Silver imports decline 60% to 3,000 metric tonnes in 20162 min read . Updated: 02 Mar 2017, 10:07 AM IST
Silver is so ingrained in Indian tradition that the country's currency, the rupee, is named after 'Rup', the Sanskrit word for silver
Mumbai: Silver imports by India, one of the world’s top buyers, will probably shrink this year to the lowest since 2012 as the government cracks down on black money, farmers struggle for cash and stockpiles remain ample.
Purchases from overseas plunged 60% to about 3,000 metric tonnes last year and will contract further in 2017, according to Chirag Sheth, an analyst at Metals Focus Ltd., an independent precious-metals research firm, in Mumbai.
Demand for jewelry has suffered after Prime Minister Narendra Modi scrapped old high-denomination notes in November to clamp down on the black market and bring more transparency to the financial system.
That hit the rural economy which depends more on cash than urban areas, and hurt demand from farmers. Inventories are “sizeable" after record imports in 2015, Sheth said.
“Investment demand for silver will continue to fare badly and we wouldn’t be surprised to see a 10 -12% drop" this year in India, said Sheth, who’s tracked precious metals for 13 years. On the global market, investors have shown increasing interest because of rising political risk. Assets in exchange-traded funds rose in February for the first time in four months, while funds and other speculators almost doubled net-long bets on the Comex this year.
While prices have been rising, they’re way below the peak in 2011 and haven’t even caught up with the highs last year. Futures in Mumbai have climbed 11% in 2017, but are still about 10% short of levels in July. “Prices have not been able to sustain at higher levels and investors who currently hold the metal will look to book profits if they go up further," Sheth said.
Silver is so ingrained in Indian tradition that the country’s currency, the rupee, is named after ‘Rup’, the Sanskrit word for silver.
The metal is popular in rural areas where it’s viewed as the poor man’s gold because it’s many times cheaper than its fellow metal and women prefer to wear it on their feet, keeping gold for hands, neck and ears. Farmers have been finding it tough to buy bullion because of lack of money.
“Silver or gold buying is a forced purchase for us as we have to send our daughters to their in-laws house with good face," said Samarpal Singh, a 50-year-old sugar cane farmer from Uttar Pradesh. “We barely have any savings as we don’t get timely payments for our crops and many farmers resort to taking loans from banks for buying jewelry for their children’s weddings."
India imports most of its silver, from places including the UK, mainland China and Hong Kong. Locally, Hindustan Zinc Ltd. produces about 400 tonnes annually.
“In the last six months, the silver market has become very quiet and there are hardly any sales," said Suresh Hundia, owner of Hundia Exports Ltd. and a former president of the India Bullion and Jewellers Association. “Jewelers have enough supplies and some of them are even using their stocks to trade on the futures exchange because of lack of physical buyers." Bloomberg