India’s Silver Imports Plunge as New Licensing Rules Spark Supply Crunch and Rising Premiums

 

India’s silver market has been thrown off balance in recent months as new licensing rules sharply slowed the flow of imported metal into the country. Since India relies almost entirely on foreign silver to meet its needs, the sudden disruption has created a noticeable strain. Local buyers are now facing higher premiums and tighter supplies, and the effects are rippling through industries that depend on steady access to the metal.

The slowdown began in May, when the government introduced licensing requirements for silver imports as part of a broader effort to protect foreign‑exchange reserves. Banks and authorized importers must now secure permits before bringing silver into the country. However, most banks have not yet received approval, leaving only a small number able to continue importing. As a result, shipments dropped dramatically, falling from 747 tons in January to an estimated 29 tons in June. For a country that is one of the world’s largest silver consumers, that June figure represents less than one percent of typical annual demand.

Silver plays a major role in India’s cultural and economic life. It is widely used in jewelry and silverware, and demand spikes during festivals and wedding seasons. Beyond tradition, silver is also essential for various industrial applications, from electronics to solar panels. Because domestic production is negligible, India’s dependence on imports means any disruption quickly affects both consumers and manufacturers. With inventories thinning and demand holding steady, the market has tightened in a way not seen in years.

The supply crunch has pushed domestic premiums sharply higher. According to Metals Focus, the average premium paid over global benchmark prices has climbed to its highest level since the firm began tracking the data in 2019. Traders say physical silver has become increasingly scarce, and some describe the situation as approaching squeeze‑like conditions. Buyers who rely on consistent supply are finding it harder to secure metal at reasonable prices, and uncertainty about future shipments is adding to the pressure.

Part of the challenge stems from how the licensing system is being administered. The committee responsible for approving import permits meets only once or twice a month, slowing the pace of approvals. The government has also begun requiring certificates of origin for shipments, a rule introduced only recently, which has added another layer of complexity. Traders say there is still confusion about how quotas are assigned and what happens once they are used up. The lack of clarity has left many unsure how to plan for the coming months.

Officials say the new rules are meant to curb a surge in silver imports from countries such as Thailand and the United Arab Emirates, which benefit from free‑trade agreements with India. The licensing system follows an earlier move by the government to more than double import duties on gold and silver, a step taken when rising energy costs and geopolitical tensions in West Asia were weighing on the rupee and foreign‑exchange reserves.

The timing of the bottleneck is especially challenging because India is entering its peak buying season. Jewelers typically begin restocking in July to prepare for festivals in October and November, followed by the heavy wedding season that runs from November through March. With imports still restricted and demand expected to rise, traders anticipate that the market could tighten even further. Many are watching closely to see whether licensing approvals accelerate or whether buyers will be forced to navigate an increasingly strained and expensive silver landscape.