Indian Art Market CW

8/3/2019 Indian Art Market CW

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FR3208: Arts and Antiques

What are the factors that affect the development

of an art market?

The Indian Art Market

Piers Bowley

Rikke BentzonLuke Demetriades

Michael Olabode

Mary Sathananthan

Francesca Satturley

Charles Smith

Hanan Taifour


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CONTENTS

INTRODUCTION......................................................................................................................................... 3

TASTE, POWER AND RELIGION ............................................................................................................. 3

SOCIAL CONDITIONS ................................................................................................................................ 4

GOVERNMENT AND TAX ......................................................................................................................... 5

SUPPLY AND DEMAND............................................................................................................................. 6

ECONOMIC CONDITIONS ......................................................................................................................... 8

POLITICAL CONDITIONS ....................................................................................................................... 10

CONCLUSION ............................................................................................................................................ 11

REFERENCES ............................................................................................................................................ 12


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INTRODUCTION

In recent years, India has experienced a fast growing economy and as a result, its art market has

witnessed a growing trend. With this being said, the potential of this market is tremendous but

it also has its flaws. This paper therefore analyses the various factors influencing the Indian ArtMarkets development.

To begin with, aspects surrounding religion, taste and power are discussed; which follows onto

social conditions in India. Thereafter, the Indian government and tax issues are analysed.

Subsequently, factors surrounding supply and demand, the Indian economy and political

matters are discussed. Ultimately, the numerous factors examined will be concluded upon in

order to determine the development of Indias art market.

TASTE, POWER AND RELIGION

TASTE

Taste is influenced by many stakeholders in an art market including collectors, critics and

dealers. The degree to which these stakeholders influence taste plays an important role in art

market development. The majority of collectors for modern and contemporary Indian art are

Indian or of Indian origin, mainly due to the lack of exposure of Indian art to people outside the

country (Stancati, 2011). Additionally, many new buyers are young and have differing tastes to

their older counterparts. Moreover, Charles Saatchi (an art collector and owner of the Saatchi

Gallery) has made many investments in Indian art. He bought a painting by Indias most highly

rated young artist, Subogh Gupta, for triple estimate and record $646,000 (Gleadell, 2010).

Saatchi has the power to influence the taste of many and thus help with the markets

development.

Dealers largely influence taste; when consumers buy art, they are essentially buying into the

taste of the dealer. India has a number of Alpha dealers including Bodhi Art Gallery and

Vedehra Art Gallery. This is significant because once Alpha galleries have selected their art, the

risk of it bombing is lessened (Robertson, 2005). Thus, they influence which art is successful.

Critics form part of an art market by acting as a communications link between the artist and the

public (Robertson, 2005). In this way, they have ability to influence public taste. India has many


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Indian art market profile globally (dawn.com, 2011). The Indian Art Summit, India's Modern &

Contemporary Art Fair, saw 128,000 visitors in 2010 in comparison to 40,000 in 2009. People

came from 67 cities worldwide demonstrating the growing international appeal of Indian art

(Elliot, 2011). ART in India, Indias premier art magazine has promoted variousart forms since

1999 (ART India, 2011). This combined with an increase in arts magazines tailored to differentaudiences helped make art education more accessible. Information technology has additionally

aided this. It is believed art is addictive, the more learnt about art the more its consumption is

desired. Thus, increased education in this sector has contributed to its growth (Robertson,

2005).

As Indias economy grows, particularly in sectors such as IT and banking so does the proportion

of people who can afford art as an investment. Many new buyers are of a young middle class

generation and tend to be open to the daring trends of contemporary art(Maneker, 2011). Not

only are a younger generation attracted to Indian art, but there is also more international

appeal. Top Indian artists such as T.V Santhosh and Atil Dodiya employ techniques and explore

themes appealing to global western audiences. In the past ten years contemporary Indian art

has changed greatly; International galleries now operate out of Mumbai, Delhi, Berlin, London

and New York while auction houses offer Indian art within the context of western contemporary

art sales, helping internationalize the collector-base (Green, 2010).

Due to financial market volatility, high net worth investors see art as an asset with tangible

long-term value (World Wealth Report 2010). The report states investors in India, China and theMiddle East have become attracted to art as a hedge against inflation risk(Hamdan, 2011). The

growing Indian art demand from these regions can also be attributed to museums and events

educating the public about this art form, including satellites of the Louvre, the Guggenheim and

the Sheikh Zayed National Museum.

Confidence in long-term sustained growth is the dominant sentiment in the contemporary

Indian art market. Buying is from India, UK, Europe, the UAE and US with corporations

contributing to sales (Green, 2010).

GOVERNMENT AND TAX

Surprisingly, for a nation with rich artistic traditions and celebrated contemporary artists,

bringing art and antiques into India is as difficult as taking them out. This stems from an

"irrational tax structure crippling the art industry due to heavy import and value-added taxes.


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While many non-resident Indians have a good collection of artwork, they avoid bringing these

into India due to prevailing policies. This is the reason why all good artworks are going to

America, where there is no entry tax (India News Post, 2009). Taxation can affect the

development of an art market as it imposes a financial burden upon buyers and sellers. This in

itself can enforce a barrier to art markets as collectors and traders would have a predispositionto operate in favourable tax conditions including America and Hong Kong.

Recently, Indias finance minister, Pranab Mukherjee, has made works of art and antiquities

exempt from customs duties when imported for exhibition in a public museum or national

institution (Financial Times, 2011). This includes art work for display in private galleries or

similar premises open to the general public. The governments move to abolish tax laws will

Internationalise art in India (Neha Kirpal, director of the Indian Art Summit). The cultural

Minister, Kumari Selja, also hailed the move believing the concession by the government will

encourage more and more private, corporate and philanthropic organisations and individuals,

to promote and popularise Indian art, allowing the sector to flourish (Art Market Monitor,

2011). The scheme will make it easier to organise exhibitions of foreign art work which will

attract a global audience towards India. Moreover, as exhibitions are on a reciprocal basis this

would enable artwork from India to be taken outside the country too. It will also allow Indian

collectors to locate heritage works of Indian art and antiquities in foreign countries and bring

them back home.

Vadehra believes India has tremendous room to expand and the government is realising theimportance of committing to cultivating the infrastructure for arts in the country, and is actively

fostering collaborations with private institutions. Additionally, in June 2011, for the first time in

the 115-year history of the prestigious Venice Biennale, there will be a pavilion dedicated to

Indian art, curated by art critic and curator Ranjit Hoskote.

SUPPLY AND DEMANDCONDITION OF ART

Todays emphasis on condition is relatively new, and has therefore arguably been one of the

major contributing factors to the perceived drop in supply over the last two decades. Condition

is a prevailing factor in the balance of supply and demand throughout the field: both restricting

the supply of good quality works and reducing the demand for damaged pieces. Indias art

market may be on the upswing, nonetheless the infrastructure that supports conservation and

restoration has yet to find a solid footing. Despite the countrys growing appetite for


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indigenously produced art, there are only a handful of recognised art conservation experts.

Today, there is more demand for restoration, because there is more awareness. Indias extreme

humidity, rudimentary framing and poor storage, make works of art especially vulnerable to

damage like pigment deterioration.

S CHOLARLYOPINION

Scholarly opinion and expertise in determining the accuracy of attributions has provoked

complications, playing a key role in defining the nature of the market. The difficulty of

attribution is illuminated by the fact that scientific analysis can only assist the process; the final

evaluation resides on the basis of aficionados in the market. Over the late twentieth century, the

number of expert scholars has increased leading to greater examination of views and ultimately

better accuracy of judgment. It is the reliability of such judgments that is essential for the

accomplishment of the market. The ability to determine the authenticity of a piece with greater

accuracy restricts market supply. However, a piece that is authenticated fuels greater demand

and increases price. The need for skilled experts is essential as fakes trouble Indias booming

art market. During a recent visit to New Delhi, 57 year old artist Arpana Caur identified two

paintings copied from her Nanak series depicting the life of the founder of the Sikh religion.

Her investigation into the fraud revealed her former apprentice and framer was running a

racket employing art students to copy her works, fetching over $44,000 at international shows

and auctions, and sell them to un-suspecting galleries. "It's not just the paintings that were

copied. My signature and certificate of authentication were being forged too," says Caur. "The

problem of fake art is not new in the global art world, but in India this cancer has spread beyond

your imagination."

AUCTION HOUSES

The international nature of todays art market, and ease of moving objects to the most attractive

sale location, is seen in the dominance of those national art markets where the international

auction houses operate, and the converse weakness of those where they do not (Robertson,

2005). Until 1997, auctions were held occasionally by the two leaders in the market, Sothebys

and Christies. However, today India has its own exclusive auction house; Osian. Osian plans tobring an Indian auction house to the international art market and with many international art

houses as clients and several Indian artists under promotion, Osian is heading in the right

direction. This will inevitably be a defining moment for the Indian art market as demand will be

fuelled by investors world-wide. In addition, online Indian auction houses are already in

existence such as Saffronart.


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ECONOMIC CONDITIONSGDP

From 2004 to 2010 Indias average quarterly GDP growth was 8.4% reaching an historical high

of 10.10% in 2006 (Trading Economics, 2011[1]). Growth was fuelled by many factors including;

developments in stock markets, technology, media and real-time information. Liberalisation ofgovernment regulations in foreign trade in the 1990s has contributed; restrictions on private

companies were lifted, and new areas opened to private capital (IndianChild, 2000).

Additionally, Indias low costs and English-speaking workforce has attracted foreign investment

by MNEs. Economic growth has resulted in higher incomes per capita and increased spending

in the art market. In a recent report, Fortune magazine has revealed the Indian art market has

risen over 485% in the last 10 years, being the fourth largest world-wide (Art Business On-line,

2010).

WEALTH DISTRIBUTION

There is high income inequality in India. While the top 10% of Indias population enjoys 53% of

the countrys income, the lowest 10% suffers with 0.2% (BBC News, 2007). The super-rich have

more money than in any other Asian nation, and these form a strong component of Indian art

demand. Growing GDP and incomes have benefited the Indian population, particularly the

middle-class. It is this rise in income per capita and wider availability of art of various prices

making art more accessible, aiding its growth (Sydell, 2007). It should however be considered

the income distribution will remain wide, and the poor will remain unable to afford art.

Additionally inflation has increased on average by 1.63% annually from 2008-2011, reducing

disposable income (Trading Economics, 2011 [3]).

THE RECESSION

The global financial crisis reduced Indias GDP from 9% to 7.4% in 2009-10. However, the

revival of the economy coupled with good monsoon in 2011 is expected to break the barrier of

double digit growth in 2011-12(Mukherjee, 2010). India recovered well from the recession. It

cut interest rates, from 6% in 2008 to 3.25% in 2009, offered tax breaks and increased fiscal

spending, and did so on smaller scale than China (Trading Economics, 2011 [2]).

India was less exposed to the international economy; China's exports represented 35% of GDP

compared with 24% for India in 2008. India's government had less necessity to replace lost

exports. Indias domestic economy provided cushion from external shocks; private domestic

consumption accounted for 57% of GDP and Indias confident consumer didn't let the economy

down, a contributing factor to growing GDP and art market spending (ChinaDaily, 2011). Since


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2010 the Indian rupee has on average decreased in value against international currencies,

making exports less expensive, and encouraging Indian art investment(Exchange-rates, 2011).

India is however not immune to risks. The government has to contend with a yawning budget

deficit, and 2009 weak monsoon rains undercut agricultural production and reduced rural

consumer spending (ChinaDaily, 2011). Rapid consumer growth is however expected tocontinue in the future, fuelling art market development. Indian Prime Minister Manmohan

Singh, when speaking of Indias plodding pace of policymaking said "slow and steady will win

the race." The 2008 recession appears to prove him right(ChinaDaily, 2011).

INTERNATIONAL GROWTH

Dubai is one of the fastest growing cities worldwide, with per capita income growing by 9% in

the United Arab Emirates in 2006. Hong Kong is seeing substantial growth; in 2009 it was the

fourth most affluent Nation in terms of GDP per capita (Richestpersons.net, 2011). London, the

world's largest financial centre has the largest city GDP in Europe. Alongside New York with the

largest stock market worldwide and with a 32.8% 10 year income per capita growth rate, the

number of high earning individuals is rapidly growing, largely contributing to the increasing

demand for Indian art across these four locations (Business Insider, 2010).

The Indian art market has however approached a crossroad. According to Neha Kirpal (2011) of

India Art Summit, a majority of Indian art buyers are of Indian origin. Though this doesnt seem

to present an immediate warning, the real question is, can this market continue to grow if it

stays attached to its geographical heritage or will the potential of this market only be realised

through further international reach. Indias art base isnt the most internationally recognised

yet, continues Kirpal(2011), indicating not all overseas benefits are being taken advantage of.

This is due to not yet taking full advantage of art fairs and worldwide showcases, suggesting the

market can rapidly ascend to maturity when they are exposed to further international circles

over time. We are slowly going global (Kirpal 2011), highlighting the inevitable direction for

Indias intercontinental ascendancy.

S PECULATION

Data from ArtTactic (2010) showed the average price at auction for contemporary Indian art

declined by 75% between September 2008 and 2009, but regained strength up 140% between

March 2006 and September 2008. One problem of the Indian art market, is that its mainly

driven by speculation (Robertson, 2011), which could result in distorted valuations, monetary

bubbles and gold rush mentality. If this trend continues, it may be difficult to calculate present


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sales volume or predict future ones, thus producing a superfluous pricing issue, potentially

hindering Indias art market development.

POLITICAL CONDITIONS

India is one of the largest democracies in the world, possessing high political stability. It

suffered political instability prior to 1999 due to the inability of any party to win an absolute

majority in Parliament. However, since 1999 general elections, when theNational Democratic

Alliance obtained a majority vote, stability has returned. Previous political volatility did not

change Indias economic course but delayed actions regarding the economy, reducing the

economic growth rate and thus art investment(MaloMaal, 2011).

India has six national parties with ideologies ranging from free market to communism. Indias

political divide is not one of policy, but essentially personalities. Economic liberalization, which

is essentially what foreign investors are interested in, is seen as crucial by all parties, including

the Communist Party of India, Marxist. Therefore, political instability poses little risk to foreign

investors as no policy introduced by a previous government has been reversed by a successive

government. This lack of risk has been a large contributor to Indian art market development

(MaloMaal, 2011). Additionally, the political stability of various cities such as London, Dubai,

Hong Kong and New York has played a part in encouraging the leading auction house for

Modern and Contemporary Indian art, Christies to hold auction sales at these locations,

encouraging demand for Indian art(Christies, 2011)

With regards to terrorism, excluding few areas in the north, activity is practically non-existent.

The Mumbai terrorist attack is however an exception. The attack occurred late 2008, when

Indias art market began to anticipate the recent economic crisis. The effects of the crisis were

seen at a Sothebys Hong Kong auction in October (2008), when a painting by Indian artist

Subodh Gupta failed to sell. However, six months earlier another piece of his had sold for over

$1m. Consequently to the terrorist attack, demand substantially declined, though this closely

correlates to or was exacerbated by recession. Many galleries in response exercised damage

limitation, for example Bodhi Art is rumoured to have offered 40 % reductions to clients. Some

however say this economic correction was needed in the booming Indian market(Harris, 2008).

Since this time however, India has remained stable politically, raising consumer confidence and

thus investment in Indian art.


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CONCLUSION

A number of factors have influenced the Indian art market development, and it appears these

are interlinked. Tastes are influenced by key art market stakeholders, and the extent to which

these are influential depends on the relative power of each party. Supply and demand of Indian

Art is ultimately what enables the markets development. This depends on factors such as

condition, attribution and auction house presence, however all factors considered above have

contributing impact. Increased arts education and art initiatives increased the appeal of art. Its

adaption to a wider audience, through the tailoring of art techniques to a global western

audience, and the rise in contemporary art has captured the eye of a younger generation. Rising

GDP, wealth and political stability are enhancing demand. There are factors including wide

income distributions, inflation and speculation leading to distorted valuations having a negative

impact. However, the influence of these seems to be largely outweighed by positive factors

contributing to the markets development. Government policies on trade have reduced

incentive for international dealings, however changes in tax structure and plans to revive the

Indian arts infrastructure will help to further internationalise Indian art.

One key factor brought to attention through this essay is the impact of international growth.

India has been relatively underexposed to the international economy and was thus less hit by

recession. However, it appears opening up to international growth will be key to the expansion

of the Indian art market. Ultimately, all factors analysed seem to be positively impacting the

markets international and domestic growth, indicating the Indian art market will continue to

develop substantially.


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REFERENCES

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http://www.artbusinessonline.com/articles/page-20.shtml [Accessed: 7 March 2011]

Artconcerns.com,2011. Arun Vadehra[Online]Available at: http://artconcerns.net/2009jan/html/atlunch.htm [Accessed 11 March 2011]

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Indian Art Market CW