India permits large silver imports despite weak domestic demand

MUMBAI: India has issued permits to import around 6,500 metric tons of silver over the next six months as the world’s biggest consumer of the precious metal seeks to meet festive-season demand, four bullion dealers who received the permits told Reuters.

Higher imports by India, which relies on overseas purchases to meet more than 80% of its silver demand, could support global prices while easing hefty domestic premiums that have risen due to tight supplies.

India in mid-May restricted imports of silver in nearly all forms with immediate effect. In June, it further tightened the rules by adding silver grain and powder to the restricted category and requiring prior import authorisation.

“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.

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Silver premiums over official domestic prices fell to 45 cents per ounce on Thursday, down from up to $2.50 last week, dealers said.

India has been trying in recent months to curb precious metals imports to ease pressure on its foreign exchange reserves and support the rupee.

As part of those efforts, the government has raised import duties on gold and silver to 15% from 6%.

The higher import allocation for the next six months surprised the market, as domestic demand for silver jewellery and investment has remained weak amid falling prices, dealers said.

“The festive season is here, but demand is yet to pick up. Many investors have burned their fingers in the recent sharp price correction and are now staying on the sidelines,” said a Mumbai-based dealer with a bullion importing bank.