India approved silver imports of 6,500 metric tonnes for the next six months to meet festive demand. Reported on October 22, this move aims to ease supply shortages and lower premiums. Chirag Thakkar said, "I expected the additional supply to help lower domestic premiums." Many investors remain cautious despite this.
Synopsis
The increased allocation could support international silver prices while bringing down elevated premiums in India, where tight supplies have pushed local prices above official domestic benchmarks.
India has approved silver imports of around 6,500 metric tonnes for the next six months in order to smoothly meet festive-season demand, news agency Reuters reported on October 22.
The new move is aimed at easing domestic supply shortages and reducing premiums even as demand for the precious metal remains subdued ahead of the festive season.
Four bullion dealers who received the permits told the news agency that the approvals would allow the world's largest silver consumer to meet demand during the likely oncoming sale-season rush.
It may be noted that India depends on overseas supplies for more than 80% of its silver requirements, making import flows a key factor for the domestic market and global prices.
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The increased allocation could support international silver prices while bringing down elevated premiums in India, where tight supplies have pushed local prices above official domestic benchmarks.
The government had imposed restrictions on silver imports in nearly all forms with immediate effect in mid-May. In June, it expanded the restricted category to include silver grain and powder, making prior import authorisation mandatory for these products as well.
Chirag Thakkar, chief executive of leading silver importer Amrapali Group Gujarat, told Reuters that the permitted volume appeared substantially higher than India's likely requirements over the next six months. He said he expected the additional supply to help lower domestic premiums.
Silver premiums over official domestic prices declined to 45 cents per ounce on Thursday, compared with levels of up to $2.50 the previous week, according to dealers.
The import approvals come as India has been seeking to contain precious metals purchases to reduce pressure on its foreign exchange reserves and support the rupee. As part of these efforts, the government increased import duties on gold and silver to 15% from 6%.
The scale of the latest import allocation caught market participants by surprise, dealers said, given the weakness in demand for silver jewellery and investment amid falling prices.
A Mumbai-based dealer with a bullion-importing bank said festive-season demand had yet to gain momentum. Recent sharp price corrections had left many investors nursing losses and reluctant to return to the market, the dealer told Reuters.
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