When the world’s largest buyer of physical silver issues import licenses for 6,500 tonnes in one go, it has significant implications for the market: The equivalent of around 209 million ounces can now flow into India over the next six months. That represents around 90 percent of India’s total imports in the previous year, 2025, which, according to Heraeus and the Silver Institute, amounted to 232 million ounces.
After months of administrative gridlock that sharply curtailed inflows this year - with around 87 million ounces entering the country in the first nine months of 2026, 32 percent less than in the same period a year earlier—the new allocation covers almost two and a half times the volume imported so far this year. Precious metals analysts at Heraeus view this as the removal of the key physical bottleneck and forecast rising silver consumption through 2027. However, the firm cautions that a distinction is needed: An import permit removes bureaucratic barriers but does not automatically constitute a purchase order—actual order volumes depend on real domestic demand.
From import collapse to the Diwali season: Physical supply shortage eases
The previous dip in demand was driven by regulatory factors: Following the introduction of strict licensing requirements, Indian silver imports plummeted to approximately one million ounces in both May and June 2026—a historic standstill for the subcontinent. It wasn’t until late summer that a recovery set in, reaching 15.5 million ounces in August and 11.0 million ounces in September. The severity of the local shortage was reflected in dealer premiums: In July, buyers had to pay premiums of around $6.50 per ounce above the world market price. With the expansion of the licenses, these premiums collapsed: A week before October 22, they were still at $2.50, before plummeting to a moderate $0.45 per ounce on October 22, which confirms the normalization of physical availability.
This liberalization is supported by a stable tax framework in India's 2026/27 budget. With the government leaving duty rates on bullion unchanged, the regulatory environment remains predictable:
- Differentiated silver tariffs: Eligible large-scale importers continue to pay a total levy of 6 percent (5 percent basic customs duty plus 1 percent Agriculture Infrastructure and Development Cess (development levy)), while non-qualifying importers face a rate of 36 percent (35 percent basic customs duty plus 1 percent cess).
- Gold import tariff unchanged: Imports of gold bars remain subject to a 6 percent tariff (5 percent basic customs duty plus a 1 percent cess), following a sharp reduction from the previous 15 percent rate on July 24, 2024.
- Taxes & exemptions: Both metals are also subject to a uniform value-added tax of 3 percent. The reduction in the customs duty rate on personal items from 20 to 10 percent announced in the budget explicitly applies to neither bullion nor jewelry.
- Domestic price correction: Prices declined after the market's expectations of further tariff relief failed to materialize: Silver in India is trading at around 265,650 rupees, about 36 percent below its record high of 420,000 rupees, while gold, at about 147,800 rupees, is roughly 20 percent below its peak of 182,500 rupees.
Just in time for the Hindu festival of Diwali on November 8 - which traditionally triggers massive purchases of jewelry and bullion - the supply floodgates are opening. Last year, imports peaked at 55.9 million ounces in October 2025. Whether this level will be repeated depends on households’ willingness to spend, as they have recently become more cautious following record-high prices earlier in the year.
Macro crosscurrents: India's physical demand fundamentals versus a hawkish Fed
While India strengthens the fundamentals of the physical silver market, macroeconomic concerns over interest rates dominate Western futures markets. Although the Federal Reserve most recently left its benchmark interest rate unchanged, robust US data continue to fuel expectations of further tightening: Annual PCE inflation rose from 3.4 to 3.6 percent in September, the core rate climbed to 3.1 percent, and annualized US economic growth significantly exceeded forecasts in the third quarter at 3.4 percent. As a result, the gold price has now slipped below the psychological $4,000 mark, while futures markets are pricing in a 76 percent probability of another 25-basis-point rate hike in December, according to CME Group.
However, the latest rebound at the start of the week demonstrated that physical demand can hold its own against the paper gold market: Spot gold climbed back to US$3,962.60 per ounce on Monday, gaining 2.26 percent for the day, while spot silver surged 3.77 percent to US$50.987. For resource investors, this sets up an increasingly compelling market dynamic: Interest rate-driven headwinds from Wall Street are meeting a massive surge in physical demand from India, whose actual buying pressure is likely to provide substantial support for the global silver price in the coming months.
