India's restrictions on silver imports have created significant market shortages in the world's biggest silver market, with premiums reaching their highest levels in six months. According to reports from Reuters, silver is now trading at a premium of around $6.5 per ounce in the domestic market, representing more than 10% above official local prices, even though demand has not yet reached its peak. India in mid-May restricted imports of silver in nearly all forms with immediate effect, and further tightened rules in June by adding silver grain and powder to the restricted category and requiring prior import authorisation. As reported by Reuters, Chirag Thakkar, chief executive of Amrapali Group Gujarat, confirmed that "Silver imports have nearly come to a halt, creating a shortage in the Indian market." Silver imports dropped to 46.8 metric tonnes in May from 534.3 tonnes a year earlier, with the market now heavily dependent on existing stocks because fresh imports have slowed significantly. The sharp rise marks a major turnaround from May, when silver was trading at discounts of up to $5.5 per ounce.
The import restrictions are part of India's broader strategy to curb precious metals imports and ease pressure on foreign exchange reserves. According to Reuters, the government has also increased import duties on gold and silver to 15% from 6% to make imports more expensive and help reduce the country's precious metal import bill. Following the duty hike in May, many investors booked profits and exited silver exchange-traded funds (ETFs), releasing metal into the domestic market initially. However, as reported by Reuters, these supplies have now dried up, creating the current market shortage. A Mumbai-based bullion dealer noted that after India raised import duties in May, many investors booked profits and exited silver ETFs, releasing metal into the domestic market initially, but now those supplies have been absorbed and the impact of lower imports is beginning to be felt. The import restrictions are part of the government's broader effort to reduce pressure on India's trade deficit and support the rupee.
India's silver market is heavily dependent on domestic production and imports, with the country meeting more than 80% of its silver demand through overseas purchases. As reported by Reuters, India imports silver mainly from the United Arab Emirates, Britain and China. At the moment, the domestic market is largely dependent on supplies from Hindustan Zinc, the country's biggest silver producer. A Kolkata-based dealer noted that as demand continues to recover, which has already begun, premiums are expected to move even higher. Silver demand in India comes from jewellery, coins, bars and industrial applications such as solar panels and electronics, with investment demand having surpassed traditional consumption in the past year, driven by growing interest in silver ETFs. Higher domestic premiums are increasing costs for jewellers and manufacturers who depend on a steady supply of silver for their businesses. As per dealers, buyers may postpone purchases because of higher prices, while others could buy early if they expect premiums to rise further.
The reduced Indian imports could have broader implications for global silver markets, as India's position as a major consumer affects international pricing dynamics. According to Reuters, lower imports by India, which meets more than 80% of its silver demand through overseas purchases, could weigh on global prices. However, the import restrictions are also expected to help narrow India's trade deficit and ease pressure on its rupee currency, representing a trade-off between domestic policy objectives and global market stability. The supply squeeze follows a series of import restrictions introduced by the government, with the market currently depending heavily on supplies from Hindustan Zinc, with buyers potentially postponing purchases because of higher prices or buying early if they expect premiums to rise further.
