India has issued permits for the import of around 6,500 metric tonnes of silver over the next six months to meet domestic demand during the festive season, Reuters reported, citing four bullion dealers who received the authorisations.
India, the world’s largest silver consumer, relies on imports to meet more than 80 per cent of its domestic demand. The additional import allocation is expected to ease supply constraints and reduce domestic premiums, while potentially supporting global silver prices.
“The government has allowed much more silver to be imported than the country is likely to need over the next six months, so this should help bring down domestic premiums,” said Chirag Thakkar, chief executive of Amrapali Group Gujarat, a leading silver importer.
Silver premiums over official domestic prices fell to 45 cents per ounce on Thursday, compared with as much as USD 2.50 per ounce the previous week, dealers said.
The move follows tighter import restrictions introduced earlier this year. In mid-May, the government restricted imports of silver in almost all forms, followed by further restrictions in June covering silver grain and powder, which require prior import authorisation. India has also increased import duties on gold and silver to 15 per cent from 6 per cent to curb precious metals imports, ease pressure on foreign exchange reserves and support the rupee.
However, the higher allocation comes amid subdued domestic demand for silver jewellery and investment following a recent price correction. Market participants said many investors remain cautious after losses caused by sharp price movements, despite the arrival of the festive season.
The extent to which the new permits translate into actual imports will depend on the recovery in domestic demand over the coming months.