MUMBAI - Indian silver imports are on pace to hit a record high this year as the wedding and festival season drives up buying of the precious metal instead of the traditional gold, made scarcer and dearer by official measures aimed at cutting the trade gap.
Higher silver demand in the world’s biggest buyer may help support prices which have fallen almost 30 percent this year on the international market and are on track for their biggest annual drop in almost three decades.
The increase in buying is unlikely to spark a fresh policy response from authorities, as in the case of gold, since the value of silver that is imported is far lower than that of gold and therefore not critical to the trade balance.
“There has been a massive improvement in silver imports and we will continue to see more. Investors are taking advantage of lower prices and the lack of restrictions on silver imports as of now,” said Harmesh Arora, director with the Bombay Bullion Association.
According to the GFMS metals consultancy, India imported 4,073 tons of silver from January to August, more than double the 1,921 tons in the whole of 2012, when a jump in prices in the peak season hurt demand. The record high was 5,048 tons in 2008.India, also the world’s biggest buyer of gold, has raised the import duty on bullion three times this year, taking it to 10 percent, and in July the government told importers that a fifth of their purchases would have to be turned around for export, leaving only 80 percent for domestic use.
The import duty on silver was also raised to 10 percent in August from 6 percent, but prices remain far apart: gold is about 60 times more expensive than silver in dollar terms.
Gold has a special place in Indian culture, bought as a hedge against inflation and traditionally used for gifts at weddings and festivals. Silver does not enjoy the same status.