Silver inflows likely to rebound as import curbs eased for Diwali | Economy & Policy News

India’s silver imports are set to rebound in time for the busiest jewelry-buying season after the government issued a raft of new permits, easing restrictions that had stifled shipments to one of the world’s biggest markets. 

Traders and bank dealers this week received quotas covering as much as 6,000 tonnes of silver, said according to four people familiar with the matter. The permits are valid for six months, said the people, who asked not to be named because they’re not allowed to speak publicly. 

The new licences “should be able to easily cover any demand spike,” said Harshal Barot, principal consultant at Metals Focus Ltd, a precious metals consultancy. “As a result, we no longer see a tight market and premiums are likely to ease substantially in the run-up to Diwali.” 

India imports almost all of its silver. The government  introduced new licensing requirements in May, one of a number of measures taken to preserve foreign-exchange reserves and defend the rupee.  

Would-be silver buyers must now apply for a permit, and every shipment must be accompanied by a certificate proving the country of origin. The government also more than doubled import taxes on gold and silver, adding to the cost of buying. 

As a result, silver imports initially plunged to a fraction of the country’s demand. In June, monthly shipments hit a three-year low of just 37 tonnes. That rose to 328 tonnes in September, according to an estimate by Metals Focus, as a limited num­ber of permits were granted.  

Demand for precious metals typically rises during the festival season that peaks with Diwali. With the latest permits granted, premiums paid to secure silver are likely to ease substantially, Barot said. 

Indian premiums dropped to around 50 cents an ounce over the global benchmark on Thursday, said Monal Thakkar, managing director of Ashoka Global FZCO, a precious metals trader. That was down from around $2 last week, data from Metals Focus shows. 

Last year, India imported over 7,000 tonnes of silver, a massive wave of buying that helped to trigger a historic short squeeze in the global market. Prices rose further as speculators piled in — hitting a record high above $121 an ounce in January — before slumping after the West Asia war sent energy prices surging, stoking global inflation fears. Spot silver was trading around $56 an ounce on Thursday.