40% Of India's Silver Now Imported From UAE, Thanks To CEPA

The India-UAE Comprehensive Economic Partnership Agreement (CEPA), established in 2022, has significantly boosted silver imports into India, particularly through the UAE route. In the first quarter of 2024, a substantial 40% of India's silver imports, amounting to 1,542 tonnes, were facilitated via this route. This surge is attributed to the appealing duty difference offered under CEPA, where silver imports incur only an 8% duty, compared to the 15% applied through other channels.

This development aligns with a notable increase in India's silver imports overall. Data from Metal Focus, a London-based bullion research firm, indicates that India imported 3,730 tonnes of silver in just the first three months of 2024, surpassing the total of 3,475 tonnes imported throughout 2023. The shift in predominant suppliers, from the UK and Hong Kong to the UAE, is poised to reshape the dynamics of silver supply to India.

Chirag Thakkar, director of the Amrapali group and a leading figure in the silver industry, highlighted the competitive advantage of lower duty rates under CEPA, allowing silver bullion to be sold at a discount of Rs 4,500 per kg in the domestic market. The demand for silver, particularly for solar energy plates, remains robust.

The World Silver Survey 2024 anticipates the duty differential for imports from the UAE to further expand, with a 1% reduction each year. This suggests that, barring any policy changes or duty reductions for other countries, the UAE will likely maintain its position as India's primary silver supplier in the foreseeable future. However, importers must comply with specific conditions, including the provision of documents proving the silver was refined in the UAE, accompanied by a Certificate of Origin (COO) and evidence of a 3% value addition.

Despite the growing industrial use of silver, investment in the metal appears to be waning. The World Silver Survey report points out a significant decline in physical silver investment in India, from 3,435 tons in 2015 to 1,534 tons in 2023. Chirag Sheth, principal consultant at Metal Focus, explained that while investment demand may seem low in quantity, the value has doubled since 2015 due to price increases, sustaining high investment levels. This reflects the market's view of silver not just as a wealth protector, but also as a commodity prone to profit booking at higher prices.