| MUMBAI, March 4
MUMBAI, March 4 Shipments of silver to India are
set to fall from last year's record level as investors
anticipate an easing of curbs on gold imports, and as a looming
election draws off "black money" that may have been invested in
the precious metal.
Lower silver demand in the world's biggest consumer could
weigh on prices, which have recovered almost 10 percent
this year after a 36 percent slump last year, the biggest annual
drop in almost three decades.
India accounts for about 20 percent of world silver
consumption, mainly for jewellery, but also for investment as an
Imports nearly tripled in 2013 from a year earlier to a
record 5,478 tonnes, spurred by curbs on gold imports and
cheaper prices, but are expected to fall sharply if the
government relaxes its unpopular restrictions on gold.
"People had bought a lot of the metal at lows of 45,000
Indian rupees ($730) per kilogram and now prices have increased,
and with lesser gold curbs there could be a 25 percent fall in
imports," said Ashok Goyal of OP Chains Ltd., a silver trader in
the northern city of Agra. Silver currently sells for nearly
50,000 rupees a kilogram.
To curb a ballooning trade deficit, India last year hiked
its import duty on gold to a record 10 percent, and tied
domestic gold consumption to exports of gold jewellery.
But Finance Minister P. Chidambaram said last month he would
keep keep the current account deficit below $45 billion as
against $88 billion last year and is expected to review the gold
curbs by mid-March ahead of an election expected by May.
"Silver jewellery fabricators are going slow re-stocking,
and also with elections approaching the market is short of idle
cash, which again points to a lower turnover of stocks,
resulting in a slowdown of imports in coming months," said
Sudheesh Nambiath, India analyst with Thomson Reuters GFMS.
India has almost doubled its election-spending limit to 7
million rupees per candidate in bigger states, but analysts say
total spending is estimated to be much higher and most of the
funds will come from illegal or "black money", which may
otherwise have been invested in gold or silver.
Any easing of curbs on gold imports could remove about 2,000
tonnes of demand for silver from investors as an alternative
asset, industry experts said.
Importers of the precious metal, who made only narrow
margins during last year's sales boom due to abundant supply,
will also look to cut costs as demand eases.
"Last year, silver business was a survival tactic for us...
For most of us in the metal business it was a way to stay
afloat. It was a turnover game rather than an income generator,"
said a senior official with a foreign bank importing silver from
Hong Kong, Zurich and London.
Importers are expected to cut costs by shipping the metal by
sea, rather than air, halving import costs to 5-6 cents an
ounce. Silver currently costs $21.25 an ounce.
($1 = 62.0300 Indian Rupees)
(Reporting by Siddesh Mayenkar; Editing by Richard Pullin)