Why is India hit by silver shortage? Why is it struggling to increase imports?

The rally in prices of gold and silver has left equity investors scratching their heads this year.

While the sustained upward movement in the gold prices grabbed headlines, the white metal also performed exceptionally well without making any noise.

Silver prices have now surged to a record high as a global supply shortage ripples through major markets, leaving India, the world’s top silver buyer, struggling to secure adequate imports ahead of Diwali.

Silver futures for December delivery jumped 4% to a lifetime high of $52.49 per ounce on the Comex exchange, while spot prices in London briefly hit $52.89, surpassing the all-time peak set in January 1980 on a now-defunct contract overseen by the Chicago Board of Trade.

Silver demand has exceeded supply for four straight years, drawing down the surplus accumulated during the previous half-decade.

With roughly 70% of global silver mined as a by-product of other metals, production has failed to respond quickly to higher prices.

In India, the shortage is being felt acutely as jewellers and manufacturers face difficulties in sourcing the metal to meet festive and industrial demand.

Silverware, coins, and bars are trading at steep premiums, while manufacturers are struggling to maintain production schedules.

According to government data, India’s silver imports fell 42% to 3,302 tonnes in the first eight months of 2025, even as investment demand surged.

Physically backed silver exchange-traded funds (ETFs) witnessed record inflows of ₹53,420 crore in September.

ETFs are mandated to hold physical silver equivalent to investor subscriptions, but when they tried to procure silver last week, they faced hefty premiums due to limited availability.

Some silver ETFs have temporarily halted new subscriptions to prevent investors from paying inflated prices after struggling to source physical silver at reasonable rates.

Why is India struggling to increase silver imports?

Under normal circumstances, the sharp premium between spot and futures prices would encourage banks and bullion dealers to increase imports.

However, tight global supplies, logistical bottlenecks, and elevated lease rates, now exceeding 30% in London, have made it increasingly difficult to source the metal.

The situation has been compounded by a surge in shipments to the United States following silver’s inclusion in a draft US critical minerals list in September, diverting supply from other major consumers, including India.