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The Rise in Silver Imports Suggests
a Revival in Indian Investment Demand

Over the last two months, India’s silver bullion imports have staged a strong recovery. With a strong inflow in May (727t) and June (984t), Indian silver imports in H1.22 totalled 3,429t, a significant uplift from 2021 when they fell short of 100t during H1. Put another way, imports in the first six months are 26% higher than 2021 full-year imports. Metals Focus research suggests that this could signal a revival in India’s investment demand, which has been subdued over the last two years.

Going back to India’s import trends over the last two years, the pandemic had a pronounced impact on local silver demand, pushing the economy into recession for the first time in four decades. Perhaps unsurprisingly, silver demand also slumped, and bullion imports plunged more than 60% y/y in 2020 to 2,200t, their lowest since 2012. The recovery in 2021 was also modest, with imports recovering by just 20% while remaining below 3,000t, or less than half the average of the preceding five years. The drop in demand also saw the silver price trade at a discount to the landing cost for the better part of 2020 and 2021.

Focusing on the trends in investment demand, India was the only major physical investment (bar and coin) market that reported a drop in 2020. This was primarily due to the pandemic-related lockdown, and the subsequent economic slowdown.

Furthermore, the year witnessed heavy investor profit taking, in response to record rupee silver prices, especially in the second half of 2020 when around 1,000t of gross selling emerged. As a result, with an 85% y/y collapse to just 269t, physical investment in 2020 was by some distance the lowest in our series starting from 2010.

While 2021 saw a dramatic recovery for physical investment, rising to 858t, albeit from an exceptionally low base, it remained well below historical norms. To put this into context, in the ten years to 2020, investment demand averaged 1,800-1,900t per annum. In addition to weak silver prices and better-performing equity markets, another important reason for the lacklustre investment demand over 2020- 21 was the weakness in jewellery and silverware offtake. Before this, strong demand for these products during 2013-19 encouraged many across the trade to take advantage of low prices to stock up on silver that would be fabricated later. However, volatile silver prices and concerns that demand would falter amid the pandemic meant that many fabricators became more cautious about holding excess inventory or in fact liquidated some of their stock.

It is also worth highlighting that Indian investors have bought more than 18,000t of investment products over the last decade, hoping that silver would eventually revisit its 2011 peak. This resulted in a build- up of near-market stocks, which has weighed on Indian demand over the last two years, as some investors took the opportunity to sell back whenever the price jumped.

This year, while concerns about the stock overhang remain, we believe that near-market inventories have already been scaled back considerably compared to levels at the beginning of 2020. In addition, with silver prices falling notably this year, even in rupee terms and despite the rupee depreciation, investors are slowly returning to the market. Our discussions with the trade suggest that bullion dealers have started to see higher investor interest. Importantly, the local silver price has fallen to around Rs. 55,000/kg so is very close to the psychologically important Rs. 50,000 level. As a result, bargain hunting has picked up and is likely to do so up further should prices fall back to this lower level.

Another important factor that could underpin investment demand in the near term is expectations of a change in the silver import duty. Investors and traders could potentially stock up on silver in anticipation of a duty hike. For background, the Indian government announced a 5% rise in the gold duty this month. As a result, it is widely expected that silver could follow suit, given that, since 2013, the tariff on both metals has typically been raised at the same time.

While physical demand has improved, silver ETPs have languished. Last year, the Securities Exchange Board of India (SEBI), the capital and commodities market regulator, permitted the launch of silver ETPs. As a result, these were launched by three leading fund houses, Aditya Birla Sunlife Asset Management Company, Nippon India and ICICI Prudential Asset Management Company.

However, since their launch, combined holdings have only reached Rs.9bn, equivalent to about 150-170t of silver. This is very much in line with our initial expectations, as we have maintained that silver ETPs face an uphill task, and the fund houses will have to work hard to develop consumer awareness. Furthermore, a large part of the silver investment market is driven by the trade itself, which would rarely invest in ETPs as the physical silver they invest in is converted into jewellery and silverware at a later date. Finally, in the short-term, the silver ETP market has had to grapple with a weak silver price; since their launch, prices have corrected and so have failed to generate much excitement. As a result, many small retail investors have liquidated their holdings. That said, if prices fall further, bargain hunting may attract interest in this market.

Overall, we believe that the recent demand trend points to a strong revival in the Indian silver market. The price correction has encouraged many investors, who had earlier booked profits, to re-enter the market. We therefore forecast a 40% jump in coin and bar purchases by retail investors, and a 31% lift in overall demand for silver (covering physical investment, jewellery, silverware and industrial offtake) in 2022 to 1,534t and 4,970t respectively.

Editor’s Note: Metals Focus is a leading, independent precious metals research consultancy providing in-depth consulting services to mining companies, corporations, investment funds, central banks, financial institutions and governments based on their extensive precious metals research. For more information on the services offered by Metals Focus, visit

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