I have an uncanny knack for premonitions that come true. It is not supernatural dexterity: just a finely-tuned sixth sense mixed with a touch of magical dunnowhat. So this morning I was shocked yes, but not altogether surprised to wake up to the news (http://hindustantimes.com/news/181_1583187,0035.htm) of taxmen raiding 200 art galleries across India. I knew it already!
Indian contemporary art has been steadily growing in popularity over the past decade, and figures match up to the rhetoric. Behind all the heady cheers, though, has been lurking a fat, fat ghost. Yep, the ghost of price-fixing, inflated pricing and under-invoicing. There have always been rumours, first niggling fly-sized ones, then bigger glitches-in-the-glass, which finally grew at viral proportions to become the present monsters. Harshad Mehta, match-fixing and tax evasion simultaneously! A triple whammy!
(There has been media coverage on the issue here and here. You can also follow the interesting viewer comments on the Indian Contemporary Art and Views on the Indian Contemporary and Modern Art Market blogs.)
Why am I concerned? Two reasons. One, I love art. I love watching it, indulging in it, collecting it, even investing in it (with the little green means I have!). So this issue directly concerns my passion and purse strings.
Second, and more importantly, I am confused/struck by the inability of the art market to regulate itself, and want to explore reasons for that. Being a staunch free-market capitalist, I want to explore free-market/libertarian alternatives to the current structure. I invite help in pinpointing reasons for the current state of our art market and suggesting ways in which it can improve price-accountability.
In the meanwhile, in light of friday's tax raids, here's my list of future events. First of all, I think, there will be more raids, tax threats, shut-downs, shut-ins... but I suspect that ultimately (within a year,perhaps) and inevitably, there will be major price corrections. Some artists (especially the younger lot who have seen a meteoric rise within a short span of 2-8 years) will lose the proverbial ground under their feet, some will see price downshifts which may take a while to recover from , while still others will remain unscathed.
Collectors/investors will be disappointed, angry, tense. They will wait for a while to see if there is any scope for their pieces to regain original values, else will undersell. The market, I think, will see a lot of initial underselling. It might take a while to stabilize, anything between a month to a year, but will eventually regain lost footing (it is important to note that Indian Art has, and will, definitely see a steady rise in international markets. Hence, the corrections will be a minor setback, and in the long run, a shift towards the right direction ).
Artists, especially the younger lot, whose prices had been falsely inflated, will lose face and value immediately. Ultimately, those among them who concentrate on the quality of their work will get back slowly into the fray. In the situation, quality of art will be the winner. I suspect also that many till-now minor artists will gain recognition, seeing as they will no more be repressed by price-fixing.
And finally, auction houses and galleries will (have to) become transparent in their dealings. Be as questioning of (most) taxes as I may, I think the market will have to stop underhand deals in order to evade taxes. And taxmen, bless them, will have no more need, or cause, to 'monitor' the situation.
These are not premonitions. Just logical analyses.