India Allows Imports of 6,500 Tonnes of Silver Despite Weak Domestic Demand
Key Facts
India has allowed imports of about 6,500 metric tonnes of silver over the next six months, according to four bullion traders who received the permits, Reuters reported in an article published by MarketScreener on October 22. The traders said the allocation is intended to meet demand during the festive season, but noted that domestic demand for silver for jewellery and investment remained weak despite the season and falling prices. The larger allocation surprised the market, as weak demand had not suggested a need for inflows on this scale. The decision comes in a market where India relies on overseas purchases to meet more than 80% of silver demand. This puts the permits in direct tension with signs of weak consumption and raises the possibility of increased domestic supply in the coming months.
Silver importer Chirag Thakkar expected the permitted quantity to exceed the country's needs over the next six months, saying the government had "allowed the import of much more silver than the country is likely to need over the next six months." He added that the inflows could put pressure on domestic premiums, the amount buyers pay above the official price. The premium did fall to 45 cents an ounce on Thursday, compared with a level of $2.50 the previous week, according to the traders cited by Reuters. The decline points to easing tightness in immediate supply in the domestic market. It also shows that the permits' impact could appear in local purchasing costs before being reflected in consumption figures.
The approval follows import restrictions that began in mid-May and covered most forms of silver. In June, the government added silver granules and powder to the restricted categories and required prior licensing, Reuters reported. At the same time, India raised import duties on gold and silver to 15% from 6%, in a move the report said was aimed at curbing imports and supporting the rupee. The measures reveal two concurrent tracks: imposing restrictions and higher import duties, then issuing large permits to secure supplies. Published estimates of the allocation differ: a Bloomberg report via Moneycontrol said the permits amount to 6,000 tonnes, while Reuters cited traders' estimate of about 6,500 tonnes. India also imported more than 7,000 tonnes in the previous year, but the report said expected consumption could be much lower amid weak trader stockpiling and a decline in silver gifting.
Shipments fell to a three-year low of 37 tonnes in June before rising to 328 tonnes in September, according to a Metals Focus estimate cited by Bloomberg via Moneycontrol. This trajectory provides context for the shift between restrictions and permits: weaker flows in the middle of the year coincided with import curbs, then shipments recovered by September. But traders said the recovery was not accompanied by a similar rebound in jewellery or investment demand. Indian silver exchange-traded funds fell on October 22 alongside a decline in global prices: HDFC Silver ETF was down 2.7% at 2 p.m., while funds from Tata, SBI, Kotak, UTI, Axis, Mirae Asset and DSP fell by more than 2%, according to Business Standard. The funds' moves alone do not establish the impact of the permits, but they came during a session marked by broad pressure on the metal.
Spot silver fell 3.4% to $55.97 an ounce on October 22, while December futures on the MCX fell 2.5% to 203,772 rupees per kilogram, according to Business Standard. The report attributed the pressure to mounting concerns about U.S. interest rate hikes, while renewed tensions in West Asia pushed oil prices higher and raised inflation concerns. EL7 data showed XAGUSD closed at 53.708 on October 23. The Federal Reserve's Federal Open Market Committee raised its target rate range by a quarter of a percentage point in September to 3.75%–4%. Minutes of the meeting showed that most participants viewed another increase before year-end as likely, with future decisions tied to incoming data. The next meeting takes place on October 27 and 28, a date watched by metals traders as prices remain sensitive to interest rate expectations.