India's silver import curbs have created acute domestic shortages, pushing premiums over international benchmarks to a six-month high of $6.5 per ounce, according to dealers and industry executives cited by the Economic Times. The premium represents a more than 10% markup over global prices, a sharp reversal from May when silver traded at discounts of as much as $5.5 per ounce.
Supply Disruption and Premium Surge
"Silver imports have nearly come to a halt, creating a shortage in the Indian market," said Chirag Thakkar, chief executive of Amrapali Group Gujarat, a leading silver importer. "As a result, silver is trading at a significant premium to global prices." The premium swing from a $5.5 discount to a $6.5 premium underscores the severity of the supply crunch.
| Period | Premium/Discount vs Global Prices |
|---|---|
| May 2026 | Discount of up to $5.5/oz |
| Current (July 2026) | Premium of $6.5/oz |
Import Restrictions and Policy Rationale
India, which meets more than 80% of its silver demand through overseas purchases, imposed sweeping import restrictions in mid-May, limiting silver imports in nearly all forms with immediate effect. In June, the government further tightened rules by adding silver grain and powder to the restricted category and requiring prior import authorization. Additionally, import duties on gold and silver were raised to 15% from 6%. These measures are part of broader efforts to curb precious metals imports to ease pressure on foreign exchange reserves and support the rupee, the Economic Times reported.
Market Dynamics: From ETF Sell-off to Shortage
After the May duty hike, many investors booked profits and exited silver exchange-traded funds (ETFs), according to a Mumbai-based bullion dealer at a private bank. "That released metal into the domestic market, so there wasn't an immediate shortage despite the tighter import rules. But now those supplies have dried up, and the market is feeling the pinch," the dealer said. The temporary cushion from ETF liquidation has dissipated, leaving the market dependent on limited domestic production.
Demand and Domestic Supply
Silver demand in India spans jewellery, coins, bars and industrial applications such as solar panels and electronics. In the past year, investment demand through silver ETFs has surpassed traditional consumption. At present, the market relies largely on supplies from Hindustan Zinc, the country's biggest silver producer, said a Kolkata-based dealer. "As demand continues to recover, which has already begun, premiums are expected to move even higher," he added. India imports silver mainly from the United Arab Emirates, Britain, and China.
Price Outlook
With imports effectively halted and domestic production insufficient to meet demand, premiums are poised to climb further as demand recovers. The supply squeeze could also weigh on global silver prices, given India's significant share of global consumption. Lower Indian imports may help narrow the country's trade deficit but will strain downstream industries reliant on silver for manufacturing. Traders are closely watching for any policy relaxation, though no such signals have emerged.
Sources:
