But amidst the current global sturm und drang, the Indian art market has suffered a remarkable battering. The days of profligate spending by speculators and investors, buoyed by mirage-like visions of quick profits and huge returns, have brought the market skidding to a halt in line with the powering-down of the economy.

In September last year, a Sotheby’s auction reported all Indian lots unsold — a statistic unthinkable only a year ago. Around the same time, leading industry experts, UK-based ArtTactic gloomily reported a sharp decline in the overall market activity during the latter part of 2008 — a 71 per cent drop in the overall market since October 2007, startling intelligence whichever way one looks at it.

The news, as is so often the case, served as a self-fulfilling prophecy. Last December, one of India’s leading auction houses, Saffron Art in Mumbai saw sales at auction fall from an average of $7 million throughout the year to just $2.8 million. And just last month, the special Indian exhibition at ARCO, one of the world’s leading art fairs, failed spectacularly to entice buyers who, even only last year, would have been eagerly proffering chequebooks for the assorted pieces, largely by up-and-coming youngsters, precisely the kind of work that would have second-wave speculators clamouring.

So is the dream over for India? Is this a cataclysmic meltdown, or in that eternally-hopeful phrase, merely a ‘correction’ in the country’s art market?

One gallery dealer in the Middle East [who wished to remain anonymous], with extensive experience in both the Indian and Gulf markets, sees the current economic crisis as an invaluable opportunity to reboot the parameters of the Indian art market. Citing the greed and harmful effects of speculation within recent years as key factors in pushing the market to a point where sustainability became impossible, this dealer believes that the current situation is a much-needed cold shower for the Indian art scene.

“It is indeed a shocking plight for the art world. People are scared to put their money anywhere today, so I guess it’s wait and watch for the next few months to see where things go from here. A few galleries and investors, in need of money, are now selling works at really good prices. And great works at that. These works wouldn’t see the light of day in a booming market.”

Recent years have produced a clutch of new art superstars, whose unique stylings and dedication to broadening the spectrum of media have made India synonymous with progressive, experimental art. Probably the best known of the current crop is Subodh Gupta, a 44-year old from Bihar, whose palette seems to know no bounds. Leaping with agility across disciplines, his paintings, videos, installations and sculptures articulate the heart of the new wave of Indian art perfectly—sharp, witty pieces that combine traditional elements of Indian life and tradition with Western forms and techniques, that coalesce into sexy, desirable, inspirational pieces.

While Gupta has transcended local markets, gained a prestigious dealership and is featured in museum-quality shows around the world, his work remains rooted deeply in his rural upbringing, mundane household items, pots, pans — the everyday detritus of life brilliantly re-cast amidst thought-provoking contexts and systems — demonstrates the combination of elements that appear to resonate most with foreign collectors. But it was the confidence created by marketability of the new superstars such as Gupta, Jitin Kallat or Bharti Kher which occasioned hysteria amidst investors. According to the dealer, this influx of cash quickly caused problems.

“There were injections of large amounts of money from Indian and foreign investors, international museums were getting into Indian art, art was seen as a status symbol, and there was a lot of hanky panky, all leading to artificial price rises. But this very fragile balance could only be maintained artificially, as long as there was surplus money in the market…”

And for a while there, there was plenty. Only last April a new gallery was opening in Mumbai every week, and sell-out openings were considered standard. Now, the reverse appears to be the case.

There is also concern over the fate of the numerous art funds that have sprung up over recent times, which encouraged smaller investors to put their money into a managed fund, that would purchase art works, betting on their future success at auction, to realise generous returns for stakeholders, With estimates of around $30 to $40million having been poured into these funds during the past four years, the stakes are high — and the likelihood of lucrative gains seems now, remote.

“Lots of people entered the market without adequate knowledge, to make a quick buck,” reflects the dealer. “Art funds today are a disaster waiting to explode. Everything stays covered up with false valuations till it is time to sell. And that time is nearing for a few of the older funds. Lets wait and see. I think a lot of people who are based in Dubai and have invested in such funds will be disappointed.”

Certainly, the art market is holding its breath, twitchily analysing the result of every auction and fair, hoping to see hints of previous glory days returning, despite the economic gloom.

But while some hedge their bets — Christie’s auctioneers, for instance, have cut back on their planned March Indian art auctions in New York, pessimistically predicting a take averaging around a third of their September 2006 bonanza of $18m — the slump in prices has made work accessible again, and there are still buyers to be found for classic Modernist works. Last month, Osians auction house in Kolkota reported reasonably healthy sales for MF Hussein, Hemen Mazumdar and J Sultan Ali, icons of a bygone age, who can still persuade blue-chip collectors to spend. And the boom and bust has had the effect of re-focusing attention on the galleries, and shifting emphasis away from auctioneers.

And while there may be fiscal stalling, the leading lights of the younger scene show no sign of stagnating, as a superb new group show at London’s Serpentine gallery, Indian Highway is currently demonstrating.

Amidst the rollcall of iconic names, including MF Hussein to Subodh Gupta and Jitish Kallat, the fresh work demonstrates how these artists continue to develop their distinctive techniques, away now from the pressures of an over-heated market and the attendant temptations to relax and churn out identikit cash-magnet work, and instead, retreat and focus on developing the ideas and practices that first catapulted them into the global spotlight.

With this breathing space, it’s hoped that the next wave of Indian art will reflect the sobering lessons learned from this strange, uncertain period. As the anonymous source has it: “This has been indeed a shocking plight for the art world. People are scared. I guess it’s wait and watch for the next few months to see where things will go from here.”