In the last decade, the Indian art market has started to take off. Prices are rising and the international art community has been taking notice. But will growing interest turn into a long-term, stable new market where big galleries open new branches and auction houses start hiring local experts? Many sharp art-focused entrepreneurs are making headway in India, but it may still be too soon to declare the country as the "next big thing" — the country faces an uphill battle in substantially growing its art market, as taxes and bureaucratic red tape threaten to muzzle the fledgling industry.

This year, after the founder and director of the India Art Fair (née India Art Summit) sold a 49 percent stake in the company to Sandy Argus and Will Ramsay, the duo behind the wildly successful Hong Kong fair Art HK, several big-name western galleries showed up in New Delhi for the event, including Hauser & Wirth, White Cube, and Lisson Gallery, bringing more international recognition than ever before.

Of course, visitor numbers were down (possibly because a new location was more out-of-the-way or the heavy arms outside the vernissage, as ARTINFO's Madeleine O'Dea reported) and sales were slow. However, that doesn't necessarily mean that it was a failure. Sree Goswami of Mumbai gallery Project 88 told the Financial Times that she was not dismayed by a lack of major sales: "Sales at fairs are no longer made immediately, as was the case a few years ago." We probably won't know the success of the fair until a year or two from now. Will the New York and London galleries keep coming back? Will more American and European collectors make the trek to India? Time will tell.

In the meantime, Indian marketwatchers can turn their eyes to online auction house Saffronart (based in Mumbai), which will venture into Western art sales next week. The auction house is moving into uncharted waters with its inaugural sale of Impressionist and modern art, featuring several Picassos and Vincent van Gogh's 1885 landscape "L’Allée aux Deux Promeneurs," which could fetch $800,000-1 million. Prices that high are nothing new for the auction house, which made a splash as the first Internet auctioneer to make a sale over the $1 million mark, and last July became the first auction house to receive a mobile bid of that amount. Still, the market for Western art is untested by Saffron, and the auction could go either way.

Interestingly, though the headquarters for the auction house are in India, most of the art for its Imp-Mod sale is being stored in the U.S., will be shipped from New York, and must be paid for in U.S. dollars. Why? Saffronart did not respond to ARTINFO's request for an interview in time, but if we had to hazard a guess, we would say it probably has something to do with the tax and tariff problems that have also plagued the IAF. According to the Saffronart's own Web site, the taxes on art in India can be as much as 20-25 percent.

The biggest obstacle to India's art market growth is its own government. Art commerce is hampered by the notorious red tape of India's sprawling state. Art is a heavily taxed luxury in the country. Take the case of India Art Fair, again: While it was granted "museum status" for the first time this year, allowing it a reprieve from some of the duties levied in the past, Indian collectors were still hit hard if they purchased a work within the country. As a result, many galleries reported that they were trying to finalize transactions outside of the borders of India. That's fine if you are a collector who flew in from London, but more of a problem when it comes to interfacing with the local market. The administrative difficulties of the IAF drew the most criticism from international galleries this year, according to an article in the India Times.

While India's overall economic growth is often compared to (if not quite as robust as) China's, there is no way that the art market can flourish like it has for its northeastern neighbor unless its government takes a similar approach to promoting it, combining state backing with some modicum of laissez fair attitude. While there are some notiorious problems with the Chinese model, it does have some strengths. On the one hand, China's government is highly restrictive of the art that can leave the country, and has all but banned Western collectors from the government-subsidized auction houses in Beijing, but it more than makes up for that by promoting art collecting among its own citizens (Poly and Guardian are doing just fine without Western money). However, even if they weren't, access to the Western art market is just a short flight away in Hong Kong, where there are few taxes or regulations and the bastions of art capitalism flourish: Christie's and Sotheby's do a brisk business, as do major gallery chains like Gagosian.

India doesn't have a Hong Kong-like tax haven, nor does it have a regime steering its citizens toward historical treasures. If it wants a future in the global art market the goverment either has to get involved or get out — it can't just keep skimming cream off the top.