India's silver imports have drastically declined following government measures, including increased import duties and stricter licensing requirements. In May, imports plunged to 46.8 metric tonnes, a sharp decrease from 534.3 metric tonnes in the same month last year, according to official trade ministry data. This 81.6% drop in May, to $76 million from $411 million in April, was attributed to the import duty hike from 6% to 15% and the reclassification of silver to a "restricted" category requiring import licenses.
The new regulations have created a severe shortage in the Indian market, pushing domestic silver prices to a substantial premium over global benchmarks. Bullion dealers reported premiums climbing to $6.5 per ounce, more than 10% above international prices, compared to discounts of up to $5.5 per ounce in May before the restrictions. The market was initially buffered by outflows from silver exchange-traded funds (ETFs) after the duty hike, which released additional metal, but these supplies have since been absorbed, and the impact of lower imports is now being felt.
The Indian government's actions are part of a broader strategy to conserve foreign exchange reserves and support the rupee, particularly after silver imports surged 149.6% to a record $12.05 billion in the financial year 2025-26. India relies on imports for over 80% of its silver demand. The Directorate General of Foreign Trade (DGFT) solidified these restrictions by moving silver imports to the restricted category on May 16, making licenses mandatory. This has made it more challenging for the bullion industry to import silver, with importers needing prior authorization and facing uncertainty regarding approval times.
Going forward, import volumes are expected to depend heavily on the licenses issued by the DGFT. While imports might continue from the United Arab Emirates under preferential tariff provisions or from other countries at the full 15% duty rate, subject to approvals, the immediate effect has been a significant reduction in inbound shipments. The domestic market is now largely reliant on supplies from Hindustan Zinc, India's largest silver producer, and analysts anticipate further increases in domestic premiums as demand recovers.
