Silver Turns Costlier in India Than Global Markets as Import Curbs Trigger Supply Crunch, Lift Domestic Rates

Silver has become much more expensive in India than global benchmark prices, as tighter import rules have reduced supplies in the country. According to a Reuters report, dealers said silver is now trading at a premium of around $6.5 per ounce in the domestic market, which is more than 10% above official local prices, even though demand has not yet reached its peak.

Silver Rates in India Jump Over 10% Above Global Rates

The sharp rise marks a major turnaround from May, when silver was trading at discounts of up to $5.5 per ounce. Since India imports more than 80% of its silver requirement, any disruption in imports can quickly push domestic prices higher.

Silver Imports Fall Sharply After Government Restrictions

The Indian government restricted imports of silver in most forms in mid-May. The rules were tightened further in June by bringing silver grain and silver powder under the restricted category, meaning importers now need prior government approval before bringing these products into the country.

Official trade data showed the impact of these restrictions. Silver imports dropped to 46.8 metric tons in May, compared with 534.3 metric tons in the same month last year. Dealers told Reuters that imports fell even further in June, leading to a shortage in the domestic market.

Why Is Silver Costlier in India?

India depends on imports for the majority of its silver needs. When imports slow, local supply becomes tight and domestic prices can rise even if global silver prices remain stable. Dealers said traders are now relying more on existing stocks because fresh imports have slowed. This has pushed up premiums in the local market.

Government Aims to Reduce Precious Metal Imports

According to the report, the import restrictions are part of the government's broader effort to reduce pressure on India's trade deficit and support the rupee. The government has also increased the import duty on gold and silver to 15% from 6%. Higher duties make imports more expensive and can help reduce the country's precious metal import bill.

However, these measures have also reduced the availability of silver in the domestic market, leading to higher prices for buyers.

Silver ETF Selling Delayed the Supply Crunch

According to Reuters, the shortage did not appear immediately after the import curbs because many investors booked profits in silver exchange-traded funds (ETFs) following the increase in import duties.

The sale of ETF holdings released additional silver into the market and temporarily helped meet demand.

Silver is widely used in jewellery, coins and investment products, but it is also an important raw material for industries such as solar energy, electronics and electrical equipment. 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 market is currently depending heavily on supplies from Hindustan Zinc, India's largest silver producer.

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