Govt imposes import curbs on silver

The government reclassified silver imports from the "free" category to the "restricted" category under India's import policy, effective immediately, requirin...

What Happened

The government reclassified silver imports from the "free" category to the "restricted" category under India's import policy, effective immediately, requiring importers to obtain a government licence from the Directorate General of Foreign Trade (DGFT) prior to importing.
The restriction applies to all silver categories including silver alloys with gold and platinum — not just pure silver bullion.
Exemptions apply to imports by 100% Export Oriented Units (EOUs) and Special Economic Zone (SEZ) units, provided the imported silver is not sold in the domestic market.
The import restriction followed an earlier increase in the customs duty on silver from 6% to 15% (effective rate exceeding 18% after IGST), announced on May 13, 2026.
The stated policy objective is to "control the outflow of forex by curbing non-essential imports."

Static Topic Bridges

Directorate General of Foreign Trade (DGFT) and Import Policy Framework

The DGFT, under the Ministry of Commerce and Industry, administers India's Foreign Trade Policy (FTP) and regulates the import and export of goods. India's import policy classifies all goods into four categories: Free, Restricted, Prohibited, and State Trading Enterprise (STE).

Free: Goods that can be imported without any licence or restriction.
Restricted: Goods that require a licence or prior authorisation from DGFT before import.
Prohibited: Goods that cannot be imported under any circumstances.
STE (State Trading Enterprises): Imports that can only be made by designated government entities (e.g., some petroleum products, certain grains).
India's current Foreign Trade Policy (FTP 2023) came into effect on April 1, 2023 — valid for five years, with scope for periodic amendments.
DGFT issues policy amendments through notifications referenced under the Foreign Trade (Development and Regulation) Act, 1992.

Connection to this news: By shifting silver from "Free" to "Restricted," the DGFT has effectively mandated prior government approval for all silver imports — a significant tightening of trade policy for a commodity that had previously flowed freely.

Surge in Silver Imports and Forex Pressure

Silver imports into India saw an extraordinary surge in 2025–26, driven by both industrial demand and speculative investment inflows as silver prices rose globally.

India's silver imports in FY 2025–26: approximately $12 billion (up ~150% year-on-year).
Volume of silver imported in 2025–26: approximately 7,335 tonnes (up ~42% year-on-year).
Silver imports in April 2026 alone: approximately $411 million.
Silver prices reached approximately Rs 2.53 lakh per kilogram.
India's forex reserves had declined to approximately $690 billion by May 1, 2026, partly reflecting the drain from elevated precious metal and energy imports.

Connection to this news: The scale of the import surge — and the associated forex outflow — directly motivated the government's decision to impose both a duty hike and import licensing requirements.

Customs Tariff and Trade Policy as Instruments of External Sector Management

Import duties are a fiscal tool used to regulate the volume and value of imports, protect domestic industries, and manage forex outgo. The Customs Act, 1962 and the Customs Tariff Act, 1975 together form the legislative basis for customs duty administration in India.

Basic Customs Duty (BCD) is levied under the First Schedule to the Customs Tariff Act, 1975.
Integrated GST (IGST) is levied on imports in addition to customs duties, calculated on the customs value plus BCD.
Silver's BCD was raised from 6% to 15%; with IGST, the effective rate exceeds 18%.
The government also closed an arbitrage loophole: importers were exploiting the India-ASEAN Free Trade Agreement (ASEAN FTA) to import unstudded silver jewellery at preferential duty rates from countries like Thailand, bypassing the higher BCD.
The India-ASEAN FTA came into effect in 2010.

Connection to this news: The duty hike alone proved insufficient — the ASEAN FTA loophole allowed continued low-duty imports. The shift to "Restricted" status plugs this gap by requiring licences regardless of trade agreement concessions.

Export Oriented Units (EOUs) and Special Economic Zones (SEZs)

EOUs and SEZs are export-promotion schemes that allow duty-free import of inputs for use in export production. Their exemption from the silver import restriction reflects the principle of not penalising export industries for general import controls.

EOUs operate under the Foreign Trade Policy (FTP) framework and can import inputs without customs duties, provided outputs are exported.
SEZs are governed by the Special Economic Zones Act, 2005.
The exemption for EOUs and SEZs in the silver restriction ensures industrial users exporting products (e.g., electronics, solar panels) are not disadvantaged.
Silver is used industrially in solar panels, electrical switches, chemical catalysts, and medical equipment — making it a dual-use (industrial and precious metal) commodity.

Connection to this news: The carve-out for EOUs and SEZs reflects a calibrated policy — protecting forex reserves without disrupting export-oriented manufacturing that depends on silver as an input.

Key Facts & Data

Silver import policy status: changed from "Free" to "Restricted" (May 2026)
Administering authority: Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industry
Legal basis: Foreign Trade (Development and Regulation) Act, 1992; FTP 2023
Silver BCD before May 13, 2026: 6%
Silver BCD after May 13, 2026: 15% (effective rate >18% with IGST)
India's silver imports FY 2025–26: ~$12 billion (~150% increase year-on-year)
Silver import volume FY 2025–26: ~7,335 tonnes (~42% increase year-on-year)
Silver imports, April 2026 alone: ~$411 million
Silver price (approx., May 2026): ~Rs 2.53 lakh per kilogram
India-ASEAN FTA: in force since 2010
SEZs governed by: Special Economic Zones Act, 2005
Exempted from restriction: 100% EOUs and SEZ units (imports not sold domestically)