India’s silver imports may fall by more than 40 per cent from a year ago to the lowest level in eight years, with investors booking profit by selling stocks after local prices rallied to a record high this month, leading importers said.

Lower imports by the world’s biggest silver consumer could weigh on global prices that have risen more than 50% so far in 2020. Their selling will reduce import requirement for 2020 to 3,000 tonnes, the lowest since 2012.

India imported 5,598 tonnes of silver in 2019, according to data compiled by Refinitiv GFMS. The country fulfills most of its silver requirement through imports.

Investors are sceptical whether silver will hold recent gains. There is rush from sellers but very few buyers are there. Sellers are forced to accept hefty discount.

India’s silver imports in the first seven months of the year nearly halved from a year ago to 1,900 tonnes and it is unlikely to rise again unless prices correct sharply.

Demand from jewellery and industry is negligible as millions of people have lost or have to accept a pay cut. The Mumbai market was hit hard by the March lockdown, which saw millions of migrant workers - including many gold craftsmen - flee India’s cities as their income dried up. According to Chairman of GJC, Anantha Padmanabhan, "When silver prices were rocketing, it was indeed heartening to note, but since years it has been observed that when both gold and silver prices show unprecedented hikes, unlike gold prices which steady at a high point, silver prices usually crash faster. This has an impact on demand and silver imports." Building demand for silver in local retail markets becomes a challenge for the whole industry. 

"Owing to the lockdown many retailers have a good stock of gold and silver items, but demand is yet to pickup and imports are on a steady decline beacuse of several reasons," he added. This causes excess inventory and low demand -- which often affects import of silver adversely.

Even the impending wedding season, which traditionally kicks off in October and sees families spend a small fortune, has failed to buoy spirits or boost spending as India braces for its first recession in four decades.

According to the World Gold Council (WGC), India’s gold consumption fell by a staggering 56 per cent during the first half of 2020 compared with the same period last year.

Demand during the April-to-June quarter plunged 70 per cent to 63.7 tonnes, the lowest since the 2008 global financial crisis.

Gold will eventually make a comeback in India as consumers recover their appetite, said Somasundaram P.R, Managing Director of WGC’s India operations.

Retailers are hopeful that people who saved money because of cancelled holidays or expenditures may invest in gold.