India Tightens Silver Imports in Bid to Reduce Foreign-Exchange Drain

India has tightened rules on silver inflows, making it harder to bring bullion into the country. In a May 16 notice, the Directorate General of Foreign Trade shifted most silver imports from "free" to "restricted", requiring importers to obtain a government licence. The change follows a sharp hike in customs duties on precious metals to 15% from 6%, effective May 13. Including the Integrated Goods and Services Tax, the effective tax burden on imported silver now exceeds 18%. The measures come as India's silver import bill swelled to about $12 billion in the fiscal year ended March 2026. Import values jumped 150% in FY 2025-26, while volumes rose 42%, driven by higher global prices and a weaker rupee. The heavier foreign-exchange outlay has added pressure to the current account deficit. The restrictions apply widely, with limited carve-outs for certain Export Oriented Units and Special Economic Zones. Those exempt entities are barred from selling into the domestic market, leaving jewellers and bullion dealers subject to the new licensing requirement. Domestic prices reacted quickly: local silver prices rose about 7% after the duty increase. The decision marks a turn from the past two years, when tariffs had been reduced to curb smuggling and support legitimate jewellery trade. With import values now surging year on year, the government appears to have shifted priorities. The downside is that higher legal costs may not reduce demand; when the effective import levy exceeds 18%, incentives for grey-market supply typically increase, potentially reviving smuggling networks. For global silver markets, tighter Indian imports remove a meaningful source of demand. India is among the world's largest silver consumers, and a $12 billion annual import bill gives it outsized influence. For domestic jewellers and bullion dealers, the near-term impact is likely margin pressure: a 7% rise in local prices may be hard to pass through fully if end-demand proves price-sensitive, squeezing profitability across the supply chain.