, just as I believe Brad Pitt only began his affair with Angelina Jolie after splitting with Jennifer Aniston.

The slump in the Indian market is receiving international attention. Last week, the Independent's John Elliot published a good piece about the situation. The question is: why should Indian art sales be doing so badly when our economy is so much stronger than most others around the world? Surely one would expect exactly the opposite to be happening, namely that the downtrend would continue in places like Europe and the US facing anaemic recoveries or a return to recession.

The answer lies in a column I published in Time Out in late 2006. I've quoted it before on this blog when the first prediction it made came true, and I'm quoting it again now that the second one has as well.

"... as the autumn auction season kicks off and the records start tumbling, I will hazard this prediction: if the market keeps its present course, it’s heading for a crash sometime in the next two years. It’s going too fast to negotiate twists in the road which are bound to appear up ahead.
People like my friend with the Badri Narayan are pricing genuine collectors out of the market. The turnover of paintings is frighteningly high: it’s not unheard of for a single canvas to be sold half a dozen times within a year. Auction houses have turned advocates rather than neutral sellers. Even Christie’s and Sotheby’s are featuring raw artists and accepting fresh-minted works consigned by galleries, in contravention of normal international practice. The boom that began with established masters has spread to artists with no proven track record or historical merit. Gallery owners, who should be turning off the tap of speculation by carefully vetting clients, have little power to set conditions. They have to suck up to popular artists in order to get a few works out of them. The artists, meanwhile, many of whom have known privation in the not-too-distant past, are keen to make their pile as quickly as possible by selling to the highest bidder.
Despite these unhealthy symptoms, the experts have convinced themselves the party will go on forever. They, like everybody else, are having too much fun to think hard about tomorrow.
The rise in art prices has been congruent with a global boom, and the crash is also likely to be triggered by global factors, as yet unknowable. Once the tipping point arrives, developments intrinsic to India will take over and probably make the correction deep and painful. Since few buyers are purchasing for love, people holding stock will want to cut their losses immediately, feeding supply even as demand fades. There is the additional dimension of mushrooming art funds to consider. These funds usually operate for stipulated periods, and will have to unload their wares even in a declining market, exacerbating the slide."

The two predictions I made were, first, there would be a crash triggered by global factors. Second, and more important, the Indian art market would be worse affected by the crash than global markets because of the dominance of art funds and speculators. In nominal terms, the Indian economy is about 15% larger than it was 12 months ago. Art sales, on the other hand, have actually fallen in value in that period.

I concluded the column thus: "I’m actually looking forward to that time, so I can visit galleries and look at art without the surrounding noise, maybe even buy a painting I like now and again. They may stop serving Black Label at openings, but I don’t like whisky much anyway."

This, too has, happened. I enjoy openings and exhibitions much more now that they're less lavish, less connected to society pages and sticker prices.