India just made it significantly harder to bring silver into the country. A May 16 notification from the Directorate General of Foreign Trade moved most silver imports from “free” to “restricted” status, meaning importers now need a government license to bring bullion across the border.
The move came just days after customs duties on precious metals jumped from 6% to 15%, effective May 13. Factor in the Integrated Goods and Services Tax, and the effective tax burden on imported silver now exceeds 18%. For a country that imported roughly $12 billion worth of silver in the fiscal year ending March 2026, that’s not a minor tweak.
Why India hit the brakes
Silver imports surged 150% in value during FY 2025-26, with volumes climbing 42% over the same period. Rising global bullion prices combined with a weakening rupee meant India was spending dramatically more foreign exchange on silver, widening the current account deficit.
The restrictions apply broadly, with narrow exemptions carved out only for certain Export Oriented Units and Special Economic Zones. Those exempted entities cannot sell into the domestic market, so jewelers and bullion dealers face the license requirement.
Domestic silver prices responded predictably, jumping approximately 7% after the new duties took effect.
A familiar playbook, and its risks
The current silver restrictions represent a reversal of a two-year period during which tariffs had been deliberately reduced. The rationale back then was that lower duties would undercut smuggling networks and support the legitimate jewelry sector. The government apparently decided that calculus no longer works when import values are ballooning by 150% year over year.
The risk is that higher barriers don’t eliminate demand. When legal import costs exceed 18%, the margin for gray-market operators widens considerably. The very smuggling networks that the earlier tariff cuts were designed to starve could find themselves back in business.
What this means for markets and investors
For global silver markets, India’s import restrictions remove a significant source of demand from the equation. India has been one of the world’s largest silver consumers, and a $12 billion annual import bill makes it a market mover.
For Indian jewelers and bullion dealers, the immediate impact is margin compression. A 7% domestic price increase doesn’t automatically translate into higher retail prices if consumer demand is elastic, squeezing profitability across the supply chain.
