(Mike Maharrey, Money Metals News Service) An increase in the import duty on precious metals has led to a significant shortage of physical silver in India, pushing premiums to six-month highs.
The Indian government announced the 9 percent duty increase in May. The change pushed the import tax on gold and silver from 6 to 15 percent.
As Metals Focus explained, the move was meant to stabilize the rupee as oil prices spiked.
“Amid elevated oil prices, India’s current account deficit (CAD) has widened. To help reduce the CAD, the government has tried to curb precious metals imports (the second largest category in value terms after crude oil), accounting for 7-10 percent of India’s total merchandise imports.”
The scheme worked. Silver imports crashed in the wake of the tax hike, collapsing to just 47 tonnes in May. That was the lowest silver import total since July 2023, and down from a peak of over 1,500 tonnes in October last year during the first silver squeeze.
So far in 2026, India has imported 1,837 tonnes of silver, a 16 percent year-over-year decline. Import levels are about 3 percent below the 5-year average.
The slowdown in silver imports has created a considerably tight silver market in India. The domestic premium reflects the shortages, having risen from 10 cents an ounce in the first week of June to $6.30 on July 3. Premiums haven’t reached levels seen during the silver squeeze, but they are getting close.
Metals Focus analysts say the situation will likely be exacerbated in the coming months as demand picks up during the festive wedding season.
According to Metals Focus, confusion about import licensing requirements is further restricting imports.
“Our discussions with the trade suggest there is little clarity about the DGFT’s license requirements. There is also some confusion as to whether banks will require the license or traders will first need to apply for one, as importing without a license is not possible. We expect this to remain a significant hurdle in the coming months, which is therefore likely to see the local silver premium climb further.”
Not Enough Silver
While tightness in the Indian market won’t likely impact the global price, it underscores a key dynamic in the silver market. There simply isn’t enough metal to meet demand.
The silver market recorded a supply deficit for the fifth consecutive year in 2026.
Last year, demand outstripped supply by 40.2 million ounces (1,250.36 tonnes). That drove the 5-year market deficit to 716 million ounces. To put that into perspective, total silver mining output last year was 846 million ounces.
Metals Focus forecasts a 46.3-million-ounce supply deficit this year.
With the physical market so tight, it doesn’t take much to send the price hurdling higher. The impact of the import tax on the Indian market bears this out.
It remains to be seen how long India can maintain import restrictions in the face of a growing physical silver shortage. It’s not just about investors. India’s large solar industry, along with its electronics sector, depends on access to a reliable supply of silver.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
