In a move aimed at stabilising domestic markets amid the escalating war in the Middle East, the Central Government on Saturday officially placed the import of high-purity silver under the “restricted” category.
The Directorate General of Foreign Trade (DGFT) moved the silver bars and products with 99.9 per cent purity into a regulatory bracket of “restricted” from the previously “free” category. This now mandates a government permit for inbound shipments of silver. The move is aimed at easing pressure on foreign exchange reserves and the depreciation of the rupee following a surge in global crude oil prices due to the blockade of the Strait of Hormuz.
This sudden intervention comes on the heels of a massive surge in silver imports, which threatened the local bullion ecosystems and complicated the trade balances as safe-haven buying hit record highs.
The decision marks a sharp shift in India’s import dynamics, moving silver from a largely liberalised regime to a strictly monitored trade asset. According to the notification, the revised silver import rules have come into force with immediate effect. The government has also increased duty on other precious metals, and has imposed a 100 kg limit on gold imports under the Advance Authorisation scheme.
The ongoing escalation in the Middle East has disrupted traditional trade routes, causing gold prices to skyrocket and forcing institutional investors to aggressively pivot toward silver as a more affordable precious metal hedge.
The newly enforced licensing system has been designed to give the government absolute oversight over who can bring physical silver into the country, effectively curbing speculative hoarding and stabilising domestic price volatility. The jewellery exporters, under the scheme, would be able to import raw materials or input materials at zero duty.
Plugging Policy Loopholes
The government’s regulatory crackdown is a strategic move to plug major policy loopholes that domestic traders had been leveraging over the past fiscal year.
India had witnessed an unprecedented influx of silver, particularly through preferential trade routes like the Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates (UAE).
By moving high-purity silver items to the restricted list, the Ministry of Commerce and Industry intends to stop unauthorised or disproportionate duty-free routing that was undercutting domestic refiners and causing significant revenue losses to the national exchequer. The silver imports surged exponentially, prompting the government to impose 15 per cent import duty, from previously 6 per cent.
Under the previous “free” import policy, private trading houses imported massive volumes with minimal government oversight. With the new restrictions in place, only designated nominated agencies authorised by the Reserve Bank of India (RBI) and the DGFT will be granted the necessary permits.
Future Outlook of the Policy
The policy shift is expected to reverberate across India’s jewellery hubs, manufacturing sectors, and commodity exchanges. The restriction has already sparked a wave of anxiety among traders, who fear that delays in obtaining government permits could lead to an artificial supply crunch and drive up premiums in the domestic market.
However, government officials have defended the timeline, stating that legitimate industrial consumers and genuine artefact manufacturers will face no hurdles in obtaining licenses, provided their compliance paperwork is flawless.
Prime Minister Narendra Modi this week called for curbs on gold purchases to reduce foreign exchange expenditure. The duty on silver imports is aimed at safeguarding the domestic currency and foreign exchange reserves from speculative shocks.
